Affiliate marketing can create a substantial amount of passive income when used on a high traffic website. There are no products to sell and no inventory to keep. Affiliates provide consumers with links to relevant products or services and earn a commission on any purchases made.
How Affiliate Marketing Works
In most cases, affiliate marketing involves four main players:
- Affiliate network
The affiliate model has evolved into an extremely large industry and now has multiple tiers and sub tiers. However, affiliate networks are not always involved in the process. In some cases, affiliates and merchants for direct partnerships, effectively eliminating the middleman. This method is ideal and provides the affiliate with some level of control over the offers provided to customers.
Advantages of affiliate marketing
Affiliate marketing has numerous advantages. Affiliates can benefit from the following factors:
Passive Income Generation – Affiliates can set up a website and watch the money roll in. It is possible to work from home and requires minimal effort.
Turnkey Operation – It is not difficult to become an affiliate. Affiliates only need to choose a product or service to join and register to participate in the affiliate program. In most cases, the affiliates paste a few lines of code on the website and the rest is served by the affiliate network involved.
Minimum necessary marketing skills – Affiliates don’t need a marketing degree and they don’t have to be good at selling. Being good at SEO (search engine optimization) is helpful for affiliates, but legal, marketing, and record-keeping issues can be handled by merchants and affiliate networks.
No investment is necessary – Affiliates are not required to pay money to join an affiliate program. Additionally, if the program is unsuccessful, an affiliate may choose to discontinue the program without loss of participation.
Multiple streams of income – Members who become familiar with the process can branch out to other areas. Affiliates can participate in multiple programs to have multiple sources of income.
Disadvantages of affiliate marketing
Affiliate marketing can have some drawbacks. Some of the main drawbacks of affiliate marketing are:
Lack of control – Affiliates cannot exercise control over the programs offered by merchants. If visitors would respond better to a different type of offer or if a price adjustment is necessary, affiliates can do nothing more than wait for the merchant to change the offer. Affiliates have access to the same offers and programs as other affiliates. With similar offers available to everyone, it’s hard for smaller affiliates to stand out from the crowd.
Competence -Affiliate marketing is easy to participate in, but this can also be a negative factor. There are thousands of affiliates participating in the same program and all of these affiliates compete for a limited amount of traffic.
Pay for performance – Merchants enjoy the benefit of having large amounts of traffic driven to their site. In most cases, affiliates are paid when a sale is made, not for the traffic generated. Numerous things can happen between the moment a visitor clicks a link and the sale is made. Bad offers or dead links can easily lead to a huge loss of affiliate profit.
Affiliate Networks – Affiliate networks link merchants with affiliates and provide reporting and tracking tools. In return, members must share revenue with these organizations for their services.
How to create a win-win situation with direct partnerships
Affiliates can avoid most of the downsides involved in direct marketing by forming a direct partnership with merchants. Direct partnerships are created when affiliates contact merchants directly, effectively cutting out the middlemen. This allows the affiliate to retain more earnings. Merchants can benefit from direct partnerships by discovering what visitors want or need, making it much easier to tailor offers and promotions around these factors.
How to start a direct association
Members who are just starting out can benefit from participating in direct partnerships with small merchants. Affiliates will be able to provide smaller or newer merchants with traffic in exchange for exclusive offers available only to their visitors. Most merchants will be willing to participate in a trial run with an affiliate to determine if the deal could be mutually beneficial. If the merchant is not a game, the same offer could easily be made to the merchant’s competition.
Affiliate marketing can provide a substantial amount of income, if applied correctly. Most of the drawbacks can be mitigated through direct partnerships or by using multiple programs. Furthermore, participating in highly relevant affiliate programs can also increase your chances of success. Affiliate marketing requires a degree of patience. It can take time to build an effective affiliate program.