What is Affiliate Marketing?

affiliate marketing in action

I recently wrote 11 Ways to Earn Money from Your Website. One of the ways I mentioned was to engage in affiliate marketing.

So what is affiliate marketing?

In simple terms, affiliate marketing is where you market other peoples’ products online and provide a customised link to where potential customers can buy the product. If they follow the link and make a purchase you receive a percentage of what they spend.

Affiliate Marketing is a Form of Passive Income

One of the hardest parts of trying to earn an income online is thinking of a viable product to sell. Sure you might have ideas. But that doesn’t mean that people are willing to spend their hard-earned cash on your ideas.

I know this from experience. Four years ago I started this quest to earn my living online. I quickly learned that there are no Get Rich Quick schemes online that work – that’s just a fallacy. The only people who make money from those type of schemes are the people who sell products promoting them.

I initially set up a couple of sites myself. The problem was that I had no idea of how to make any money from them.

I couldn’t think of anything to sell! Admittedly I didn’t have much traffic to buy my non-existent products anyhow.

I was then introduced to the concept of affiliate marketing as a type of passive income. By passive income, I mean that once you set up a website promoting the products, the bulk of your work is over. Sure, you need to keep your website refreshed with new content (so it isn’t truly passive). But is a lot less hassle than having to create (or buy) and sell products.

Pat Flynn, who writes the Smart Passive Income blog, is the guru of passive income. He also knows how to do affiliate marketing well.

Who is Involved in Affiliate Marketing Transactions?

Affiliate marketing involves four parties:

  1. The Merchant – this is the person or business who creates the product that is being marketed. The merchant may be a well-known company, for example, Dyson who make vacuum cleaners, or it could be somebody small with an unknown product, e.g. somebody who opts to sell an eBook they have written through affiliate marketing.
  2. The Network – This is the organisation that acts as the intermediary between the Merchant and the Affiliate Marketer. In most situations, any potential affiliate marketer works with a Network, rather than with a Merchant themselves. If you act as an affiliate marketer for Amazon, you work with Amazon – not with the authors of the books you promote
  3. The Affiliate Marketer – this is the person who attempts to sell the product – i.e. you if you set up an affiliate marketing site
  4. The Customer – this is the person who ultimately buys the product

How Does Affiliate Marketing Work?

The Marchant creates a product. They have no real interest in marketing it themselves, so they decide to engage in affiliate marketing.

They will go to a Network that specialises in affiliate marketing. This could be a company like Clickbank. Or, it might be someone like Amazon Affiliates who act both as a retailer and an affiliate marketing network. The Merchant agrees to allow the Network to arrange the sale of their product via the Network’s affiliate program.

The Network adds this product their product line and makes it available to Affiliate Marketers looking for a product to promote.

Those wanting to act as Affiliate Marketers, come to the specialist Networks. They look through catalogues of products and some will choose to sell this particular product. They may set up a specialist website to help find potential Customers.

Ultimately an interested Customer comes along. They see the product on the affiliate’s website and decide to buy it. They follow a link from the Affiliate Marketer’s website to a site where they can buy the product. The link is customised so that the Network knows who has sent the Customer to buy the product.

The Network pays the Merchant for the product. When the person follows the customised link and buys the product the Network will pay the Affiliate Marketer an agreed percentage of the value of the sale.

If You Want to Make Money Online You Could Operate as Either a Merchant or an Affiliate Marketer

If you are innovative and like to create products, then you could use affiliate marketing as a way to sell your product. You put your energies into product creation and do not have to worry about marketing.

People who enjoy writing eBooks or creating courses often take this path, although it is also fine for those who create physical products.

Or, you could follow the Pat Flynn pattern, and sell affiliate products from your website. You could either do this as an extension of your existing site (as Pat does), or you could set up a microsite devoted to that particular product.

The second route is probably the easier one – you don’t have to come up with fresh product ideas. This is where most people begin affiliate marketing. Though, you may eventually prefer to become a Merchant. There is usually more money available at that end of the transaction.

I will look in more detail at what steps you will need to do if you want to become involved with affiliate marketing in a future post.

Main image: rawpixel.com

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