What is affiliate marketing, and more importantly, how can you earn from affiliate links? Let’s talk about that here on Grey Matters.
What is Affiliate Marketing, and How Can One Earn from Affiliate Links?
[0:00] – Introducing this episode of the Grey Matters podcast: Affiliate marketing.
- When people hear the term affiliate marketing, defensive shields almost immediately rise, due to its mostly negative connotation. However, the truth is that many people don’t really understand how it works, leading to their fear and mistrust of an otherwise perfectly legal and logical system.
- Affiliate marketing can be the perfect side hustle, especially for someone building their own online business.
[2:57] – What is Affiliate Marketing?
- There are usually three parties involved in an affiliate program: the manufacturer, the customer, and the middleman. The manufacturer owns or sells the actual product, the customer buys the product, and the middleman – or in this case, the affiliate marketer – is the bridge between them.
- In an affiliate relationship, there is some education involved: endorsement, a little bit of training, some background, perhaps an included incentive, and any other ways to help the person come to the purchasing decision.
- Through the affiliate program, the middleman or affiliate is rewarded for either their connections, their network, the people who listen to them, the trust that they built in their community, or their expertise with a corresponding amount of money – the affiliate commission.
[4:33] – The Mechanics: How affiliate marketing is tracked
- A piece of software may be tracking all of the traffic, or a third-party network of sorts that represents multiple clients multiple times. The middleman receives a unique identifier code so that when people visit the web page, they're tracked with a cookie, which then identifies to the manufacturer that this person came as a result of this affiliate relationship.
[7:00] – What makes affiliate marketing such a perfect fit?
- For those of us in online business, especially those of us starting out, revenue is an important factor. But there are so many other benefits that are attached to it as well.
- First, it establishes a mindset that we can start to incorporate into our content that we want to have some sort of a transaction at the end, instead of simply offering content for free.
- When you start to enter an affiliate relationship and promote different products, your community will be reaching into their wallet, and they will be purchasing something. Thus, you'll be starting to establish a different level of authority. There's an increased level of trust as a result of that.
[10:50] – A great alternative to Sponsorship
- One route that many will decide to follow in order to earn money from creating content, at least right out of the starting gate, is sponsorship. This involves finding companies who are interested in reaching your audience, and then pitching them on sponsoring your product, your media property, in a traditional sponsorship relationship.
- The challenge here is the inherent pressure that comes with the sponsorship relationship: the sponsor will likely only continue to see value in the relationship when your community is clicking on the links you’re supplying. And because you start working hard just to satisfy your sponsor, you start to lose independence and credibility.
- Meanwhile, affiliate marketing is a very self-serve process. Doing it can be so liberating, because they don't have any expectations, and you don't have any obligations, other than if you want to promote the product.
[21:45] – How much can you really earn from affiliate links?
- Aside from setting realistic expectations, there are three phases that we're going to go through with affiliate marketing and generating revenue for online property.
- The first phase is making enough to cover hosting and operating costs.
- The next phase is the growth phase: Once our costs are covered, we begin to consider taking the revenue that we're earning from these affiliate relationships and reinvesting in ourselves, such as hiring a producer or graphic designer.
- Phase three is where you start bringing money in and it lands on the bottom line of your business.
- The manufacturer, retailer, the person who is selling the product or service
- The affiliate, the person recommending the service or product
- The customer