Affiliate marketing, an accessible business model!
This week we are covering a relatively low-stakes business model, namely affiliate marketing. Affiliate marketing is the promotion of other people’s products in exchange for a fee. You can get this compensation, for example, per product or lead sold.
Affiliate marketing: what does it mean?
The parties involved in an affiliate deal
Affiliate marketing involves several parties. The company you want to advertise for is called the advertiser. This party offers products or services via the Internet, often in the form of a web store. The advertiser is also the one who provides the promotional material for the affiliates. This can be in the form of advertising banners and text links, for example. In addition, the advertiser determines the level of remuneration. The affiliate (publisher) is the one who promotes for the advertiser. By forwarding customers to the advertiser, the affiliate receives a predetermined fee, depending on the agreements.
Affiliates can find advertisers through intermediaries, a so-called affiliate network. The affiliate network is the connecting link between the advertiser and the affiliate. In addition, affiliate networks take care of the measurements of the transactions. Based on the data, the intermediary can arrange payment processing. In doing so, they often grab a small percentage of the fee themselves. Examples of affiliate networks are TradeTracker, Awin, TradeDoubler and Daisycon.
Below is a 1-minute video that clearly explains the affiliate business model.
Compensation for an affiliate deal
The fee structure depends on agreements between the parties. Generally, a no cure no pay principle is used in affiliate marketing, which means that the advertiser only pays a fee if actual results have been achieved by the affiliate. The result can be defined in different ways. For example, there are a number of fee structures such as Cost Per View (CPV), Cost Per Click (CPC), Cost Per Lead (CPL) and Cost Per Sale (CPS). Cost Per View (CPV) means that the affiliate receives a fee when a visitor looks at the ad. Cost Per Click (CPC) goes just a little deeper and means that the affiliate is paid a fee, often a few cents, per click on the promotional material. One level deeper is the Cost Per Lead (CPL) which means that the affiliate only gets paid when a lead is provided. This means that the visitor contacts the advertiser but has not necessarily led to sales yet. An example of this is when someone fills out a contact form. One level deeper is the Cost Per Sale (CPS). The name says it all; the affiliate receives a payment if the referred visitor has actually led to sales for the advertiser. Often the fee amounts to a small percentage of the sales amount.
Pros & cons of an affiliate business
Want to get started with affiliate marketing yourself? This model is easy to set up if you have your own website and want to start promoting. Many digital nomads use this business model to give their income an extra boost.
- Approachable: Becoming an affiliate is a piece of cake, provided you have the space to put your promotional materials. Often a website of your own is enough. After that, you just need to sign up with an affiliate network and join one of the many programs.
- Passive income: Once you have set up your affiliate promotion, you have little else to worry about. When visitors are referred to the advertiser through you, you earn your compensation. Of course you can optimize your promotion to get even more out of it.
- No hassle with stock and peripheral issues: You only send people through and are rewarded for that. Therefore you do not need to have stock or deal with peripheral issues such as customer service.
- Not tied to location: As long as you have internet access and a computer, you can promote for the advertiser. This allows you to live your digital nomad life while being an affiliate.
- Scalable: Your affiliate ambition can grow with your business. There are many affiliate programs you can join and as long as you refer, you get your compensation.
- Takes a long time to earn money: Before you receive a reasonable fee with your promotion you often need a lot of visitors and links. It often takes a long time to build this, patience is a good thing.
- Many visitors are needed to make a lot of money: The commissions are often low, therefore you need to refer many people to earn a reasonable fee.
- Limited freedom in promotion options: The advertiser decides what kind of promotional material you get and in what way. Therefore you do not always have the freedom to organize the promotion on your website the way you want to.
- Lots of different content needed: It is often necessary to link to many different products in order to generate stable and growing affiliate income. Since affiliate links are often embedded in content, a variety of content is required to effectively refer to the advertiser’s products or services.
Opportunities of the affiliate business model
To get the most out of it as an affiliate, it is important that you send a lot of visitors to the advertiser. As mentioned earlier, you can do this by using your own website for this purpose. You can do this in various ways, for example by writing blogs for your visitors and placing affiliate links to the products you mention. But there are also ways to apply affiliate marketing on a larger scale, for example by building a comparison site. Comparison sites often base their business model on affiliate marketing. They allow you as a visitor to compare products and services, redirect you to the seller of those products or services, and then receive compensation.
Are you planning to promote as an affiliate? Then the key is to get your website or platform ready for the promotional material and then sign up with an affiliate network. TradeTracker, Awin, TradeDoubler and Daisycon are the major affiliate networks and may be able to make the connection between you and the advertiser!