Chapter 1

What is Affiliate Marketing?

A Guide To Affiliate Marketing - Oberlo

Just twenty years ago, businesses spent thousands of dollars each year on radio, TV, or print ads in the hopes that their brand would grow. While they were promised success, the truth is that it was incredibly difficult to stand out and make money via advertising.

Worse yet, their efforts were often pitted against enormous corporations with million-dollar ad budgets. If they got any airtime at all, the smaller companies had a harder time gauging success against their Goliath-esque competition.

Small companies and your everyday entrepreneur held the short end of the stick, and growth was hard.

But that was twenty years ago.

These days, anyone with an internet connection and the know-how can make money by helping brands grow and sell online by participating in affiliate marketing.

Affiliate marketing is an advertising method used by brands to attempt to mitigate wasteful spending in their marketing budget. It can be frustrating for a business to pay thousands for clicks or impressions only to win a handful of customers.

Many brands have been burned by such endeavors, so as online advertising costs have risen,  they’ve turned to innovative ways that minimize costs while still growing their customer base.

While most businesses recognize that spending money on advertising is necessary, the ideal situation is to keep their costs limited to customers earned.

That’s where the idea for marketing with affiliates was born.

As a performance-based marketing method, affiliates and businesses can work together in a revenue sharing relationship between brand and marketer.

 

For brands that have a product and want to sell more, they can offer a financial incentive through an affiliate program.

For individuals with no product that want to make money, they can find a product that has value and earn income as an affiliate marketer.

This guide provides a step-by-step journey through the world of affiliate marketing for beginners. You’ll learn what it is, how it works, and most importantly, how you can make money doing it.

And since good affiliate marketers can be hard for brands to find, you’ll learn everything you need to stand out from the crowd.

Use this ebook as a starting point and a reference for each stage of your journey as you learn how to sell as an affiliate marketer. As you read through each section, you’ll find affiliate marketing explained to you in a way that you can relate to. Plus, you’ll find tons of examples and tips that will help you establish yourself and improve your selling methods that will grow your income over the years.

So let’s get started by teaching you the basics.

1.1 Understanding Affiliate Marketing

The first question that most people raise when they approach this topic is relatively basic: what is affiliate marketing?

Here’s a basic definition that sums it up nicely:

Affiliate marketing is a way for you to earn money by selling a brand’s products. As strictly a marketer, you have no inventory and work for commission. Generally, affiliate marketers receive payment when a consumer they referred buys a product or service or completes a specific task.

In other words, it’s a way that businesses can outsource their marketing to you in a way that’s strictly performance-based. This offers businesses a 100% return on their investment, which makes it unique among online marketing methods.

It also means that you have the opportunity to make a good deal of money by selling a product that isn’t yours. The more you sell, the more you earn.

And since you don’t have to worry about shipping, overhead costs, or customer service, your input is as small as you want it to be.

But to make money as an affiliate marketer, you have to understand all parties involved and what they stand to get out of the relationship. Knowing each role and how they can potentially help you make money is an essential first step when starting out as an affiliate.

Your overall success requires building relationships that rely on three distinct parties:

What is affiliate marketing

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Advertiser: The first party, typically referred to as the advertiser or merchant, is the party that’s selling the actual product or service.

This is the party that you, the affiliate, will be working with. They usually have an established affiliate program, and leave it to you to carve out your space on the web and sell their product.

The product or service could be a physical product like phones or laptops, or even less tangible items like insurance policies. We’ll cover many more possibilities and examine how to choose products wisely in a later chapter.

Affiliate: The second party is the publisher, more commonly referred to as the affiliate marketer.

This is you, the individual working with the merchant to sell in exchange for a commission. You’ll have a contract in place, and you’ll seek to push traffic in the form of links, ads, or in some cases unique phone numbers that you incorporate on your site.

Affiliate marketers fall under a very broad umbrella and could be just about anyone on the web. If you follow a blog or a popular social media profile, the chances are good that they are an affiliate of a brand.

