Affiliate Marketing Business Model Explained

​There are dozens of legit ways to make money online but in my opinion, one of the simplest ways to make large amounts of money quickly and easily is affiliate marketing.

The beauty of this business model is that you are selling other people’s products, which means you never have to spend thousands of dollars producing something only to find out that no one wants it!

This also allows you to test multiple markets quickly and without too much upfront capital outlay until you know a market is working.

How Affiliate Marketing Works​

The most straightforward way to explain this business model is that you sell other people’s products/services online and get paid a commission on every sale you make – you’re the middleman in making the deal.

But instead of knocking on doors trying to sell stuff you don’t really like, affiliate marketing means you only ever have to promote products you like or believe in, and customers come to your website(s) looking for these same products.

You build websites to promote the products and services offered by other companies. If your website visitors make a purchase they are redirected to the merchant’s site (the company you’re promoting), and if they make a purchase you’re then paid a commission of anywhere from 5% – 50% of the item’s price.

If you are the visual type – here’s a little infographic to explain affiliate marketing…

How Affiliate marketing works graphic

In terms of the offers you’ll promote, these can be found either directly on company websites, or alternatively on affiliate network sites such as Commission Junction, LinkShare, or ClickBank.

You can build multiple sites, promoting multiple products, with the cumulative result of a very respectable monthly income from a business that requires very little upkeep.

Affiliate marketing is different from Amazon affiliate marketing in a number of ways, but the main difference is that you can promote products from thousands of different companies, and not just what you find on Amazon.

Another major plus is that commission rates for most affiliate offers are between 5% and 50%, which is an awful lot more than Amazon pays their affiliates.

When you sign up to promote an affiliate offer you’re given a unique ID code by the merchant, which you then use on your website so that any sales your site generates can be linked back to you.

Even better is that these special codes can track when the person visited the merchant’s site, and even if they don’t make a purchase for several weeks you’ll still get paid your commission.

This is made possible by something called a cookie, and these are used by most eCommerce sites. The companies you represent through affiliate marketing will also provide you with promotional materials, including graphics, videos and even content to send out in emails to your customers or use on social media platforms.

Affiliate offers can also work on the CPA (Cost per Action) model, where you get paid for simply getting people to try something out, or register their interest in a credit card, or a new weight loss treatment, for example.

The commission rates paid in affiliate marketing are higher than with Amazon affiliate marketing, but it can be more of a challenge to convert visitors into customers. With that being said testing is part of the process, and small changes can increase your conversion rate dramatically.

You can choose to use paid traffic from Google, Facebook or Bing, but you also have the option of optimizing your affiliate sites for the search engines so you can benefit from the free visitors they’ll send to your site every single day.

How to Make Money from Affiliate Marketing

There are a number of ways to build a full-time income with your affiliate marketing business, but the two most popular are to either promote products in a market where customers are already spending money or to find a new product which hasn’t received much exposure yet and promote that instead.

If you decide to choose a profitable market as the basis for your website you’ll need to look at markets where online shoppers are willing to spend money, and then focus solely on that market.

So, one example would be to focus on the golf niche, but not to try to sell everything related to golf. The reason you might choose this particular market (also called a vertical) is because golfers are always willing to spend money on their hobby, and that can mean thousands of dollars spent each year.

Once you’ve identified a profitable market, such as golf, you then drill down into that market looking for products that are popular but not always promoted on the bigger golf websites.

For example, you could build a website that focuses only on motorized golf caddies and their accessories, with lots of information and reviews on new and upcoming products of that type – like this guy did:

Golf affiliate site

I found this site ranked #2 on Google for “best motorized golf caddies”, I have no idea how much this site makes per month but with high ticket items like Golf Carts the commissions per sale can be upwards of $200 a pop!

Honestly, this is a pretty crappy site that does not offer much value to viewers. You could easily build a better site and outrank him in the search engines with a bit of work. This could then result in thousands of dollars in commission each month.

Taking the approach of promoting a product which hasn’t received much exposure yet can also be very profitable. Finding an untapped market can give you a head start on other marketers that they can never recover from.

