If you want to create your first online business, most people would agree that the best model to start with is affiliate marketing.
Affiliate marketing is a growth industry with massive amounts of potential. Even better, due to the fact that affiliate marketers live in the digital space, an affiliate marketing business is an online business you can start today.
Affiliate marketing businesses require very little up-front investment, and if properly nourished and developed, can become wildly successful and generate renewable passive income. There are no costs associated with inventory, shipping, product research and development, or (in most cases) hiring staff.
Affiliate marketers, or simply “affiliates,” promote other people’s products and services, but they don’t actually stock, ship, deliver, or technically even sell them.
Instead, affiliates recommend or otherwise direct customers to purchase products sold by someone else—a person or a business who does sell a product or service.
If the customer follows through with a purchase from the seller because of the recommendation of the affiliate, then the affiliate earns a commission on the sale.
For the affiliate, this generally means low expenses, high profit, and most importantly freedom of time and financial independence.
Read on to learn exactly how to start your own affiliate marketing business today.
This post is part of an ongoing series where we dissect many of the popular, proven, and cutting-edge online business models. Each of these models is completely unique to the digital world, but all are similar in the fact that they have low barriers to entry, robust business principles, and can be started as quickly as, well, today!
Questions about the nuts and bolts? Let me know in the comments and I will be more than glad to shoot some advice your way. Your question (and answer) could even end up on the front page of the ClydeBank Media Business Blog!
Business Model: Affiliate Marketing
Average Cost to Start: Under $100
- Doesn’t require a lot of up-front cash to get started.
- Once established, affiliate marketing businesses can run very nearly on autopilot to generate a lot of money with minimal effort.
- There is no need to create your own products or services.
- Affiliate marketing businesses are vehicles for generating passive income.
- It takes a lot of time and effort to build a brand and establish an audience that knows, likes, and trusts you.
- It will usually take months before you make any money.
- Your entire business relies on the products and services that are produced by other people, meaning you have little control over the direction of your business.
Primary Source of Revenue
Affiliate commissions generated from promoting other people’s products and services
Skills You Should Have
Website building, SEO, email marketing, copywriting, rapport/relationship building, salesmanship
Is the Business Ultimately Sellable?
Absolutely. Established affiliate marketing businesses are highly sellable; once they are established and productive they can be revenue machines that require minimal upkeep. The exception, of course, is the case of a business that is centered on the personality of an owner or key individual. Unless that person comes with the purchase, the business cannot easily change hands.
Affiliate Marketing Business Example
Affiliate marketing is considered a low difficulty, low barrier to entry online business.
What Is Affiliate Marketing?
Affiliate marketing is one of the most popular online business models for beginners. It doesn’t require as much technical expertise and infrastructure as other models and presents huge money-making potential.
Affiliate marketing is based on the relationship between three parties: the partner, the affiliate, and the customer.
The partner is the person or business that sells a product or service. The partner could be the manufacturer, designer, or creator, but they could also be a retailer or reseller. A partner is a party who has something for sale.
Because partners make money through sales, they are always looking to reach new customers.
The affiliate is the person or business that promotes the product or service the partner is selling. Through an agreement with a partner (or more commonly, a number of partners) affiliates promote products and services to customers in exchange for a commission on sales.
Affiliates are facilitators, and they don’t need to carry inventory, design products, manage sales teams, deliver services, or ship merchandise.
The customer is the person or business that buys the product or service that the partner has for sale. Customers who purchase products and services via affiliate promotion earn those affiliates a commission.
If it isn’t already clear, it is worth repeating. Affiliates promote other people’s products and services. That means that the hard (and expensive) work of development, testing, and implementation has already been done.
This is ideal for novice digital entrepreneurs because it usually does not require a lot of capital to get started. Affiliate marketing is one of the few online businesses that can be started with less than $100—but there is quite a bit of sweat equity involved (as you’ll see).
