If you’ve ever came across Tim Ferris's iconic book on how to just work four hours per week, you’ve probably dreamed of sipping a Mojito on a beach while your money worked for you in the background. One of the main ideas he constantly talks about is the concept of passive income.
After all, having an income chart like this is the main goal of many online entrepreneurs:
For many entrepreneurs looking to build an online business or marketers looking to monetize their web traffic, affiliate marketing is often how they got started with generating income.
Affiliate marketing is one of the world’s most popular methods of generating passive income online, and it continues to grow. In fact, affiliate marketing spend is reported to increase to $8.2 billion by 2022 — up from $5.4 billion in 2017.
If you’re looking for a complete guide to affiliate marketing, read more to find out how you can promote products as an affiliate to create an additional source of income.
What is affiliate marketing?
Affiliate marketing is a performance-based marketing tactic in which a retailer, typically an online one, rewards a website with a commission for each customer referred via the website’s promotional activities. The website, often called an affiliate, will only get paid when their promotion results in a transaction.
There are typically four parties involved in affiliate marketing:
- Affiliates: The promoters of the product
- Product creators: The creators of the product
- Networks: The networks managing the affiliates
- Consumers: The end users of the product
You don’t always need a network to become an affiliate, but the other three parties (the affiliates, the product creators, and the consumers) form the core of an affiliate program.
Who are the affiliates?
An affiliate, also known as a publisher, can be an individual or a company. Typically, these are other bloggers or content creators operating in the industry of the product they are creating.
They help promote the product or service by creating content like blog posts, videos, or other media.
They can also promote their content to get transactions by putting up ads, capturing search traffic from SEO, or building an email list.
When one of their visitors creates a transaction, which could be a purchase or submitting a lead form, the affiliate gets a commission. How much commission is structured depends on the affiliate program terms.
Who are the merchants?
A merchant, also known as the product creator or advertiser, is typically the creator of the product or services. They offer revenue sharing and commissions to people or other companies (affiliates), which have a significant following on their brand.
The merchant can be a company like HubSpot, which offers a commission to every affiliate who’s able to get their visitors to make a purchase.
Or it can be an individual like Pat Flynn, who offers an affiliate program with his podcasts.
The merchants can be anyone from a solopreneur to a big company, as long as they are willing to pay their affiliates to help them gain a transaction.
Sometimes the merchant does not even have to be the product creator, as in the case of the Amazon Associates Program.
Who are the affiliate networks?
An affiliate network acts as an intermediary between the merchants and their affiliates. In some cases, a network is not necessary, but some companies choose to work with a network to add a layer of trust.
The network manages the relationship and provides third-party checks and balances. Third-party checks can be important because they bring down fraud rates.
Some merchants choose to work with an affiliate network because they lack the time or resources to track, report, and manage payments to the affiliates. They might also choose to work with multiple affiliates or publishers within the affiliate network.
Who are the consumers?
The consumers or customers are the ones who makes the transaction. They are the ones who purchase the product or submit the lead form in order for the affiliate to gain the commission.
How does affiliate marketing work?
Affiliates are typically paid whenever a visitor creates a transaction, such as a click, form submission, or sale. Affiliate marketing is mostly performance-based, which means you only get paid as an affiliate if your visitor takes an action (versus just visits your site).
Let's say you owned a popular knitting blog that saw 100,000 hits per month, and a knitting supply company contacted you about promoting their needles and yarn on your website. As an affiliate, you'd place links to their products throughout your blog content. In this case, you'd receive affiliate income if a visitor landed on your blog and took an action — either a click, form submission, or purchase.
We'll talk more about getting paid in the next section. In the meantime, here are some common affiliate marketing models:
Pay-Per-Click (PPC): The affiliate gets paid for all clicks that were generated, regardless of whether a lead or sale happened. This is fairly rare since all the risk is on the product creator.
Pay-Per-Lead (PPL): The affiliate gets paid for every lead they generated. This could be an online form submission, trial creation, or any pre-purchase. This is a shared risk on both the merchant and the affiliate.
Pay-Per-Sale (PPS): The affiliate gets paid for every sale they generated. This is the most common model since all the risk is on the affiliate.
Need some examples? Check out our video on the top three ways you can use influencer marketing to grow your business.
Now, let's talk about how to get started with affiliate marketing.
How to Start Affiliate Marketing
- Choose a platform and niche.
- Build an audience.
- Sign up for an affiliate program.
- Choose products to promote.
- Create remarkable content that promotes your affiliate products.
- Optimize and track.
- Get paid.
When it comes to affiliate marketing, most people think it's a process of earning a commission by promoting other people’s or company’s products.
While affiliate marketing can seem straightforward — just find a product you love, promote it, and earn a piece of profit with every sale you make — there are actually a few moving parts you need to a monitor.
1. Choose a platform and niche.
To be an affiliate, you need to have influence. Establishing a website or blog that specializes in a niche is the best way to establish influence. Whether you focus on finance, personal health, business, or even cats, a niched blog or website will help you gain influence and build an audience.
2. Build an audience.
A large, engaged audience is a highly valuable asset for any blog or website. Having people who read, view, and engage with your content can help you make affiliate income.
The best way to build an audience is to first establish who your target audience is, and you can find your target audience by researching competitors, monitoring your traffic, and conducting first-hand research by talking to subscribers and customers.
Once you establish this group, grow and cultivate your loyal online audience through targeted content and emails. Give your audience a reason to read and engage with your content, and they'll find a reason to purchase your recommended products, too.
