How Exactly Does Affiliate Marketing Work?

Without a doubt the Internet has changed the way we do business, both personally and as a culture. Thousands of people are daily looking for opportunities, both as a way to save money and also to make money. While there is a multitude of ways to make money on the Internet, one of the most popular and easiest ways to begin is with affiliate marketing.

While this article is not meant to be a detailed treatise on affiliate marketing, more an overview, affiliate marketing stated basically is where one person places an advertisement or link for a second company or person, and then they are paid a commission for every sale that is generated from their efforts.

This is a solid and sustaining relationship, where the affiliate delivers potential customers (also known as traffic) to seller and the seller in turn pays a commission, most normally for a sale, but sometimes simply for a lead. While the term affiliate marketing may be new, the actual business model has been around for generations.

Amazon.com launched its own affiliate program in the middle 1990s, allowing a visitor who clicks a special link on a website, then purchased a book or product, then the affiliate received a commission. Amazon certainly wasn’t the first with this idea, but they were among the best to implement it, providing affiliate tools and easy implementation of their products, receiving a patent for their methods in 2000.

With social media (termed Web 2.0) and the advent of nearly instant communication, blogging, commenting, and ratings, affiliate marketing has grown into a massive industry, with top affiliates earning hundreds of thousands, if not millions of dollars.

While the rates may vary, most affiliates will be compensated in the area of 25 to 70% for each sale based on a customer following a link they’ve placed somewhere on the web. This compensation is based on either the number of clicks, leads, or in most cases an actual sale between the merchant and the customer.

When you look at these percentages, you will immediately realize that affiliate marketing can be a very profitable business, particularly if done right. When and affiliate marketer can drive significant traffic to the merchant’s website, they in turn can potentially make a six-figure income each and every month (certain variables apply). For this reason alone, thousands of people turn to the Internet daily, believing they can strike gold by becoming an affiliate marketer.

Here are a few of the benefits of becoming an affiliate marketer:

There are no actual product development costs, instead the merchant will either develop the product and/or provide the inventory.

The affiliate need not concern themselves with shipping costs; again this is the responsibility of the merchant, if dealing with a tangible product.

Customer support is provided by the merchant, not the affiliate marketer.

There is no limit to the amount of products you can market, nor any long-term contracts (in most cases) that you need be concerned with.

Depending on your interests, or the focus of your website or niche, there are a multitude of products to choose from.

Set up costs are low, normally only requiring establish a web presence and hosting.

There are no geographical limitations (in certain instances this may not be the case), allowing an affiliate to market from anywhere they have an Internet connection.

Affiliate commissions, especially with digital products, can often be as high as 70%.

Money can be made 24/7/365 – as long as your marketing is in place and your website running, the potential of making money happens continuously

Becoming an affiliate marketer can be exciting and profitable. If you’re considering becoming an affiliate marketer, do as much research as you can, choose a product or niche, then take the next step by putting your website online.

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How Does Affiliate Marketing Work?

If you have ever wondered how all those sites that review and recommend various products, or those “Best such and such” sites that include product descriptions with “buy-now” links make their money, the answer is Affiliate Marketing.

There are hundreds and thousands of companies out there looking for assistance with selling their products. Buying advertising is not always financially viable, as you often have to pay in advance, or invest a large amount of money before you see the returns (if at all).

The solution many companies use is to instead offer a percentage of their sales (sometimes as high as 70%) to anybody who will promote their products for them.

Let’s say I became an affiliate of “XYZ Product” which retails at $100. I might recommend it on my website, build an entire site around it, or find some other way to promote it. If anybody goes to the vendor site via my referral link (known as an affiliate link) and makes a purchase of XYZ Product, the company will pay me a predetermined percentage of that $100.

This method can be very profitable for both the affiliate and the company. The company after all is just giving up a percentage of their profits, but may have done no work whatsoever to promote it (except making a decent website on their end).

The affiliate on the other hand gets to partner up with a great product and doesn’t have to worry about inventory, shipping, or any other details, they just send interested people to the product and then receive their commission. It’s a win-win situation for all involved.

