Affiliate marketing is a method where a retailer, merchant, or brand can acquire customers by using an “affiliate network” to put ads, banners, or information on third-party websites (which is the affiliate). If the concept is foreign or confusing to you, you’re not alone. This form of marketing is unique to the online world, and using it correctly can get complicated.
However, it’s still extremely popular. Web Market Support says that 81% of marketers and 84% of publishers utilize the power of affiliate marketing.
If you’re looking to learn more about affiliate programs, we’re here to help. In this article, we’ll answer, “What is an affiliate?” We’ll also detail some of the pros and cons of the affiliate marketing industry so you can get a better understanding of whether it’s right for your small business.
What is an affiliate?
An affiliate is a third-party company that you attach your business to. You and another company work together to sell products. To put it more simply, here is how affiliate marketing works:
- A website displays banner ads or buttons promoting products or services from other companies.
- The website receives a commission if site visitors perform a desired action. Examples range from clicking on a link to the retailer’s website to making a purchase.
- The small business pays a fee for the click, which is collected by the affiliate network company.
If you’re a small business with a product to sell, affiliate marketing might seem like a slam dunk as it allows you to drastically expand your customer base. Similarly, if you’re a website or blog owner looking to monetize your site, this might be a lucrative option. Generally, there are two ways you can use affiliate marketing.
How can you use affiliate marketing?
The first way to use affiliate marketing is to offer your business as an affiliate to other companies. These companies will post your information on their site.You’ll pay-per-click (PPC) or lead that the affiliates drive to your online business.
The other option is to sign up to be an affiliate marketer for another company. In these cases, you’ll be the one receiving affiliate commissions for driving web traffic to the company’s site. You can broadcast your affiliate products through your marketing channels, including your:
- Social media
- Content marketing
- Email marketing
No matter which option you choose, a successful affiliate program is a win-win business model. Let’s take a more in-depth look at the ins and outs of affiliate marketing and determine if it’s right for your small business.
Why affiliate marketing?
As opposed to standard online marketing, affiliate marketing gives advertisers more control over how they spend their advertising money. By limiting the payout to only the websites that perform, the advertiser is not wasting dollars on unseen or ineffective marketing efforts.
One of the other significant benefits of affiliate marketing is that you gain access to untapped markets. If you feel that you’ve tapped out your current market potential, a successful affiliate website could introduce you to a new customer pool.
For website publishers, affiliate marketing is a way to get advertising on their site without having to employ a sales or creative team to build ads. The network that runs the affiliate ads will be in charge of reporting on analytics and keeping track of the site’s performance.
Having a good KPI system in place will allow these publishers to successfully monitor web traffic.
While it may seem that this is an easy way to make some money, the truth is that affiliate sites have their own responsibilities and demands too. You should consider some of the downsides of affiliate marketing before jumping in.
Pitfalls of affiliate marketing for advertisers
An affiliate marketing strategy is certainly a way to earn passive income, but if you don’t do it correctly, you could find yourself losing money.
1. You might end up competing with your own ads
Most online advertisers use a mix of digital advertising options, including search engine marketing, pay-per-click, search engine optimization (SEO), relationship marketing, and more.
Many affiliate networks use the same tactics, so you might end up competing with your own ads. While this might turn into a fascinating A/B test, chances are the cost you’re paying for your other online display ads is high, and you don’t want to waste that money.
2. You can’t fully control your brand’s exposure
Affiliate sales don’t occur on your own website. Because you aren’t necessarily vetting every site that will carry your affiliate ads, your products or brand may be represented alongside questionable content.
Also, some sites use less-than-reputable tactics, such as email spamming or false advertising. Your affiliate ads run alongside the merchant’s products, so you may gain a poor reputation as a result.
The consumer might come to associate you with the merchant’s subpar products or shady tactics, even though you don’t have anything to do with them.
