Affiliate marketing, in essence, involves two parties: the affiliate (you); and a brand. This is the basic business relationship.
When an affiliate recommends a product or service through their website (or other digital platform: social media, Facebook e.g.) and it is bought by a consumer, the affiliate earns a small commission.
The economics of this business, in short, revolves around how many consumers bought a product and the level of commission offered by the brand.
This is the basic business model. To understand this a bit more elaborately we need answer, a number of other questions entwined with it — such as . . .
- What’s Passive Income?
- What’s The Appeal?
- Where Does Affiliate Marketing Fit Into It?
- What Are The Bare Requirements?
I shall take you through each of these questions, so that at the end of it you have clarity on the subject.
Let me get started with the first question . . .
What’s Passive Income?
Passive income may be defined in the simplest terms as any revenue for which the investor didn’t engage directly in generating it. One example of this is rental income of any sort — real estate, boat, vehicle, equity (shares).
The last — shares — also provides an opportunity to make the point by contrast: owning shares and trading in shares are two different things. They are different because they produce different types of income. Share owners earn income from dividends. Share traders, on the other hand, earn their income from constant buying and selling shares.
What’s The Appeal?
Passive income means not having to do anything other than acquire an asset to produce an income which explains its enduring popularity. It’s a relatively simple way to earn an income without the challenges of owning and running a business profitably. Generally speaking, we humans want more pleasure than pain (freud called it the pleasure principle) and thus we gravitate towards the line of least resistance if we can.
Most of us would rather spend time doing the things in life that matter most to us — spending time with family; gardening; hiking. The whole point of getting up in the morning to get on the free way or catch the first flight to somewhere (God knows I’ve done my share of it over the years) is to earn an income, so that we can look after ourselves and our families. A career is one thing but wage slavery on the pretext of a career is a dismal existence.
This is where a passive income fits in — a source of revenue that doesn’t require our direct input. But immediately, the question that follows is . . .
Where Does Affiliate Marketing Fit Into It?
Affiliate marketing provides an opportunity to own an asset which can provide value in two ways — first, as recurring income (affiliate commissions); and, second as digital property. You may be interested to know that affiliate marketing websites are bought and sold on Flippa, a marketplace for digital assets. Let me elaborate. In that sense, affiliate marketing is a prime example of passive income.
While it’s relatively easy to build a website these days (and we’ll get into that later), it doesn’t mean automatically that people will come to it: you’ll still have to rank on search engines (Google; Bing; Yahoo) and generate traffic. It’s very important to bear in mind that the quality of an affiliate marketing website is directly related to the quality of the content on it — posts, discussions, analyses, insights, information. Those are the challenges of affiliate marketing. But rather than feeling daunted by them, we can also look at them as opportunities. The glass is half full or half empty — perception is reality. I would, therefore, like to change the question from, Can I do it? to . . .
What Are The Bare Requirements?
Affiliate marketing revolves around a website; content; niche; key words; and traffic. Let me elaborate further on these.
Website
— this is your own personal platform on which you will conduct your business. It’s your digital property. And this is all the property you’ll own in this business. Done properly, this is something you can sell later and cash out. The value of this digital property is determined by the content you put on it and the size of the audience you garner. Your main activity on your platform will be to reach out daily and connect with the audience in your chosen niche by posting informative material you create.
Content
— this is what you create using words, mainly, and digital images. The essential purpose of the content is to provide value — insightful pieces of advice or analysis on a particular aspect of the niche that might interest your audience. Imagine that your chosen niche is beauty (one of the most lucrative niches) and, say, that you have advice on natural products (a niche within a niche, even more lucrative). You can provide that advice in the form of an article — preferably with links that will take your readers to your affiliate partners’ website where they make a purchase, so that you get paid. However, this aspect needs to be treated with sensitivity. An affiliate doesn’t the sell the product per se but the concept behind it — and as such, they perform an advisory role. This is also where the whole question of trust comes in — the valuable intangible asset you develop as an affiliate marketer. Would you advice your friends to purchase dud insurance policies? That’s the pub-test we apply as affiliate marketers.
Niche
— this is defined by an interest. My example beauty above is a case in point. And there are as many niches as there are passions in this world. Stamp collecting. Elizabethan ceramics. 3-D printing. You name it. Each niche has a certain degree of profitability, which is why it pays to choose a lucrative one from the outset. Of course one person’s passion is another’s waste of time. Everyone to their own taste.
Key words
— are the search terms people use on their browsers (Google, Bing, Yahoo) to find information. Search engines treat them as potential buyer intents. And, this is where the ingenuity of online marketing comes in. Find the right key words, find the right buyer intents. That’s the basic logic. Using my example of “beauty” above, this can be a keyword. Of course to do this job more efficiently, you’ll need nothing less than a specialised tool — and one that comes immediately to mind and one that I am most familiar with is Jaaxy. You needn’t worry about this immediately but further down the road it will be indispensable.
Traffic
— refers to the number of visitors to your website. The more traffic you have, the more chances of engagement. And the greater the engagement, the greater chances of what are called conversions — actual purchases. In the beginning — let me be very clear — this can be very dismal, because it takes time to rank on Google or any search engine. Your website has to be discoverable by those interested in what you have to offer. Factors such as niche, quality of content, key words all have to work together to provide the results we all want. Thus my emphasis on diligence.
Before Leaving You
Now that you have an understanding of affiliate marketing and why it provides a viable option for generating passive income, you may have other questions — such as how you can build a website, rank, get traffic — succeed, in other words. I will come back to these in my subsequent posts. Feel free to please drop me a line at: soheil@affiliatepathways.com. Some of these questions have already been answered in my post: The Wealthy Affiliate: A Critical Review.
However, if you can’t wait, then let me leave you with something interesting — a presentation by Kyle, one of the co-founders of Wealthy Affiliate.
Wondering What’s Next?
Try this: Affiliate Marketing’s Moving Parts
Cheers.