The Role of an Affiliate
Affiliates promote products and services and warm up prospects to buy. When someone in an affiliate’s audience makes a purchase, the affiliate gets a commission for sending the business to their partner.
The affiliate gets a commission and the partner gets a sale they may never have had otherwise.
For businesses that are structured well, the customer lifetime value (CLV) is much higher than what results from a single sale, so a percentage of that initial sale (or even a percentage of recurring revenue) is a small price to pay to capture a new customer.
How much a customer is worth to a partner varies greatly, which means affiliate commissions vary greatly.
Some businesses might have such a high CLV that they are willing to give upwards of a 70 percent commission to the affiliate for each sale.
That’s 70 percent of the purchase price, and sometimes a portion of recurring revenue as well, for doing little more than pairing partners with warm customers who have been primed and are in a buying-ready mindset.
Pretty crazy, right?
How Do Affiliates Get Paid?
Affiliate-generated sales are commonly tracked via affiliate links. Affiliate links are like regular hyperlinks, but they contain additional embedded code.
This code identifies the link as belonging to a particular affiliate—partners often want many affiliates promoting for them—and tracks the action of customers on the partner’s site. If a customer makes a purchase after clicking through an affiliate link, the affiliate who owns that link earns a commission.
Simple as that. Keep the concept of affiliate links in mind as you read through the following steps to creating an affiliate marketing business.
How Do You Start an Affiliate Marketing Business?
The development of an affiliate marketing business typically follows these steps:
1. Determine Your Niche
Your niche is the specific topic that you want to build an audience around, such as health and fitness or business development.
The more specific the niche is, the more likely you will be able to build an audience due to the fact that there will be less competition. On the other hand, smaller niches will have fewer participants, so the potential size of the audience will be smaller.
2. Create a Brand and Website
Your brand should be centered on the niche you are targeting.
This brand could be a company name or your own personal brand. A solid recommendation that will set you up for success in the future is to avoid using your name and face. Build a brand that is transferable.
If your business is focused on your name or likeness, it will be much harder to sell when the time comes to move on.
Conversely, a more anonymous brand can easily change hands. Maybe you intend to run your affiliate business forever, but for most digital entrepreneurs it is a good idea to have an exit strategy and keep your options open.
3. Create High-Quality Content
High-quality content is at the core of so many online businesses. This content can take many forms: informative blog posts, engaging videos, useful tools, or actionable podcasts. The most important piece of the content creation puzzle is ensuring that your target audience will be interested in, and more importantly, find value in, your content.
This cannot be overstated.
High-quality, value-forward content is the most important part of building a successful affiliate marketing business. You need to consistently create content that your audience will find useful and engaging, and you need to put it somewhere they will experience it.
For example, if your niche’s audience only watches videos on YouTube, then you need to create YouTube videos. If they only listen to podcasts, then you need to create podcasts, etc.
Content mediums will change—maybe in the next ten years no one will be reading blogs or watching YouTube videos, and everything will be beamed straight into your brain. No matter the case, your content needs to live where your audience will consume it.
4. Optimize Your Content for Discovery
Sorry, but it’s not enough to just write killer blog posts.
Make sure that the people interested in your niche will actually be able to find your valuable content. It probably goes without saying that if you make amazing content and no one ever experiences it, you will never make any money.
Optimizing your content doesn’t just mean that you focus on SEO. SEO should definitely be part of your overall discovery strategy, but by no means should it be the whole piece.
You should also be focusing on finding out where your potential audience spends their time online. That means finding out what other websites and social networks they frequent and putting your content in front of them where they hang out online.
5. Collect Your Audience’s Contact Information
When it comes time to monetize your audience by promoting products and services, the most effective way to communicate with them is via email.
Of course, you’ll also include these promotions on your website and social media pages, but the likelihood of those platforms actually driving action from your audience is low compared to the conversions boasted by email marketing.
Compared to on-page actions, email communication is a far more personal and intimate communication channel that, still to this day, has the highest ROI for affiliate marketing businesses.
