How Affiliate Marketing Works: The Big Guide
In 2021, affiliate marketing continues to be both a relevant marketing element and a working business model that allows you to build an online business without your own products. The fact that you can earn money with affiliate marketing is no longer a secret. But what is the best way to start? We answer the most frequently asked questions about affiliate marketing, explain the exact process using a concrete example, discuss the advantages and disadvantages of Amazon’s affiliate program, and also have a tip or two up our sleeve.
What is Affiliate Marketing? – A definition
Affiliate marketing describes the cooperation of sales partners with the aim of selling products and earning money. Affiliates promote products from manufacturers or retailers and receive a commission in return. In simple terms, affiliates help to sell other people’s products. By the way, this definition explains affiliate marketing using the example of products, but the principle works equally well for services.
What does Affiliate, Advertiser & Co. mean?
Strictly speaking, the word affiliate initially only means partner. So when asked “What is an affiliate?” two parties of affiliate marketing can be the right answer. Therefore, it depends on the context whether the promoting or the selling distributor is meant. In everyday usage, however, it is more common to speak of an affiliate when referring to the person who promotes someone else’s product and earns commission-based money if the deal is successful. Another word for affiliate is publisher, as advertising content is published independently for a target group. Opposite to this is the player, who wants to sell the own product. This can be the manufacturer but also a dealer, i.e. merchant. In affiliate marketing, this player is also called advertiser.
What are affiliate networks?
Besides the parties described above, there can be a third player. In case you were wondering what an affiliate marketing network is, here comes the answer. Affiliate networks are platforms where affiliates and advertisers can sign up and find each other. Affiliate networks thus act as an intermediary between the two parties and handle all payment matters. Belboon and affilinet can be named as popular affiliate networks.
Classification in online marketing
Affiliate marketing is a component of online marketing. Even if a clear categorization of the areas is hardly possible, affiliate marketing can still be subordinated as a measure or instrument of performance marketing. Characteristic is the exact measurement work and the flow of financial means when a precisely defined action occurs. But more about that later, when it comes to how to earn money with affiliate marketing.
How does affiliate marketing work?
In order to sell a product, a seller naturally needs potential customers. Unlike in brick-and-mortar retail, however, these customers do not walk past the store by chance. Thus, a major challenge in e-commerce is to first make potential customers aware of the offer. Through various online marketing measures, such as search engine marketing, store operators can ensure that people become aware of their online store, visit it and, in the best case, become customers. Affiliate marketing is a measure by means of which a seller pursues an additional sales channel without having to ensure the necessary traffic on the website himself. This is done by the affiliate.
THIS IS HOW AFFILIATE MARKETING WORKS IN CONCRETE TERMS
To make the whole thing easier to understand, let’s look at an example of affiliate marketing. First of all, six steps are relevant, which are also shown on our infographic.
- Include advertising: Let’s say you are a passionate gardener and share your knowledge about it on a blog. If you write an article about pruning roses, you could also recommend suitable products in your text. For example, it could say, “XY’s rose shears have been my favorite to use for years.”
- Click on advertising: Then, when you say “Rose shears from XY,” you put a link to the product page of the advertiser you want to promote in this case. Once a user reads your blog post and their interest in the rose shears is piqued, they will click on your link to take a closer look at the product.
- Refer visitors: By clicking on the affiliate link, your blog reader becomes a user on your distributor’s website and you have successfully generated traffic for the advertiser. In most cases, you won’t receive any compensation for this yet.
- Visitor buys: In order for you to make money with affiliate marketing, the visitor usually has to purchase something. So only when the customer buys the rose scissors through your link, you get a commission for it. Which requirements for a payout exist, especially with the Amazon Partner Program, you will learn further down in the article.
- Pay for the purchase: The next important step is the payment of the customer. Via an ID in the redirect, the purchase can be tracked.
