Affiliate marketing is becoming increasingly popular in today’s digital world. However, many misconceptions still exist about what it is, how it works, and why its become so popular among companies looking to capture their target consumer.
Studies completed by Statista show that advertising spend on affiliate marketing is expected to increase to $8.2 billion by 2022, more than triple the amount reported just a decade earlier. If you’ve been utilizing the internet for many years, you’ve likely seen this increase in real-time. Nowadays, everyone is trying to sell you something online. Let’s take a look at how affiliate marketing is currently being used by marketers to effectively promote both products and services.
What is Affiliate Marketing?
Affiliate marketing is an advertising model in which a business compensates a third-party entity for driving traffic, leads, and sales to their offering. When e-Commerce merchants want to reach a wider base of internet users and online shoppers, they utilize the help of hired affiliates. An affiliate could be the owner of multiple websites or email marketing lists or even a solo entrepreneur. However, to be a successful affiliate, it’s important to have some sort of the following base.
A hired affiliate communicates with consumers and promotes products and services to his or her network. They implement banner ads, text ads, or links on their blogs, websites, emails, and social media posts with the goal of getting consumers to click on their personalized affiliate link and completing a transaction. This will allow them to receive a commission from that particular sale.
You may be surprised to find out that affiliate marketing predates the Internet, but today’s digital marketing efforts, analytics, and browser cookies have revamped affiliate marketing and transformed it into a billion-dollar industry. According to Business Insider, 15% of e-Commerce revenue can be attributed to affiliate marketing. Once a person clicks on an affiliate’s link, their online activity is tracked with the help of cookies. Furthermore, if a consumer clicks on an affiliate’s link after seeing them advertise a particular product, but ends up purchasing something else instead, the affiliate still gets a percentage of the commission.
Let’s put this into perspective. Say you’re watching a YouTube video on how to build a wooden table by hand, and the person in the video tells you to click on the link in the description box below to buy the electric saw they used. After seeing how well the power tool performed in the video, suddenly you find yourself compelled to click on the link. However, once you end up on the website, you end up browsing the online shop and purchase a handheld drill instead. It doesn’t matter what you end up buying – since you were redirected to the online shop with an affiliate’s link, they will still earn a commission for your purchase.
How Affiliate Marketing Works
According to well-known entrepreneur Neil Patel, there are typically three parties involved in affiliate marketing:
1) The Affiliate––also known as the publisher. Affiliates can range from single individuals to entire companies. An affiliate promotes one or more products to its network in hopes of convincing potential consumers to make a purchase. Depending on the niche of consumers that they are trying to appeal to, they utilize whatever channel they see fit. Some popular channels that they use are review blogs, Instagram posts, YouTube videos, and email newsletters.
2) The Consumer––Affiliate marketing wouldn’t be possible without consumers. Without any people making purchases, there aren’t any commissions to hand out to affiliates. Whether a consumer knows that they are a part of an affiliate marketing deal or not remains up to the affiliate – some choose to disclose this information to their audience and others choose not to.
3) The Network––This one is especially relevant for solo entrepreneurs who take up affiliate marketing as a way of increasing their passive income. Many of them utilize the help of affiliate networks; some of the most popular ones being GoDaddy.com and ClickBank. These networks generally offer free subscriptions while handling consumer payments and product delivery. They also have partnerships with e-Commerce websites and provide a list of products that affiliates can advertise. Sometimes, affiliates have to go through a network to be able to promote certain products. This happens when a merchant only manages their affiliate program through a specific network.
Types of Affiliate Marketing
So, since affiliate marketing has dramatically increased in the wake of this digital era, let’s explore the five most popular ways that e-Commerce affiliate marketing is used in 2021:
1) Influencer Marketing––Affiliate marketing works best for people who have a large network that they can advertise to, making social media influencers one of the top people that can benefit from this venture. They can add affiliate links to their social media captions or profile bios, use Instagram or Snapchat stories to promote product benefits, and already have a large fan who trusts their opinion.
2) Blogging––Nearly 65% of affiliate marketers generate traffic by blogging, according to TrueList. Bloggers often specialize in a specific niche category and share products or services related to that niche. As their content is highly specialized, they become a trusted source for product reviews and recommendations.
3) Referral Links––Have you ever completed an online purchase from a website and then received a personalized discount link to share with your friends and family? Well guess what, that’s another form of affiliate marketing.
4) Microsites––These are mini-sites or webpages that are separate from a company’s main website. They are great for advertising a single product line, events, or campaigns. Microsites are often sprinkled with affiliate links that direct consumers to online shops or other e-Commerce websites.
5) Email Lists––Marketers often include a set of affiliate links in their consumer emails. For example, email newsletters often include links that allow the marketer to make money when subscribers click on a link and make a purchase. Exclusive and limited-time offers are also generally advertised with affiliate links through email messaging.
Now that you’re more aware of what affiliate marketing actually is and the different ways that individuals or companies can promote their affiliate links to you, let’s dive a little deeper and talk about today’s most well-known affiliate programs:
- Amazon: Amazon’s affiliate marketing program, called Amazon Associates, is one of the world’s largest affiliate marketing programs. The program provides a list of products that can be shared by affiliate marketers and gives them a personalized, shareable link for each one. However, you must first be approved to join the program. The approval process is based on qualified sales quotas and a thorough review by Amazon staff. If your application is rejected, it will not be eligible for reconsideration. The commission varies but is generally around 10%, however, they offer special commissions during certain events.
- Etsy: Etsy is a global online marketplace for vintage goods and other unique handmade items. To qualify as an Etsy affiliate marketing partner, you must be at least 18 years old, have an active website, brand identity, and more. Commission rates vary and are based on the order price. Etsy sellers can be affiliates, but they cannot earn commissions on their own products without special permission.
- eBay: eBay’s affiliate marketing program is called eBay Partner Network and it pays partners for sharing their personal listings outside of eBay. Commissions are earned when a buyer bids on or immediately purchases an item within 24 hours of clicking the eBay purchase link using an affiliate’s redirect. Partners can also earn commissions on other sellers’ items. Commission rates depend on the item sold, but normally don’t exceed 4%.
Disadvantages of Affiliate Marketing
Affiliate marketing is a great way for companies to expand their reach. No matter how much target market research you conduct, there isn’t a realistic way to appeal to the likes of every single consumer that might be interested in your product. Affiliates help companies reach a broader audience and gain more sales. However, there are certain disadvantages to affiliate marketing.
- Building traffic for referrals can take time. Regardless of what people on the Internet will have you believe, it’s not an overnight success.
- It’s possible for poor-performing tracking systems to attribute sales incorrectly, meaning commission may not always be properly allocated.
- The risk of a company not paying an affiliate after they have driven sales can be high.
- The risk of a consumer disliking a product referred to them by an affiliate marketer and then losing trust in that affiliate is also a problem.
- Lastly, creative freedom is limited. Sometimes affiliates are stuck selling products that they themselves don’t believe in.
Affiliate marketing is yet another example of how digital progression and online reliance have shifted marketing trends. Chances are if you’re an avid online user, you experience at least one form of affiliate marketing on a daily basis. Although affiliate marketing can have some downsides, it’s not necessarily something that is harmful to a consumer. Unlike pyramid schemes, affiliate marketing methods are an effective and legitimate way to earn income. Consumers benefit as well, as they often receive discounts when using affiliate links. At the end of the day, as long as you’re happy with the products or services that you end up purchasing through an affiliate, it’s a win-win situation for everyone involved.