Some of our favorite examples of this include things like the first affiliates to promote media players like those from Roku, or the first affiliate marketers to promote the Force FX range of lightsabers.

How can you find the latest products to promote? Pay attention to the news in hobbies or markets you’re interested in – there’s a new product appearing almost every day, and these companies are looking for affiliates to help them generate sales.

How Much Can I Make from Affiliate Marketing

This business model is one where you’ll get as much back from it as you put into it. It’s scalable to whatever size you want, with unlimited income potential if you’re promoting products in the best markets.

We know marketers who have generated US$60,000 each month promoting affiliate offers in the financial services industry, namely credit card offers. That’s just one example of dozens that clearly demonstrates what’s possible.

Most of the truly successful affiliate marketers tend to operate a number of websites in the same profitable niche, allowing them to create multiple streams of income from one market.

So, although each website might only generate $500 per month in commissions for them, if they have ten websites making that much each month, that equals a cool $5,000 in passive affiliate income. Or an extra $60,000 per year added to your household budget.

Some of the bigger affiliate marketers we’ve met generate anywhere from US$10,000 to US$100,000 in net profit from their websites each and every month. Most of these businesses are run by a single person from their own home, often generating enough income for their partner to quit their day job.

With affiliate marketing it’s not about how much you can earn, but how much you want to earn. After that, it all comes down to picking the right markets and promoting the right offers.

Examples of Affiliate Marketing In Action

AirsoftDude.com

Paintball gun affiliate site example

This website focuses on the airsoft gun niche, which had very little competition from other affiliates when it first went online. The site generated around $350 per month in passive income, with a spike in December and January of each year – gotta love those Holiday Season shoppers.

CompareAccounting.com

Accounting software affiliate

Here’s a great example of a review site dealing purely with affiliate offers for accounting packages. The site itself doesn’t look like your typical affiliate website, in that it offers a lot of value through its content, and then passively promotes the affiliate offers, which is just flat out the smartest way to build an affiliate site.

How much are they earning each month? We’d estimate that you’re looking at a business earning well over $25,000 per month in affiliate income, and probably has a small team of people running it.

InternationalLoveScout.com

International Love Scout - Global dating site

This affiliate site in the International Dating niche. Unlike most dating sites they do not have any members of their own but instead, they post reviews of the female dating profiles from all the top global dating sites on the web.  

Most of the big international dating companies have very generous affiliate payouts so I’m sure the owners of International Love Scout makes a pretty decent monthly income.

I’ve been following this site for several years and have seen it go from a small niche affiliate site to a large authority site.   It would be pretty hard to compete head to head with this site but you could easily take a different approach and collect some of that sweet dating money for yourself.

Getting Started With Affiliate Marketing

Researching your market and its related products is the most important first step you take when building any affiliate website. You’re looking for a market where people are spending money, but that’s not already saturated with hundreds of affiliate sites all promoting the same offers.

The research you conduct at the very start can have a big impact on how much money you earn later on with your business. In fact, it can be the difference between your site earning thousands of dollars in passive income each month, or earning almost nothing.

Startup Costs

One of the costs involved with starting an affiliate marketing business is a domain name for your website, which will set you back around $10 per year. After that, you’ll need a web hosting package, but don’t cut corners here by using the cheapest hosting you can find. Be prepared to spend between $25 to $50 per month on your hosting package.

Most affiliate offers can be promoted using very basic websites, but if you want to take your business seriously then invest another $100 – $200 in having a professional website designed for you.

The final cost involved will be in purchasing an “SEO package” to help improve your placement in the search engines – budget for around $150. Your total investment to get started should be no more than $500, although you can start with far, far less.

What You Need

You’ll need reliable web hosting, and ideally a VPS (Virtual Private Server) hosting package. Website packages suitable for hosting just one or two websites are a waste of time and money.

One solution is to look at reseller hosting packages from companies like Site5, or other professional web hosting providers. With reseller hosting each website has its own individual administration interface, so it can make managing (or selling) those sites much easier.

Another key requirement is accounts with the biggest affiliate networks out there, so be prepared to sign up with Commission Junction, Link Share, Max Bounty, Click Bank, and several others.