- Receive payment: Last but not least, you will receive your commission. Provided the application was made through an independent affiliate program, such as Amazon PartnerNet, you settle the payment issues directly with the advertiser. This is different if there is an affiliate network between you and the advertiser.
Advantages and disadvantages of affiliate marketing
Affiliate marketing can have many advantages as well as disadvantages. For a better overview we have listed them once in summary.
- No advertising costs
- Integration of banners and links requires no prior technical knowledge
- Setting up an affiliate program is uncomplicated
- Targeted customer approach
- Big competition due to many affiliates
- Search engine optimization has become more complex
- Traffic becomes more difficult to generate
- Few relevant affiliates
Earn money with affiliate marketing
If you want to earn money on the Internet, there are many options available to you as a blog and website operator. Earning money with advertising is particularly well suited for this. However, the prerequisite for this is that you provide enough traffic to your own website. How much money you can earn with affiliate marketing depends on the number of visitors to your site. The higher the traffic on your website, the more interesting it is for potential advertisers and the more money you can earn with affiliate marketing. Basically, it is also worthwhile to start with affiliate marketing in 2020. According to the Affiliate Marketing Trend Report from the marketing agency xpose360, 61% of affiliates expect a growth in sales.
The exact process of how you can generate income with affiliate marketing, we have already explained to you. Here is the short version again:
When you promote an advertiser’s products and generate a sale, you receive a commission. So that it can be determined through which affiliate a sale was made, the links are provided with a code. In addition, cookies are set when users click on affiliate links. Thus, an exact tracking can take place and even a temporally staggered sale can be assigned.
THE MOST COMMON COMPENSATION MODELS IN AFFILIATE MARKETING
Now we have established that there is a commission on a successful sale. This is also the rule in affiliate marketing. However, as is generally the case in performance marketing, there are other cases where compensation is possible.
- PPS: Pay per Sale (also CPS: Cost per Sale): With this form of payment, the affiliate only receives a commission if a customer has actually purchased a product via his affiliate link.
- PPL: Pay per Lead (also CPL: Cost per Lead): With this billing method, the advertiser only incurs costs if a previously defined action has been successfully performed. This action can be, for example, registering for the newsletter, ordering a catalog or filling out a form. Unlike PPS remuneration, this billing model does not require a sale to take place.
- PPC: Pay per Click (also CPC: Cost per Click): With the PPC billing model, the affiliate already receives remuneration as soon as even one prospective customer clicks on his affiliate link or on his advertisement. This form of remuneration is often calculated as a thousand-contact price.
Three requirements for affiliate marketing
With affiliate marketing you can build up a good additional source of income besides your employment or your business. In the following we will explain which requirements you should fulfill to be able to earn money as an affiliate. We also provide you with a few affiliate marketing tips.
USE THE RIGHT PLATFORM(S)
First, you need a platform where you can place your promotional content and affiliate links. The best place for this is your own website or blog. It is also possible to do affiliate marketing via YouTube, Facebook or Instagram. However, it is important to note that you are always subject to the regulations of the social media channel. If you want to start affiliate marketing via Facebook, Instagram, YouTube, etc., you should familiarize yourself with the regulations of the respective platform. On Facebook, for example, users are not allowed to share their affiliate links on other people’s pages or posts. If you don’t have your own website yet, it makes sense to create one. Here you are the owner and therefore more independent.
Our tip: Focus on your own website, but don’t spread affiliate links exclusively on it. Also include your social media channels, especially if you have more reach on YouTube or Instagram than visitors on your own website.
If you don’t have a reach yet, it’s important to build it. In case you already have traffic on your website or followers on Instagram, it is always important to work on increasing your reach. The more people you reach with your content, the more potential customers you can generate for an advertiser and the more money you earn with affiliate marketing. Even if it is not your goal to sell your own products, you have the goal to generate customers. Therefore, knowledge in the area of new customer acquisition is worthwhile.