The Advertiser/Affiliate relationship is a highly strategic one, as both parties need to make money for the relationship to continue. Since you’re working so closely, you need to be on the same page about your roles, responsibilities, and payment.

Consumer: Finally, you have the consumer or the party that will be (hopefully) buying your product. Thus, the relationship between the affiliate and the consumer should be one of trust.

The consumer finishes out the relationship triangle by interacting with your marketing efforts (like clicking a tracked URL or ad) and then moving further into the publisher’s sales funnel. Once they’ve bought something or completed the action agreed upon by the affiliate and merchant, everyone receives their piece of the exchange.

All three groups center on the relationship created by the affiliate and will receive their product or payment through you. Of course, you’ll also get paid when a purchase goes through.

Once you know how each party plays its role, you start to gain a better picture of how the entire affiliate marketing process works:

affiliate marketing meaning

You, as an affiliate, publish ads or content that encourages a consumer to buy from a merchant. You’ll have a set affiliate marketing method that will allow you to build an audience and promote to them.  

Using various technologies and platforms, the merchant can track when you send a customer to them and will pay you if they buy a product or service.

As a third-party to the brand, you have no say over what you sell or the price it sells for, but you also carry less risk.

When every aspect of affiliate marketing works together, every party benefits. Consumers get their product, merchants generate revenue, and the affiliate makes a commission.

If you do this process well, you can make money in the long-term by keeping a consistent strategy and building stronger relationships with all three involved parties.

Let’s look at a basic example of how this works in real life.

Some Examples of Affiliate Marketing

If you want an example of how successful you can be as an affiliate, look no further than the mega-affiliate website MoneySuperMarket.

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This massive website has been around since 1993, and at this point has made its founder Simon Nixon, a billionaire. While it’s a pretty rare example of how successful one of these sites can be, it’s the perfect model to show you how this process works.

When you scroll down on the homepage, you’ll see a vast list of products or services that you can browse through. They promote a wide variety of products, including insurance, smartphones, and travel services.

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Say you’re in the market for a mobile phone. When you click through to the phone offerings, you’ll see a product page that has a unique ‘Go To Site’ button instead of a ‘Purchase’ option.

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That’s because this site doesn’t sell you anything. It recommends products that you can buy elsewhere as an affiliate.

If you were to browse MoneySuperMarket, click on to a site, and then buy one of these phones from the merchant, then part of your purchase would be sent to MoneySuperMarket.

That’s how MoneySuperMarket makes their money as an affiliate. As long as you buy from a promoted site, then they will get a kickback. This site has made billions by promoting instead of selling, and they carry zero inventory.

But you can do more than sell a product on a marketplace as an affiliate. Look at what blogger Matthew Woodward does with his website.

You’ll notice from the very beginning that it looks very different than MoneySuperMarket:

affiliate marketing for beginners

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That’s because this is strictly a blog. Affiliate marketing for bloggers is a different process than for marketplaces.

By writing on topics that his audience needs to know about, he builds trust and acts as an influencer in their day-to-day. He also complements his blog with a direct email marketing approach that puts him directly in his audience member’s inbox.

affiliate marketing influencers

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All of this is designed to build trust, not sell.

He then takes the trust he builds with his audience and recommends specific tools that he’s an affiliate marketer for. He even has a whole section of his site dedicated to offering exclusive deals and discounts for his readers.

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Much like a marketplace, if someone is referred from his site and makes a purchase, Matthew Woodward then makes a cut. But the difference is that he can also link to these deals in his blog post, or even send them directly by email when a new deal becomes available.

He’s quite successful too, as he reportedly brings in more than $20,000 each month on a regular basis.

But that’s another example of a more prominent, more established affiliate marketer. What does it look like when you’re starting out?

Well, to answer that, let’s look at smaller Instagram influencer like Cassie Andrews Style. She started her Instagram account in 2015 and her first pictures weren’t all that impressive.  

But it wasn’t long until she was up and running. Most notably, she decided to take stylish photos of her home and post them for others to admire. Her Instagram feed is a collection of posts that have the same look and feel as you see in this photo below.

