Affiliate marketing is the sharing of revenue between online merchants and individual salespeople. This concept has been a major contributor to the rise of many online companies including Amazon and Walmart.
In fact, Amazon was one of the first companies to recognize the value in affiliate marketing, and now has thousands of affiliate relationships that help generate millions of dollars in sales. Today, almost every company with a website has an affiliate marketing program.
People have realized that there is a lot of money to be made simply by promoting other people’s products. Companies have realized the value in having tons of salespeople out there promoting their products on 100 percent commission. If their affiliates don’t sell anything, they are not out any money. If they do sell, then, both the company and the affiliate, make lots of money.
This can be a great way for you to generate income using your blog or website. The more people that see your ads promoting a certain product, the greater chance you have at making a sale. Of course, you have to make sure you are generating a lot of traffic to your blog or website because not everyone is going to click on your affiliate ads.
In addition, out of everyone that clicks on your ads, only a small percentage will follow through and make a purchase. Therefore, affiliate marketing can be an excellent way to earn a mostly passive income. However, like anything, it has its challenges and is by no means a get rich quick business method.
Within affiliate marketing there are three different payment methods, which are the three different payment structures that certain companies may offer. You can be paid a straight commission for a sale you referred, for a click-through from your website, or for getting people to sign up to their program. Here is an explanation of what each of these areas entails.
Commission based sales are where you sign up to promote the company, and the company gives you a commission on each sale. The rate of commission is based on a number of factors including performance, the product, time of year, your conversion rate, your affiliate status, et cetera. In essence, the more money you make the company, the more money you will get paid. When you are promoting products with the purpose of making a sale, it isn’t enough to generate thousands of clicks for a company; you need to make sure those clicks convert into sales.
As an example, let’s say one affiliate marketer generates 1000 clicks and 5 sales and another generates 100 clicks and 5 sales. They both generated the same number of sales and let’s even say it was the same monetary sales value. However, the company is going to like the second affiliate marketer better. Why?
Because the second affiliate marketer has a higher conversion rate. In commission based affiliate marketing, this is what companies care about. They don’t really care how many people click on your ads; they care about how many sales your clicks turn into. This is why it is extremely important to make sure your ads are relevant to your content so that your clicks will be more likely to convert to sales.
Click-Through or PPC
Click-through affiliate marketing is where you are paid each time someone clicks on your ad. This is also known as Pay Per Click or PPC. However, the PPC term is more often used when buying ads. You state that you will pay every time someone clicks on your ad. This can be an easy way to earn money by featuring ads on your website.
The most common way to do this is through Google AdSense. In fact, they are really the only place that will pay you when someone clicks on an ad. The reason companies don’t have their own pay per click marketing campaigns is that it is expensive and not all clicks turn into sales. Therefore, it is more lucrative for them to use the commission based affiliate marketing.
One thing to note is that the amount of money you receive for clicks is nowhere near the amount you can receive on commission. Usually you will only receive up to 5 cents for a click. Most likely it will be around 2 cents. However, with commission based affiliate marketing you will usually receive 5 to 10 percent of the sale with companies and 50 to 70 percent of the sale for private individuals who want you to promote their product.
Some companies will offer to pay you when you bring someone into the company. These are usually companies that offer a course, program, plan, or some other form of commitment based opportunity. Health and Fitness and Multi-Level Marketing programs are good examples. Basically, you get paid a flat rate each time someone joins the program. Amazon has also gotten into paying for sign-ups. Currently, they have different “Bounty” programs where you can get paid for referring people to Amazon Prime, TV, Audible, et cetera.
This can be pretty lucrative, especially when the program has a commission-based incentive tacked onto the end of it. Perhaps you get someone to sign up for a certain program and you receive an initial flat payment of $20. Then you receive 10 percent of their monthly membership fee. These are the programs to promote. This way you can have a passive income once you sign up several members.
There are many benefits to affiliate marketing that include the potential for making lots of money, having a passive income, being your own boss, working from home, promoting a product you love, et cetera. It is by no means a get rich quick business model and it will take some time and effort in order for you to start making money. There are three primary ways that you can do this within affiliate marketing. You can earn money based solely on sales.
This is where you earn a straight commission for promoting a product. You can also be paid each time someone clicks on your ad. Although the amount of money you receive will be significantly lower than commission-based sales. Finally, you can be paid for getting people to sign up or join certain memberships or programs. This is often a flat rate and can be pretty lucrative if the rate is coupled with a monthly membership fee on which you can receive commission.
In the end, affiliate marketing can be a great way for you to start earning some extra money on your blog or website. It is very easy to start and has infinite potential. You have the option to promote one product or several products and you’ll receive money for doing so. You’ll need to dedicate time to research and find the best products for your site. But once you know what you’re doing with affiliate marketing, you’ll be on top in no time.