6. Continue to Obsessively Add Value for Your Audience
Continuing to share more and more high-quality content that is relevant and useful to your audience will cement you or your brand as a thought leader on the topic. As your audience begins to better know, like, and trust your influential position on the topic, your input becomes valuable.
This means that when it comes time to promote products and services, your audience will listen to what you have to say!
7. Promote Products and Services from Partners
Promoting products and services from partners is how affiliates make money.
It will often take months of hard work before you ever see a penny from your affiliate business. That is the sad truth about affiliate marketing. BUT once you have an audience, you can begin to monetize your position as a thought leader and expert in the niche.
You should only ever promote products and services to your audience from partners you trust, and that you believe will actually add value to their lives. Focus on products/services that you have used, and on topics where you can provide real value.
If you start to promote everything under the sun, especially things that your audience doesn’t find relevant or doesn’t end up liking, then you will lose their trust. They will stop following you, and as your audience goes, so too will your business.
At this stage in your brand’s relationship with your audience, they should know, like, and trust you. You are no longer a stranger, and therefore, they will be more inclined to follow your recommendation and purchase the products or services you share with them.
These products and services you are sharing are part of your affiliate network. Your affiliate network is the web of partners, customers, and products/services that you use every day to run your affiliate business.
8. Reinvest Your Profits to Improve Your Business
All successful businesses have one thing in common: they reinvest their profits back into the company. You should continually reinvest your profits to improve and grow your content, your website, your communication tools, and your marketing strategy.
For example, if you are making YouTube videos, you could reinvest your profits to purchase a better camera, microphone, and set elements to increase your production quality (and enhance your value).
If your audience is all about your blog, you can hire freelancers to help you write more content faster, so you can reach more people, more effectively, than you would on your own.
9. Rinse and Repeat
Continue to execute these steps over and over again; grow a larger audience, provide value to them, and promote different products and services that will add even more value to their lives.
In this way, there is no limit to how large your business can be scaled, as we’ll see with our real-world example affiliate marketing site.
How Do You Build Your Audience?
The audience is the key to a successful affiliate marketing business; so how do you build your audience?
There are a few proven strategies for building an audience, all of which involve creating high-quality content. I recommend that you utilize as many of these as possible in order to build a larger audience faster.
Additionally, all of these strategies should be optimized so that whoever consumes your content is added to your email list. Your email list will be your single biggest asset and the main way you communicate with your audience.
With a Blog
One way to build an audience is with a value-forward blog. The blog should contain written content that is media-rich. The content itself must be valuable to an audience in your niche.
You can also use the blog to host other forms of content you create, such as videos and podcasts.
There are a number of competing theories surrounding the argument about whether blogs are dying off or are simply transitioning into the next stage of their evolution. There is, however, no denying that no matter what the future may hold, right now blogs continue to be effective audience builders.
As an affiliate, you can promote products and services directly in your blog posts or use your high-quality valuable content as a vehicle to collect your audience’s email addresses.
Email marketing is the gold standard in conversions and relationship-building, and once you have a robust list of subscribers with whom you have a rapport (they like, know, and trust you) you can promote affiliate partner products and services directly to their inboxes.
With a Killer Social Media Presence
Many social influencers leverage their massive followings to directly promote the products and services of their partners.
While the environment in which your social audience lives and connects is different, the premise is the same: provide value, build a relationship, then promote and collect commissions.
You should be active on all of the major social networks that your potential audience uses—Facebook, Twitter, Instagram, Pinterest.
Your social channels will be one way that you can communicate with your audience, but again, you should be pushing your social media following to your email list (email has the highest conversions).
With a YouTube Channel
Creating YouTube videos that are high-quality and are related to subjects your potential audience is interested in is yet another method of growing your audience. More people are consuming more video on more devices, and that trend is only going to continue.
As you create more YouTube videos, your channel will attract more subscribers, which will produce more views, enabling more videos, and so on.