Affiliate links

When you join an affiliate program, you will be given a unique link that has your tracking ID in it. When somebody clicks on that link and is taken to the destination (the product purchase page), the tracking ID tells the vendor that it was your link that was clicked, and they will know to add any earned commissions to your account. This is an incredibly simple system to use and doesn’t affect the customer at all.

Some affiliates might use a link shortener like goo.gl or bit.ly to either hide their affiliation, or simply make the link cleaner and shorter.

Negativity

In some circles, affiliate marketing has a negative connotation. That is because over the years there have been a lot of “badly behaved” affiliates who use spam, lies, and other misleading methods to trick people into purchasing products. They would also build up sites that were purely designed to get people to click their links, and many of the reason changes to Google search came about as a result of them being sick of affiliate sites.

This does not affect the “good” affiliate though. Real quality affiliates know that they need to provide a service, and offer top quality information in order to make a high volume of sales and make all their hard work worthwhile. To be perfectly honest, a lot of the driving force of the Internet comes from affiliate marketing, because it is one of the most lucrative and honest ways of making money online.

Affiliate marketing can be a very profitable way of earning a living if you stick to the ethos of providing quality information and services. It is not something you can walk into and make a fortune overnight with, but once the ropes are learned and you know what you are doing, fortunes can definitely be had.

How Affilliate Marketing Can Work For You

There are many ways to describe affiliate marketing; however most have much the same meaning. People who market on the Internet as an affiliate marketer, have caused it to become a legitimate business. In a nutshell affiliate marketing is a cooperative effort between the product creator (also termed merchant) and the affiliate.

From the standpoint of a merchant, affiliate marketers are gold, since they do most of the advertising; they are able to easily broaden their reach without significant capital expenditure. By marketing their products, whether tangible or digital, the merchant is, in effect increasing their sales force without the associated costs. This is extremely attractive, since this allows their wide distribution, while only paying the affiliate, when a sale is made.

The Internet continues to grow exponentially, and every day more and more people are seeking ways to make money from home; affiliate marketing is at or near the top of that list. However many people go about affiliate marketing the wrong way, making beginner mistakes, then deciding Internet marketing doesn’t work. There are intricacies to affiliate marketing, and without the proper mentor, or experience, most new affiliate marketers are left without understanding what is involved in the task.

Over several years I’ve been fortunate to work with many affiliate marketers, and when I work with someone new to the concept, one of the key points I always explain, is the difference between advertising and marketing.

Statistically speaking, most beginners think purely in terms of advertising, without understanding the marketing part of the equation. Many times these affiliates will not last in what has become a very competitive arena. On the other side of the coin are those extremely knowledgeable, and ready to turn this competitive arena into a true cash cow. Those who thrive and conversely make a good living understand they must market their website in addition to the affiliate product they are promoting. While selling and advertising are strong components of marketing, they must be combined in a strategic way, in order to become profitable affiliate marketers.

In this model, the affiliate marketer is compensated for every visitor they send to a merchant site, who in turn purchases the product or service being offered. The commission varies greatly, and anyone looking into affiliate marketing, should be certain they understand the commission structure before beginning their marketing efforts.

Besides product owners, there is affiliate networks designed to cater to those interested in affiliate marketing. These networks operate as a third-party between the merchant and affiliate, acting as a trusted third party who will ensure compliance, both from the merchant/product owner and the affiliate. There is a great deal of technology involved with these networks, however this all operates behind the scenes track sales and statistics. These networks remain profitable by collecting a commission from the merchant, keeping their percentage, and then paying the affiliate their commission, normally once every 30 days.

While there are downsides to becoming an affiliate marketer (most namely understanding how to market), there are also benefits which allow the affiliate to quickly change from product “A” to product “B” should they find that more lucrative. Depending on the person and their commitment, affiliate marketing can generate an excellent part-time or full-time income. This is not to say that there isn’t work involved, this should be thought of as a business, not a hobby, and to be successful it will take work and persistence.

From a business standpoint, affiliate marketers have low start-up and overhead costs; however the challenge isn’t in putting a website online, rather in getting targeted traffic (visitors) to look at the affiliate offer.

Deciding to become an affiliate marketer, shouldn’t be taken lightly, however it can be an excellent first step in your online career.