The Best Business Model: Affiliate Marketing in a Nutshell
A company is merely just a group of individuals gathered around to create a product or service. But what if you had no product or service and still wanted to create a business? This is where affiliate marketing comes to play.
Affiliate marketing is a $6.8 billion dollar industry. We see this business model in action every single day without even noticing it. It has been used by individuals to create million dollar home businesses, to multi-million dollar companies with hundreds of employees.
To visualize this, think about an employee at a department store. They get paid hourly, but they also get commissions when they make sales (depending on where they work). Ever notice how when you walk into a department store employees begin hovering around you? This is because they’re waiting for you to ask for help, so they can help you complete a purchase and make a commission. This “commission” is the core essence of affiliate marketing.
A company pays people an incentive when they help sell their products or services. The more employees’ sell, the more they make. And the more they make, the more the company makes. It’s a win-win for everyone. Now think about this same concept but online.
Companies online will give you a commission if you refer a customer to them. An easy example would be with Amazon. Amazon has an affiliate program called Amazon Associates. It’s free to join and takes just a couple minutes to set up. From there you can search every product that is on Amazon and get your personal referral link. Let’s say your friend mentioned they wanted a new TV. You could send them your referral link for a TV on Amazon. Your friend buys the TV for $500, and Amazon gives you 6% of that sale. That means you made $30 without doing anything. Pretty cool, huh?
That’s just a general understanding of what affiliate marketing is, but let’s see how we can build a legitimate business with it. This business model can be fully automated and generate us anywhere to a couple of hundred dollars a month, to upwards of half a million a month. And yes, some people are millionaires from this and only spend a couple of hours a week managing everything. It’s basically passive income.
An example of this business would be to create a blog in a particular niche. Let’s say you’re an audiophile. You could create a headphone review blog. On this blog, you write articles on your favorite headphones and tell people where they can buy it on Amazon. You then place your referral link for those headphones in your article. When people read the article and decide to buy the headphones, you get paid. Simple right?
Don’t be fooled though. Guru’s will tell you that creating an affiliate marketing business is easy and requires little to no capital to start. Anyone that says that affiliate marketing is easy is trying to sell you something.
It’s easy to set up your site with your affiliate links. But how do you even get people to see your content? Your first option should be free traffic and then paid traffic.
Free traffic can be achieved through things like social media or SEO. Free traffic is just another term for free visitors to your site. If you post your website on Instagram for your friends to see, when your friends visit your site, your site receives traffic. This traffic costs you nothing and is free. SEO, on the other hand, stands for search engine optimization. It’s how well Google ranks your website in its search engine. Every time you search a term in Google the results that show on the first page have a high ranking because their SEO is done right. The higher the rank, the more visitors to your website. And because this traffic is coming from people searching through Google, it costs you nothing as well. The power with search traffic is that you can essentially create a business revolved around headphone reviews and mostly all of your revenue is profit. The only overhead costs would be your domain name and web hosting service, which costs next to nothing.
The next method would be paid traffic. This by far is the best method, but of course, requires money. The beauty of paid traffic is that you can reach a lot of people fast. The bigger the budget, the more people you can get to view your content. Mastering the skill of paid traffic can result in huge returns. Some individuals make up to $10k/day by using paid traffic. Obviously it would cost them a couple of thousand dollars in ad spend every day to generate $10k/day, but those are still massive profit gains. And if you have no idea how it’s done, you could easily spy on other affiliate marketers. All you have to do is find what the most profitable affiliate marketing offers are. Paid traffic also increases your organic traffic if your SEO is done right. You’re essentially killing two birds with one stone. But like I said earlier, it’s not as easy as it sounds. Affiliate marketing is difficult but hundreds of people are creating a passive income doing it, so it definitely works. All it requires is mastering the art of online marketing. My MarketerMilk blog goes into full detail of the art of creative marketing, so go check it out (shameless plug).
Now that we know this model works for things like blogs and niche websites, we can dive deeper. How can we create a real multi-million dollar company with an actual team of employees? Well, look at companies like Expedia, Ebates, NerdWallet, and TripAdvisor. These are just a few companies using the affiliate marketing business model. Expedia is a great example. They own no product or service. All they do is connect people to different hotels and flights. When someone books a flight through Expedia with any airline, the airline company pays Expedia a commission for the ticket sale.
However, to be genuinely successful today you need a twist of creativity. Ebates is a great example of this. They are a cashback website. This means they offer cash back on purchases you make online. You make an account on their website and whenever you shop anywhere such as Amazon, you click on the link in your account first. Ebates says they will give you 3% back on any purchase you make. Let’s say you go to Amazon and buy whatever for $100. You would then receive $3 in your Ebates account. However, the cool part is how Ebates is making money with this model. Amazon’s affiliate program gives you 6% commissions per sale. Ebates decided to give half of their commission back to their users as an incentive for them to shop through Ebates. This way the whole idea is consumer driven. Consumers buy things and make money using Ebates. The more consumers receive in cash back, the more revenue Ebates generates.
With a little bit of creativity, this business model can be molded into any business. It can be used as a personal moneymaker, as a legitimate company, or even as a supplement for a company already adopting a different business model. As we enter a new era of virtual reality, crypto-currencies, and whatever crazy new tech that comes out think about how you can implement the affiliate marketing model into future businesses. Wake up; we are in a gold rush.