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As her following grew, brands started to notice her as well. Before long, she was creating sponsored posts that allowed her followers to take advantage of special deals with her merchant partners.

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While I don’t have exact figures on how much she’s made from this, she currently has more than 6,500 followers and gets tons of engagement on her posts. And while not all of her posts are sponsored or affiliate-marketing oriented, she still promotes brands from time to time on her account.

But as you can see, it’s entirely possible to be a successful affiliate marketer on a variety of levels. If you want more ideas and inspiring stories, check out this chapter dedicated to affiliate marketing examples.

Now that we’ve explained what affiliate marketing is, it’s time to start digging a little deeper into what affiliate marketing has to offer.

And with success stories like these, it’s hard not to want to dive in as soon as possible. Hold on just a little bit though because you’ve got a long way to go before you can potentially have that kind of success.

The Pros and Cons of Affiliate Marketing

Before you start as an affiliate marketer, you should know about the good and the bad. The rewards may sound amazing, but this venture doesn’t come without risks.

Pros of Being an Affiliate

  • Low startup cost. Most programs let you join for free, so costs are typically tied to how you build your audience and get referrals.
  • You don’t have to make your own product or service.
  • When someone buys, your merchant ships for you.
  • Work anywhere with a WiFi connection.
  • If set up correctly, income can be passive.
  • Adds an extra revenue source for home-based businesses or anyone with a website.

For a cash-strapped entrepreneur that’s willing to go slowly, becoming an affiliate is a dream come true. You can grow as you make money, and eventually can create a higher source of income. If you’re very successful, it could even grow to be your full-time job.

But like all good things, not everything is always simply the positives we want to hear.

Cons of Being an Affiliate

  • Building traffic for referrals can take time.
  • It’s possible for poor tracking systems not to attribute your sales properly (you lose money).
  • Bad customers to the merchant can damage your reputation and relationships.
  • Zero input on the product you promote.
  • The potential for a company to ‘go ghost’ and not pay.
  • You have a lot of competition.
  • The customer is ultimately the merchant’s, not yours.

If you commit to being an affiliate marketer, you have to understand your place in the pecking order. The brands you work with ultimately can make or break you, so you’ll need to choose wisely.

By now, you should have a better understanding of what it means to be an affiliate marketer and how you can make money doing it.

However, before we dive into the nitty-gritty details of starting out, I want to raise and answer a few questions that you need to be aware of.

1.2 Affiliate Marketing for Beginners: FAQs

Once you answer the initial question of ‘what is affiliate marketing?’ it’s not uncommon for the aspiring entrepreneur to start looking for more clarity. In fact, there’s usually a long list of questions that you want to have answered before you dig into starting your journey as an affiliate marketer.

So to help try to answer any questions or concerns, I’ve put together a list of common questions that will help ease your mind and give you some basic guidelines to work with.

Is It Still Viable?

One of the biggest concerns with newcomers is perhaps the most relatable. Simply put, is there any more room in the world for another successful affiliate to make it?

That depends on what you want to sell as an affiliate.

It’s no secret that interest in affiliate marketing has trended positively over the last decade. A simple look at Google Trends will tell you that much.

google trends affiliate marketing

On the surface, this trend may seem discouraging. Your interest is piqued, but so is the interest of your friends, neighbors, and coworkers. It gives the impression that affiliate marketing for beginners is an uphill climb.

That idea isn’t wrong, but it’s only half the picture. Much like the rest of the digital frontier, being an affiliate means changing with the times. That means while there’s more interest than ever,  there’s also more opportunity than ever as well.

For example, smartphones have changed the way we interact with the world around us, which means they’ve also affected how affiliates approach their audience.

Also, sites like Instagram and YouTube have created a broader pool of influencers for brands to choose from, as there are more content creators with ready audiences than ever.

Becoming an affiliate is still a viable option for the entrepreneur that’s willing to put in the effort and find what works. It may take trial and error, but there’s no doubt that you can make money once you hone your approach.

Is It Truly Profitable for the Little Guys?