Some of these networks require that you have an active website before you sign up, so have a 3 – 5 page website complete before you apply to the bigger affiliate networks. The topic isn’t really important – it’s just the fact you have an active website to convince them you’re not wasting their time.

Best Affiliate Marketing Training Courses

PROJECT 24 BY INCOME SCHOOL

This is one of my favorite overall courses right now. It covers so much ground that it can take you from absolute beginner to seasoned pro. This really is the only course you will need for at least a year or 2.

Here are some of the best things about Income school:

1. It is always available

Many of the courses I recommend are only available at the whim of the creators, which can be VERY frustrating if you are chomping at the bit to start your online career.

2. The Teachers

Jim and Ricky, he guys who put Income School together, have the perfect storm of attributes. They are legit Niche site owners/builders who make 5 figures a month with their portfolio of sites, they are pretty damn fun to watch, and they are first-rate teachers.

There are a lot of guys out there making 4-5 figures with niche sites, but they suck as teachers. The creators of income school, do a great job of laying out the steps you need to make money online in a series of easily digestible modules which you can consume at your own pace.

3. The Methods

Their methods are a bit different than most of the “Gurus” in the niche site space. They teach you how to get traffic to your site without building backlinks – which is one of the most frustrating tasks for beginning internet marketers.

They don’t use any of the big keyword research tools like Ahrefs or SEMRush, instead, they concentrate on creating solid content that readers love. I think this is a great tactic for newbies as creating content is 100% in your control.

I have been doing SEO for 10 years now and it just keeps getting harder and harder to get quality backlinks that will actually move the needle with your rankings and traffic.

4. Diverse Monetization Methods

Many Niche site courses just concentrate on one specific monetization method, Income School covers several, most notably, Display Ads, Amazon Affiliates and independent affiliate offers. In my opinion, diversification is key to the Authority Site business model.

AffilioBlueprint

Full disclosure – I have not used this course because it was not available when I was getting started way back in the olden days, but 2 of my Internet marketing friends started their online careers using AffilioBlueprint and 5 years later one is making over a million a year and the other makes a respectable 6 figures.  

They both loved this course and assure me it was instrumental in their future success.

Am I saying that you will become a millionaire using the methods in AffilioBlueprint?  Probably not, but it is a great course to lay the foundations for future success.

AffilioBlueprint is a step by step guide that teaches you how to start an affiliate website from scratch, how to get traffic to the site and how to start earning residual income.  

The course was created by multi-millionaire Mark Ling who is a true God of Internet Marketing and from what my friends who know him tell me, is one of the most honest people they have ever met.

The course cost $197 is really one of the most comprehensive training courses out there. You also get a membership to the Private forum – which can be invaluable for meeting like-minded people to help keep you motivated.

It comes with a 60-day unconditional money-back guarantee.​

How Long Will it Take to Make Money with Affiliate Marketing?

If you research your market properly and can find areas with very little competition, you can start generating income from an affiliate business within a few weeks.

The one thing to note here is that the more established an affiliate site becomes, the more money it will earn. This means your income from the site will increase over time, often surprising you with the income potential of just a handful of small affiliate websites.

Pros of Affiliate Marketing

  • You can create truly passive income – the same websites can earn you money year after year
  • There are no customer service issues to deal with
  • You never need to ship or handle any products
  • Commission rates are higher than with Amazon affiliate marketing
  • CPA offers can be very lucrative, with some promotions offering $50 per lead
  • You can use paid traffic to get sales coming in overnight
  • An affiliate marketing business can be run by one person
  • The only equipment you need is a laptop and an Internet connection
  • Running affiliate sites can be a lot of fun when you’re promoting products you like

Cons of Affiliate Marketing

  • Changes in the major search engines can see your free traffic reduced dramatically
  • Certain niches are stupidly competitive e.g. finance, weight loss, and adult dating
  • Managing links to hundreds of different products can become a headache
  • Affiliate offers can be suspended without any warning
  • Some affiliate networks can be a bit shady and there is no guarantee that they will pay you what they owe. As I write this article I am trying to get nearly $4,000 owed to me from one of my top paying affiliate programs – they also happen to be the biggest pain in the ass!
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