For the sake of protecting your brand, make sure to set stringent guidelines, especially around promotions and pricing, and hold your affiliates accountable if those guidelines are broken.
3. You might end up paying commission to an affiliate that didn’t earn it
While the instances are few and far between, there have been cases of affiliate sites and networks defrauding retailers out of money. There are numerous types of affiliate fraud, which is a real problem in the industry.
Another tactic is leading users to your site under false pretenses, such as the promise of a coupon or discount code.
The best way to avoid this is to keep close track of your analytics, especially in the beginning, and evaluate which sites are really working for you. You can also take a look at metrics like referring URLs to determine if the affiliate has earned its finder’s fee.
By staying on top of your affiliates, you can ensure that you’re getting a good return on investment and that you aren’t wasting money on your affiliate efforts.
Pitfalls of affiliate marketing for affiliates
If offering your business as an affiliate site is an avenue you’d like to go down, make sure to watch out for these pitfalls.
1. You might end up doing more work than you anticipated
While many people believe you can simply set up a website, place some affiliate ads, and then let it go, that simply isn’t the case. Like all online advertising, best practices apply.
Examples include updating content and offering valuable information to consumers that Google’s bots can pick up on.
If you put up your website and then let it sit, Google will penalize your site in their search results, and that inaction will bring your organic traffic to a grinding halt.
So, you’re going to need to invest time and money into your site. However, because you’re hosting products from another company, you may find yourself dedicating more time and effort than usual to updating your content.
2. You might not make any money
If your website is new or caters to a particular niche, chances are your daily site traffic is pretty low. Steady, maybe, but it’s still low. This makes earning commission through click-throughs or purchases very difficult since you’ll have a smaller pool to start with. Carefully consider whether your site is equipped to generate the type of traffic that makes affiliate marketing worth it before committing any time or effort to establishing your affiliate site.
3. You might not get paid
Make sure you do your research when starting off in the world of affiliate advertising. Does the affiliate network have a good reputation? What is the average monthly payout for an affiliate site? How much can you hope to make?
While these questions and answers are particular to your site, the campaign and the advertiser should have some statistics they can share. The stats should demonstrate quantifiable success on past campaigns.
Also, be sure to read the terms and conditions carefully. You want to fully understand the requirements for earning and receiving commissions, as well as the restrictions and types of support you can expect.
Is affiliate marketing right for you?
Affiliate marketing is tempting to many small business owners. They see it as a shortcut to success and a way to quickly push more product. While this may be the case in some scenarios, affiliate marketing programs do not have guaranteed success. Remember that affiliate advertising is not the perfect fit for every small business or website. To truly find success, you must:
- Diversify your affiliate campaigns. This is true for both affiliate sites and advertisers. Affiliates shouldn’t pin all of their hopes and dreams on one advertiser, and advertisers shouldn’t assume a handful of sites will earn them success.
- Pay close attention to the type of products. Make sure that the affiliate is a good match for the product, and the product is a good match for the affiliate.
- Carefully monitor your results. Whether an affiliate or advertiser, you want to be fully aware of your results. As an affiliate, are you getting paid decent commissions? Is there anything you could do to improve your success rate? As an advertiser, are you using the right websites? Do your affiliate sites genuinely provide you with qualified leads or customers?
If you decide affiliate marketing is right for you, look for a trusted affiliate marketing network. In many cases, this is the easiest way for retailers to get started.
Maximize marketing success with affiliate programs
Affiliate marketing is here to stay, and you don’t want to miss out on the opportunity to bring in some money and increase your products’ online exposure — so long as that exposure is going to benefit your brand. Similarly, you could host ads on your site to earn a bit of passive income for your company. Both options are worthwhile and could bode well when implemented properly.
Remember to also have your accounting software in place for when you do start to sell. You’ll want to keep track not only of things like the revenue from your e-commerce sites, but also things like how much you’re owed from affiliate partners. Having this system in place before you get started will help ease the transition into this new marketing industry.