It’s easy to look at an example like the one above and think you’ll never get there. However, the facts should pleasantly surprise you.

Recent studies have shown that affiliate marketing is the second-best way that brands generate money. Google AdSense barely edges it out.

Is affiliate marketing profitable for publishers

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That means the potential for newcomers to be profitable is there if you approach with the proper system.

At its best, being an affiliate can become an excellent source of passive income. There’s a moderate amount of upfront work required to potentially make a sale, but once you create a system, you can easily turn a profit.

Say for example you decide to use paid ads to sell a product. Once you build an ad, determine a budget, and do some optimization, you can have your ad running in the background that will send visitors to your merchant’s site.

You don’t hassle with a product or customer complaints. Your only goal is to send highly targeted traffic to a landing page or product page to start winning conversions.

But being profitable requires much more than sending a visitor to a page and hoping they buy. Much of the profitability of your efforts depends on elements you can’t control.

For example, does the product that you promote offer a reasonable commission rate? If not, you may not make enough to cover the costs of your advertising.

Even though commission rates are rising, that doesn’t mean you’re guaranteed to always turn a profit.

Furthermore, does the niche that you’re selling within have high enough demand so that products will sell?

And will people actually click on your ads at all?

All of these questions need to fall into the ‘yes’ column for your efforts to be profitable. Instead of going with the first brand you find, you’ll need to do some serious digging. Partnering with an unsustainable brand could lose you money and put you off from being an affiliate for good.

John Doherty, Credo

There absolutely is still room for new affiliates, because there are always new products to promote and new audiences to reach. The internet is a vast place with infinite verticals to work in, so instead of just focusing on the biggest affiliate programs in a specific industry I recommend using that one as well as others (and Amazon!) to round out your affiliate offers and thus your revenue.

The most important thing a newcomer to affiliate marketing needs to focus on and learn is *how to generate a large and engaged audience*. Without a large and engaged audience, or the skills to grow that, then affiliate marketing will be completely ineffective. Learn one top-level acquisition channel (partnerships, SEO, whatever) and then learn the middle of the funnel with marketing automation/email marketing to further convert people time and time again to different offers once they are within your network.

So yes, being an affiliate can be profitable if you’re strategic about your efforts and do your homework.

Is It a Scam?

While affiliate marketing has a good reputation in general, one of the common questions raised by newcomers is whether or not it’s a scam.

Unfortunately, these allegations sometimes have a leg to stand on, as there have been some publicized scams through the years that you should be aware of.

This scathing article on VentureBeat from 2013 still ranks number one for a Google search of ‘affiliate marketing scam’.

Affiliate marketing isn't a scam

The author’s business was being scammed by affiliates who manipulated their system, which cost a great deal of money.

The business owner unfortunately concluded, and shared, that most affiliates were scam artists. Since he writes for a major publication, the damage was done for good even with the rebuttal post that the publication posted.

It’s also not uncommon to stumble upon affiliate programs that are little more than a get-rich-quick scheme. If you ever watched late-night infomercials, the promise is typically one and the same.

These schemes typically focus on a product or service that doesn’t even exist, which is the first red flag.

The other thing to watch out for is how the program is ‘sold’ to you. If they overuse buzzwords like ‘work from home’ or ‘make money while you sleep’, you should proceed with caution.

While those phrases are technically true, they can be used to pique your interest and lower your guard. It also makes being an affiliate as a profession look somewhat sleazy, and has prompted many a forum chat about authenticity.

The final common ‘scam’ revolves around people who advertise courses for new affiliate marketers.

They typically draw an unknowing and unsuspecting prospect in, only to give them poor advice or information that leads the marketer down the wrong path. This ‘training’ is just someone trying to make a quick buck at the expense of an interested but unknowing party. While legitimate affiliate marketing training courses do exist, there’s enough bad out there to cause some harm to affiliate marketing’s reputation.

People sign up, and when they don’t make any money (or actually lose money), they decide that the whole thing is a scam. It’s best to do your research and make sure that any course you join is worth your time and money.

