According to Investopedia, affiliate marketing is an advertising model in which a company engages third-party publishers to generate traffic and leads to the company’s products and services in exchange for a commission fee.
The third-party publisher builds a trustworthy and popular online profile that attracts followers and connections. It can be a website, blog, YouTube channel or a social media profile (such as a Facebook Page). By sharing authentic content around a topic of discussion related to the company’s products and services, the publisher drives traffic to their pages and websites.
While here, he recommends the company’s products and services through a unique tracking link. When a user clicks on the link and converts (e.g., makes a purchase), the third-party publisher gets paid.
In this article, we are going to look in detail at how affiliate marketing works, the components of an affiliate marketing model and how you get paid as an affiliate marketer. Further, I will share my experience so far; what I have tried; what works for me and make conclusions.
How Affiliate Marketing Works
We have seen that affiliate marketing is when you earn a commission for the online promotion of another company’s products and services. As an affiliate, you perform online marketing on behalf of a merchant to drive traffic and conversions to their website.
In an offline business setup, salespeople get paid a commission when they bring customers to purchase in a local store. This model is the same as affiliate marketing. The only difference is that the salespeople do it physically and offline while affiliate marketers work online, and send customers to virtual stores via a unique affiliate link.
To summarise, this is how affiliate marketing works:
- Customers browsing online visit the affiliate’s website, blog or social media page. They are attracted by the rich content he produces. Because he has built a good reputation online, they can trust his product recommendations or reviews.
- The affiliate website redirects the customers to the merchant’s website through an affiliate link. If they like the product, they choose to buy it.
- The affiliate website gets a commission from the merchant’s website for the completed sale. The commission is usually a negotiated percentage of the total amount paid by the customer to the merchant for the purchased product.
You must have noticed that we have continuously talked about an affiliate and a merchant. What do these terms mean? Let’s see below:
Components of an Affiliate Marketing Model
As a business model, affiliate marketing is made possible by four components that interrelate and interact. These are the components of an affiliate model, which include the following:
- Merchant – A merchant is the actual seller of the products and services who is looking for a way to increase his sales. This can be an individual or a company.
- Affiliate – An affiliate, also known as a publisher, is the party that promotes, attracts and convinces a potential customer of the value of the merchant’s products and services and leads to a sale. He or she can be a blogger, an influencer or just a company.
- Customer – Refers to those who buy the products or services through the affiliate unique link. This is the actual person who ends up buying and using the products and services of the merchant.
- Network – To manage the affiliate partnership, the merchant uses an affiliate network to host product databases, enrol new affiliates and track their performance. Affiliates also use the network to choose the products to promote and generate or access affiliate links for sharing with their audiences. Therefore, the network is an intermediary between the merchant and the affiliate.
When an affiliate converts a fan or blog visitor to a buyer (either by generating leads or sales for the merchant), they get paid based on agreed terms. Therefore, in the following paragraphs, we explore the compensation methods available for an affiliate marketer.
How You Get Paid
As an affiliate marketer, you get paid when you influence your audience to perform certain actions on the merchant’s website. It can be marking a purchase, clicking on a link to the merchant’s site or just by the mere fact that they have seen the merchant’s ad on your site.
Therefore, in the course of my research and prior experience, I identified two main compensation metrics that merchants use to calculate payments to their affiliates. They include the following:
1. CPA (Cost Per Action/Acquisition)
Cost per acquisition refers to the scenario where an affiliate marketer gets paid for each lead they generate for the merchant. A lead is created when an affiliate sends a customer to the merchant’s website and takes an action.
The action can be either completing a form, signing up for an email newsletter or downloading an e-book.
Also, affiliates get a pay-out when they direct customers to the merchant’s website and resulting in a sale. This is called cost per action. The amount paid to the affiliate is calculated as a percentage of the total value of the sale made via the affiliate tracking link.
A good example is Amazon’s affiliate program called Amazon Associates Program. When you promote products on their website and successfully generate a sale, you will be paid a percentage of the value of the customer’s purchase made.
However, it is important to note that the customer will pay the normal price charged on the site. The price will not be raised to cater for the affiliate’s commission. It is this normal price that gets split between the merchant and the affiliate according to the agreed percentages.
2. EPC (Earnings Per Click)
As the name suggests, you will be paid an agreed amount of money when your referred customer clicks on a link to the merchant’s website.
Since it is easier to generate clicks than sales, the commission for this model is lower than the cost per action or cost per acquisition model. More clicks will lead to more earnings.
What Works for Me: My Experience in Affiliate Marketing
Like most people, when I heard the idea of the possibility of making money online, it sparked a lot of interest and curiosity in me. Is it not a good thing to make extra cash while you work on things that interest you?
However, the internet is proliferated with lots of misinformation on making money online. Some people paint it as an easy-to-get rich scheme which is not. Others run spammy programs that con people of their hard-earned money. I was aware of that and I decided to do my independent research and experimentation to see what works and what doesn’t work.
I have been creating content on YouTube and running three websites; two of them with active blogs that I update regularly. Most of my content spans a range of quantity surveying topics, building information modelling and computer-aided design.
In the course of building an audience, a digital creator approached me to partner with them and promote ArchiCAD templates and online courses they were creating. After negotiations, I signed up and started promoting the products. You can see some of them on the resources page of this website. Others appear in the descriptions section of my YouTube videos.
Also, I share affiliate links to other products that have been useful to me. These include Hostinger’s website hosting services; that I use to host all my websites, and WordPress based page builders (Elementor) and themes (Elegant Themes’ Divi) for creating websites and blogs.
If anyone subscribes to any of those services or buys the products via my affiliate link, I get credited some amount as my affiliate commissions. So far, I have made some good earnings since I started engaging in these programs.
Challenges and Way Forward
Nevertheless, the journey is not without challenges. Convincing someone to buy a product is not a walk in the park. You have to consistently deliver useful content to them and remain as authentic and unbiased as possible. It is only until you have shown that you are trustworthy that a potential customer will take your advice.
Further, consistently creating content requires a huge deal of commitment and effort. Self-discipline and the resilience to keep on pushing out content even when you don’t make any sales for weeks are important ingredients of the process. When the rewards come, there is no limit to how much you can earn because it depends on the volume of sales you generate. The more sales, the more the earnings.
If you are starting today, you have made a big step ahead. Create a website, a blog or a YouTube channel and start making useful content. Building an audience is the first step. Then from there, you can start looking for a way to convert your audience to customers.
We have seen affiliate marketing as a business model that involves an affiliate promoting the products of a merchant and getting rewarded a commission when a customer clicks on a link, converts to a lead or makes a purchase through the affiliate’s unique tracking link.
Further, the amount of money you can earn from this is infinitely scalable. It depends on the number of leads you generate or the number of sales you make. That makes it a very attractive business as you can make a decent earning by creating content and promoting other people’s products and services online.