3. Sign up for an affiliate program.
The best way to get started with affiliate marketing is by signing up for an affiliate program like the Amazon Associates or HubSpot Affiliate Program. After signing up, you will get an affiliate link that contains a unique ID. You can then use this link in your content.
There are typically no upfront costs when it comes to joining an affiliate program, but your variable ongoing costs will depend on how you want to promote the products. If you choose to outsource content or run ads, those are costs that will come out of your pocket.
4. Choose which products to promote.
Choosing the right product to promote, working with the right company, fostering relationships, and updating content are all core essentials of excelling at affiliate marketing.
According to Pat Flynn, one of the pioneers of creating passive income through providing value to his audience, there are two important rules when it comes to affiliate marketing:
- Only recommend products as an affiliate that you’re extremely very familiar with. If you are not confident in the product and do not feel it will help people, do not promote it.
- Never tell anyone to directly buy a product. Always recommend products based on your experience and in the context of what you’ve done.
When it comes to choosing the right products, David Gonzalez — founder of an affiliate management agency, suggests that you should think about these three components when choosing a product to promote:
- Your audience: Will the product resonate with them and make them grateful you promoted it?
- Product quality & value: Would you advocate your best friend buying it?
- Profitability: Does the offer have highly competitive conversions & payouts?
After reading these recommendations, do any products come to mind?
5. Create remarkable content that promotes your affiliate products.
To see the best success with affiliate marketing, you need to create genuine and remarkable content that promotes your chosen products. Write a roundup blog post of your favorite products. Create comparison charts that discuss the merits of similar products. Interview other users and fans of the products to showcase different opinions.
Regardless of what kind of content you create, ensure it features authentic reviews and mentions of your affiliate products. Avoid discussing and promoting products you haven't used yourself.
6. Optimize and track.
Whenever your visitor clicks on your unique affiliate link, a cookie is inserted in their browser to track actions.
When they make a transaction that is a qualified action (could be a sale or lead form submission, depending on the terms of the program), the merchant is able to record this action and attribute it to you as an affiliate so they can make a payout.
You should track your own affiliate content, too, to see what has performed well and what you can improve and promote. Understanding what content resonates best with your audience will show you what to focus on for future affiliate marketing opportunities.
7. Get paid.
There are different structures when it comes to payout, which varies based on affiliate program terms.
Commission payouts by the company are usually given on a monthly basis, but this varies depending on the affiliate program terms. This can also be based on how each affiliate program reallocates spending or determines its compensation structure.
It could be a weekly payout or a monthly payment for all the leads or sales you've made.
You'll want to pay attention to the payout structure when choosing an affiliate program to join, which ultimately depends on the goals you have.
You might want to understand the commission structure of the company or product creator. Are you looking for a commission per sale or commission per lead generated? Are you looking at a recurring commission or a one-off payment?
Depending on your goals, this will affect which product you choose, how you plan to promote the product as well as how much time & resources you want to invest.
For instance, if you choose to promote your content via paid ads, then that’s a cost you have to account for. You will have to compare how much you’ve spent to promote each piece of content or to generate each purchase against how much commission you’re getting for each referred sale.
Or, if you have a blog and an affiliate website, then you will have to pay for hosting. In this case, this should be a flat fee spread out across all your referred sale.
Use this marketing plan generator to calculate how much you need to invest to get a basic marketing plan up and running. You can also see this case study how HubSpot uses Impact for our affiliate program.
How much can you make from affiliate programs?
You might be wondering, what are established affiliates earnings? (established affiliates are those working full-time.) Well, that varies. I've seen super affiliates earn upwards of $100,000 per month.
Making money from an affiliate program is more about the profits than the revenue you’re getting.
An affiliate making $5000/day might be worse off than another affiliate making $500/day with no cash outflow because the former might be spending most of his revenue on paid acquisition.
At the end of the day, before becoming an affiliate, you have to align your expectations to your earning potential. What kind of industry or niche you operate in, and what kind of work you do depends a lot on how much you want to make.
If you focus on ads like Adwords or Facebook to promote your affiliate products, how much money you invest is as important (if not more) as how much you make.
Affiliate Marketing for Beginners
Too often do I hear this misconception: affiliate marketing is dead.
In today's landscape of online marketing, people often mention that some variant of X is dead — SEO, email, mobile, etc.
The test of time is a pretty good test; if something has stayed around for a while, there’s a better chance of it sticking around for a while.
Everything evolves, and there are tactics that don’t work the exact same way as they did before. Affiliate marketing, of course, is no exception to that rule.
Affiliate marketing has evolved from a get-rich-quick scheme into something that requires you to build real trust with you audience to reap the rewards of the work that you put in.
At the end of the day, becoming a successful affiliate marketer as a beginner requires you to nail down the fundamentals of marketing. Authenticity is hard to fake, especially when it comes to building your own personal brand.
A brand that promotes products incessantly without any regard for bring real value to its audience will find affiliate marketing to be a short-lived source of income. Choosing the right products to promote, stemming from a true passion for what the product does, forms the basis of all your promotional activities.
While there are many tactics to scale your promotion, the golden rule of affiliate marketing stays the same: only promote products you love and treat your audience like humans.
Build your own brand, choose products that you love, create authentic content and you will be on your way to building a real source of passive income.
Editor's note: This post was originally published in December 2018 and has been updated for comprehensiveness.