Affiliate marketing is also known as referral marketing. People buy something through your affiliate link if they are convinced by your content and trust what you say. Consequently, it is crucial for your success as an affiliate that your readers and followers can trust you. It is helpful, but not absolutely necessary, if you represent a certain expertise to the outside world. This can be done, for example, through well-prepared content with added value, so that your product recommendations seem rather secondary.
Affiliate Marketing Start: The Right Choice of Advertiser
To start with affiliate marketing and actually earn money, you now need products that you can advertise. To do this, you can network with suitable advertisers. You can do this either through independent in-house affiliate programs or by joining an affiliate network.
For both companies and publishers, affiliate marketing can be very cumbersome. Accordingly, there are parties who want to minimize the technical or bureaucratic hassle. This is where affiliate networks come into play.
The difference between affiliate networks and in-house affiliate programs is that as a publisher with affiliate networks, you only need to sign up once. Then you have access to numerous affiliate programs from different areas. Another advantage for you is that all settlements for all advertised affiliate programs run through one account. This way you always have your earnings at a glance. Affiliate networks also take care of the technical basis of the tracking and thus the correct allocation of the commission. Registration and participation in affiliate networks is often free of charge for publishers. However, your earnings may be reduced, as commissions may be lower for you within the framework of networks.
INHOUSE AFFILIATE PROGRAMS
Besides affiliate networks, there is another way to do affiliate marketing. And that is with so-called in-house partner programs. With an in-house partner program, the merchant or the company that wants to run the partner program implements it itself. The registration for the partner program and the support then take place on the company’s website.
There are now very many companies that offer an affiliate program. Not always do manufacturers or retailers communicate this. Therefore, it is worthwhile to ask the company directly if you want to advertise a specific product.
AMAZON ASSOCIATES PROGRAM
With Amazon’s affiliate program, affiliates have the opportunity to advertise the items offered there, e.g. via text links, banners or similar, and thus receive a commission of up to 10%. Prerequisite for this, however, is that you operate your own website.
Advantages of the Amazon Affiliate Program:
- With a wide product range of several million different products, the affiliate program offers suitable products for every affiliate’s website.
- Due to its reliability and punctuality, Amazon enjoys great trust from its customers, which is why the purchase threshold for potential buyers is lower and your chance to earn money with affiliate marketing is correspondingly greater.
- If a customer is referred, the affiliate receives a commission on the entire shopping cart and not only on the product that he has advertised. This is true even if the customer ultimately does not buy the product that was advertised via an affiliate link, but decides to buy other products. So you can
- Amazon pays the advertising fee reliably and on time. You can choose one of three different payment methods (bank transfer, check or Amazon gift certificate).
Disadvantages of the Amazon Affiliate Program:
- For some product categories (TVs, smartphones, tablets or PS4 consoles) there is an extremely low commission of 1%.
- If the customer purchases a product on Amazon after one session (24 hours after arriving at a product from Amazon via the affiliate link), the affiliate will no longer receive a commission.
- In addition, with the Amazon affiliate program, there is a risk that the link will not only cease to be valid after 24 hours, but that it will also be overwritten by others. The principle of “last cookie wins” applies. For example, if a user becomes aware of a product through your content and clicks on it, a little later at xyz, and then buys, then xyz receives the commission.
HOW CAN YOU PARTICIPATE IN AMAZON PARTNERNET?
In order to participate in Amazon’s PartnerNet program and earn money with affiliate marketing, all you need is a free registration or your application to participate in the program. This application is then reviewed by Amazon, which can take a few days. After the review, you will be informed whether Amazon has approved the application or whether it was rejected.
The application can be rejected, for example, if the conditions of participation are not met by Amazon. This is the case, among other things, if Amazon determines that your website is not suitable for the affiliate program. Websites are classified as unsuitable if, for example, they advertise products with sexual or violence-related content or if they engage in illegal activities.
If you already have an Amazon account, you can easily log in with your credentials. Otherwise, you’ll have to create an account first, but that’s a matter of just a few minutes. Click here to sign up.