You’ll also want to drive this traffic to your email list by directing them to a squeeze page. A squeeze page is a purpose-built form used to collect contact information from your audience, often in exchange for a free bonus
If your YouTube videos garner enough views, they may be enabled for monetization. Producing monetized content for YouTube can be a lucrative business, and between a robust affiliate marketing business and a popular YouTube channel, a savvy (and hardworking) digital entrepreneur can build a highly profitable revenue stream.
With a Podcast
Podcasts are really popular right now.
Sometimes it seems like everyone and their mother has their own podcast. The same strategy you would apply to a blog or a YouTube channel is applicable here: create and produce a podcast that has good content that your potential audience would want and find valuable.
With a Review Website
Early on, savvy affiliate marketers realized that they could squeeze value and profitability into a single content concept—review sites.
They built websites around reviewing and comparing different products and services within a chosen niche.
Within those reviews and comparisons are affiliate links, so that whichever product their audience selects to purchase, the affiliate gets his or her commission.
Review websites are an especially great fit for affiliate marketers who are part of the Amazon Associates program because, let’s face it, what doesn’t Amazon have for sale? They are the ultimate partner.
How Do You Find Products and Services to Promote?
Getting an audience to promote to is obviously critical, but having an audience with nothing to promote to them is just as much of a missed opportunity.
Before you move forward and start building your own affiliate website and cranking out content for a niche audience, you need to have a monetization plan in place.
This plan is the blueprint for the way in which you will present the products and services you are promoting to earn your commission.
There are a few different affiliate networks that contain a directory of participating partners and their products and services that are available for promotion, along with their commission structures and their terms.
Once your account is created and approved, you can apply to work with the affiliate partners in the network.
The top affiliate networks right now (in no particular order):
It is worth noting that there are also plenty of opportunities to personally reach out to a product/service seller to see if they are interested in a potential affiliate partnership. In addition to the established affiliate networks, there is off-the-shelf software that provides affiliate tracking and creation functionality.
Here at ClydeBank Media we use (and love) ClickFunnels, the premier SaaS funnel creation software.
Their Backpack program is designed to help businesses of any size create and manage affiliate promotion campaigns, so it is possible for businesses that aren’t part of an established affiliate network to become partners to their own army of affiliate marketers.
Hypothetical Example – Affiliate Marketing in Theory
Let’s say you are an affiliate marketer who has a website dedicated to the latest and greatest in workout aids, supplements, and other related products.
Your website is full of content such as blog posts, instructional videos, tutorials, reviews, and more that people are searching for.
The content you create is really valuable to those who visit your site, so they always come back to you when they are looking for more info on a new supplement or product.
You receive tens of thousands of visits a day to your website through organic search (SEO), social media, and email-driven traffic. By capturing leads from your website, (via opt-ins or a squeeze page) you were able to build an active email list of 5,000 subscribers.
You have put in the hard work to create valuable content, get visits to your website, and build an audience that knows, likes, and trusts you. This is the money zone.
There are a few ways to communicate with your audience, but the most effective communication channel is, hands down, email.
Let's say you team up with a partner who is launching a brand-new protein powder. You have tried the free sample they provided, and you love it. You feel comfortable sharing and promoting this product to your audience because you think they will love it as well.
Here’s how you execute a promotion to your list of email subscribers.
You send all 5,000 of the people on your list an email that tells them how great the new chocolate peanut butter protein power from your partner is. In that email is a link to a sales page, and embedded in that link is a line of unique tracking code (an affiliate link).
When someone on your email list clicks on the link in their email and goes to the protein powder sales page, their clicks are recorded via the affiliate link’s tracking code.
This means that your partner can see all of the data related to the traffic generated from your email.
They will know how many people visited their sales page from your email, as well as how many of those people bought the product.
Any sales made through the link you provided earn you a commission. You get paid, your partner makes some sales and acquires some new customers, and your audience gets a great new product that helps them get the most out of their workout (and tastes great).