An added result of this is that there’s now an unfortunate amount of wrong information that you’ll need to wade through to determine what’s right. But that’s why you should turn to successful affiliate marketers and authoritative guides to learn the fundamental skills.

So yes, there have been scams. Should that scare you away? Definitely not!

Now that you know what to look for from disreputable sources, you can avoid them. As long as you stick to established influencers and commit to building a legitimate network, you don’t have anything to worry about.

You can truly and safely start making money while you sleep, just stay away from the sites and individuals who promise that will happen overnight.

How Long Does It Take?

The truth is that building your income as an affiliate will take time. Overnight success is unheard of, and you’re likely going to be contending with other affiliates who have been at it for a while.

However, that doesn’t mean you can’t get a good idea of how long it may take to start seeing something. Many affiliate marketers report making modest sales within the first three months, even though that’s not a guarantee.

You have to approach this like you would any other online brand. The goal when trying to sell a product is twofold, and that extends to affiliate marketers when they sell to them.

On the one hand, you can approach this as if you are your own brand. You’ll have to build a website, start a social media account, and then create content that adds value to your target audience.

With this method, your two objectives are:

  1. Build an audience.
  2. Earn their trust.

So in one instance, the answer to the question “how long does it take?” is really better phrased like this:

How long does it take to build an audience and earn their trust?

Many successful affiliate marketers focus on building compelling content first. Then, they worry about revenue. But that’s just one example.

On the other hand, you could take a more incognito approach and choose to rely on paid advertising. Your role would be to create an ad and shoulder and budget obligations. You still have the same goal of making a sale, but no one would ever have to know your name or see your website.

When you utilize paid ads, the timeline for making a sale can be much shorter provided you know what you’re doing.

Either way, you have to start by providing value that draws attention, and then you move to capitalize on that opportunity.

It also helps if you truly believe in the product your selling, as that creates a more genuine conversation with your audience. You can certainly build an affiliate business around any product, but that doesn’t mean you should.

How Does It Compare to Dropshipping?

When discussing affiliate marketing, it’s inevitable that dropshipping will enter the conversation.

Dropshipping is another form of online selling that often gets tagged onto this topic and sometimes causes confusion. Allow me to clear up the confusion for you.

When you take a closer look at dropshipping and affiliate marketing together, you’ll notice some immediate similarities:

  • You don’t have to carry inventory for either.
  • There’s little to no risk involved.
  • Both will allow you to earn a substantial income.
  • The startup barrier is low.
  • Both require a digital marketer’s skill set.

So both are the same in that you don’t need to actually have a physical product in stock in a warehouse to make money. Dropshipping usually involves a relationship between a manufacturer that ships to a customer on the brand’s behalf.

But that’s where the similarities tend to end.

Unlike being an affiliate, dropshipping requires you to establish your own business. You’ll set up a website, build a relationship with a manufacturer, and handle all of the day-to-day minutiae of running a business. It’s still low risk and can be profitable for an entrepreneur willing to learn the ropes.

The upside of dropshipping is that you have much more freedom with your products. You set the margins, market how you want to, and ultimately build a brand. Being an affiliate doesn’t allow you that freedom, as you’re selling someone else’s goods.

Of course, you also have to deal with customer service, backlogs, and other frustrating e-commerce issues as a dropshipper as well. The potential for success may be greater, but the risks and responsibilities grow with your business.

This debate naturally leads to one question: which is better?

The ultimate choice you go with is up to you. Both present low-risk, low-cost opportunities to make more money, and you can learn more of the differences by checking out this free ebook on dropshipping.

But keep in mind that your only costs are related to the marketing tactic you use, and you can grow as fast or as slow as you want. Being an affiliate is a much easier path than dropshipping, and can be just as lucrative.

So How Do I Get Started?

At this point, you’ve got the big picture. Affiliate marketing for beginners can be tough, but it can also be a great source of income if you’re willing to stick it out.

Now you’re ready to dive into the details of how you can get started. The next chapter will cover the basics of how you’ll make money, which channels you can use, and provide more guidance on where to begin.

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