For the registration process your account data as well as information about your website, e.g. about main topics and visitor behavior, will be requested.
It is important to specify the desired payment method early on. To do this, simply click on the “Set payment method now” button.
After you have agreed to the conditions of participation, you have to wait and be patient. You can also log in to your PartnerNet account. You should only include links or advertising material on your website once you have received confirmation of participation from Amazon.
HOW DOES AFFILIATE MARKETING WORK AT AMAZON?
For the product integration on your page you can choose between
- Text links
- Banner links
- Site stripes
- Widgets (“Bargain” widget or search widget)
which are provided by Amazon and contain all necessary product information.
With the tools provided to you, you can create a link from your website to Amazon with just a few clicks. To do this, go to the desired product page in the Amazon.de store and click on the “Create link” button. You select the link that suits you best (e.g. text link or banner link). Amazon will then generate an HTML code that you can copy and easily integrate into your website.
When you register, a tracking ID is automatically created, which is included in the affiliate links to Amazon. This makes it possible to assign a buyer to a specific affiliate. If a customer comes to a product on Amazon via your affiliate link and buys something within 24 hours, you will receive a commission for the entire shopping cart. Commissions can vary significantly depending on the product category. For video game downloads, software downloads, clothing, jewelry, luggage, shoes, watches and furniture, the highest commission is paid at 10%.
HOW MUCH MONEY CAN YOU EARN WITH AMAZON PARTNERNET?
The earnings depend mainly on the following three factors:
- Your niche: First of all, it’s important that you’ve discovered a good niche in which Amazon products can be introduced, which are also bought online and are lucrative.
- Your traffic: The more traffic you have on your website, the more money you can earn with affiliate marketing as well.
- The trust: If you have discovered a good niche topic for yourself, it is important that your website does not look unserious. Otherwise, people will simply not trust you. Therefore, make sure that your website has an appealing design – including the integration of Amazon affiliate links – and good content. With a well-visited site that people trust, it is quite possible to earn a few hundred to a thousand euros a month with Amazon’s affiliate program.
OUR CONCLUSION ABOUT THE AMAZON AFFILIATE PROGRAM
Even if there are not only positive things to report about the Amazon affiliate program, it is still clear that the advantages of the program outweigh the disadvantages and that it is a good opportunity for you as a website operator to earn some money on the Internet.
Our conclusion on affiliate marketing
With affiliate marketing, you can earn good money on the side and even generate passive income with the right groundwork. To do this, you need a certain reach, the trust of your readers or followers and relevant content that you can distribute. Basically, you should make sure that you offer your target group added value with your product recommendations.
IN-HOUSE AFFILIATE PROGRAM OR AFFILIATE NETWORK?
With in-house affiliate programs, you always have to register separately, enter your payment details each time, and you have different contact persons. Furthermore, it may be difficult for you to reach the minimum payout limit at the beginning, as you will receive different statements for each in-house affiliate program. By the way, the payout limit, above which your earnings are transferred to you, varies from program to program.
However, in-house affiliate programs also have some advantages. Due to the close contact to the merchant, publishers often get individual advertising material. Furthermore, the commissions are often significantly higher than with affiliate networks.
Our assessment: If you are a beginner, affiliate networks are better suited for you to build up a foothold in affiliate marketing. However, once you have built up a good feeling for the needs of customers and gained more traffic, in-house programs are more lucrative in most cases and you can earn more money with affiliate marketing.
Affiliate Marketing Frequently Asked Questions (FAQ)
|What is Affiliate Marketing?|
Affiliate marketing describes the cooperation of sales partners with the aim of selling products and earning money. Affiliates advertise products from manufacturers or retailers and receive a commission in return.
|What are affiliate networks?|
Affiliate networks are platforms where affiliates and advertisers can register and find each other.
|What are the requirements for affiliate marketing?|
In order to make money with affiliate marketing, there are three key requirements for affiliates:
1. use of the right platforms
2. generating reach
3. building trust