To attach some numbers to our example, if your commission per sale was 20 percent of the purchase price, and the protein powder’s value size costs $55 (not an uncommon price tag), then a conversion rate of 10 percent (10 out of every 100 people buy) could make you over $5,000 off a single email!
$55 x 20% = $11.00
5,000 subscribers x 10% conversion rate = 500 conversions
$11.00 x 500 sales = $5,500
Pretty cool, right?
One of the best examples of an affiliate marketing business that is really successful and lives completely online is NerdWallet.
NerdWallet was started in 2009 with only $800. Seven years later, in 2016, the business was valued at $550 million.
NerdWallet is today’s premier personal finance website. From helping you decide what type of credit card is best for you to figuring out if you’re ready to buy a home—NerdWallet has extremely valuable content and helpful tools for just about everyone.
Their website has information on every personal finance topic imaginable, but their most popular content is their credit card reviews.
Remember review sites as ways to monetize your traffic?
NerdWallet’s content creators develop extensive and objective credit card reviews that give their readers all the information they need to make an informed decision when selecting a credit card.
These reviews are usually the top Google search results for keyword phrases such as “best credit cards 2018.”
The reviews contain links that point to the credit card provider’s site and streamline the card application process for each card reviewed.
By now you have probably guessed that those links aren’t just helpful navigation tools.
NerdWallet primarily makes money through affiliate commissions received when visitors click through the tracking links found on their credit card review pages.
When readers successfully register, NerdWallet gets paid. With a valuation of $500 million, they are obviously making a killing.
The core of their business model is summed up in the affiliate disclosure on their website:
The above article takes a deeper dive into the concepts covered in this blog post. Open in a new tab to continue reading this guide for digital entrepreneurs.
How WE Use Affiliate Marketing
Affiliate marketing is by no means our core business model, but it is one of the monetization strategies we use at ClydeBank Media to help us continue to produce quality content (like this post).
We regularly discuss and share information on the products and services we use day-to-day to run our business. We’ve spent countless hours and thousands of dollars figuring out what the best tools and services are to run our online business, and we share that information with our audience.
If you read our recommendation/review of a specific tool that we use and think it would be a good fit for your business, your purchase through our affiliate link will earn us a commission.
We make money from sharing tools and services we use every day in our business, and our audience receives value in learning about these tools and adding them to their own business if they are a good fit.
Trust is paramount here.
We can recommend the products we receive with the utmost confidence because we use them, abuse them, and have squeezed every bit of performance out of them. And our audience can buy from our partners with confidence because we don’t promote low-quality products we haven’t tried out.
What’s the Catch?
The catch with affiliate marketing is that despite its very low startup cost and huge amount of flexibility, the process of audience-building and relationship management is labor intensive and requires a lot of upkeep.
Once the groundwork is in place, affiliate marketing programs become exponentially easier to run, and they can be run with a very high profit margin. That process can take a long time, however, and it is not uncommon for affiliates to simply give up or get discouraged.
Affiliate marketing businesses are highly scalable and very systematized, making them attractive for entrepreneurs who make their living buying profitable businesses—providing them with an exit strategy and a healthy payday.
That is, of course, assuming that your business is configured for an easy transfer of ownership (don’t put your name and face all over your affiliate marketing business!).
There’s something else that would-be affiliate marketers should keep in mind: honesty and transparency about potential compensation are very important. This goes further than just promoting products you know to be of high quality.
The FCC requires that influencers and marketers disclose that they may be or will be compensated. Failure to comply can result in hefty fines or worse. As a result, many partners mandate that their affiliate marketers disclose the potential for compensation as a requirement of working with them.
Additionally, it’s just kind of shady not to be up-front with your audience. If the product is good and they like, know, and trust you, then you have nothing to worry about by letting them know you will make a few bucks if they decide your recommendation is right for them.
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John co-founded ClydeBank Media in 2013. Focusing on adding as much value as possible to the market, John, with the support of the exceptional team at ClydeBank Media, has helped guide the early growth of the company. He currently serves as the Director and as a contributor to the ClydeBank Media blog.