Affiliate Marketing Guide: Step-by-Step, Do’s & Don’ts, Comparisons to Other Biz Models

What is affiliate marketing? (And how does it work?)

Affiliate marketing is a type of performance marketing where an individual earns a commission for promoting another company’s product or service. This marketing strategy involves three parties: a brand, a customer, and a marketer that isn’t directly employed by the brand (called an affiliate). Affiliate marketing works by using unique affiliate links to track referrals and pay commissions for each sale or action generated through those links. An affiliate link is a custom URL that typically includes the brand’s website domain and a tracking ID that is unique to a specific affiliate. Affiliates usually obtain these affiliate links through an affiliate network that hosts the affiliate program for the brand, such as Awin or Impact.

Unlike sponsorships, where a third-party marketer can get paid a flat fee for promoting the brand in their content, an affiliate marketer gets paid commissions for driving customers to take specific actions.

What are the affiliate marketing commission models?

• CPA (Cost Per Action): Affiliate earns a commission for driving the customer to take any action that the brand deems as valuable and payment worthy. This is the most broad type of affiliate marketing and it can include actions like sales, leads, downloads, and free trial signups.
• CPL (Cost Per Lead): Affiliate earns a commission when they generate a lead for a brand. Common actions for CPL affiliate marketing include form fills, newsletter signups, application downloads, and free trial registrations.
• CPS (Cost Per Sale): Affiliate only earns a commission when a customer makes a qualifying purchase after clicking on the affiliate link. CPS affiliate marketing can be either a percentage of the sale or a fixed payment amount per sale.

An example of a CPL affiliate program is Inuit Credit Karma on the AWIN affiliate network. The Credit Karma affiliate program pays $7 when a new member signs up. It’s free for new members to join the platform.

An example of a CPS affiliate program is Bluehost on the Impact affiliate network. Bluehost pays affiliates $65+ per sale.

What are the types of affiliate marketing?

The types of affiliate marketing are:

• Unattached affiliate marketing
• Related affiliate marketing
• Involved affiliate marketing

Unattached affiliate marketing is when an affiliate promotes products and services they don’t actually use themself. Unattached affiliate marketers usually don’t build a personal brand or audience to promote products to, they typically rely on paid ads to generate impulse buying decisions. An example of unattached affiliate marketing is a Clickbank affiliate running Facebook Ads to a landing page that promotes a weight loss pill.

Related affiliate marketing is when an affiliate has an audience and promotes relevant products in their niche, but they don’t always use these products themself. It’s based on niche relevance, not direct product experience. An example of related affiliate marketing is a travel blogger like Nomadic Matt giving his readers a range of different hotel options to stay at even though he’s only stayed at a handful of them himself.

Involved affiliate marketing is when an affiliate personally uses the product they are promoting to their audience. This type of affiliate marketing has the highest trust level and so tends to boast the highest conversion rates. An example of involved affiliate marketing is the finance YouTuber Andrei Jikh recommending that his audience buy Bitcoin through Gemini because he uses it himself and shows it in his content.

How to start affiliate marketing?

To start affiliate marketing :

1. Pick an affiliate marketing niche like health personal finance, or travel
2. Sign up for beginner-friendly affiliate programs like Amazon Associates or ClickBank
3. Choose a marketing channel to drive traffic to your affiliate offer such as SEO, organic TikTok, or Facebook Ads
4. Create helpful content like reviews, comparisons, or tutorials to stimulate interest in your affiliate offer
5. Track your affiliate campaign performance with tools like PrettyLinks and Google Analytics 4
6. Scale by doubling down on the channels and content types that are driving sales

I primarily targeted the online business niche when I was actively doing affiliate marketing because I already had good expertise and experiences to share to make my content better than much of the competition. I suggest doing the same by targeting a niche you know well.

What are the best courses to learn affiliate marketing?

These are some of the best affiliate marketing courses .

What are the best tools for affiliate marketing?

Link management tools

Link management tools help you organize and monitor your affiliate links so you never lose out on commissions because of broken or untracked links. They can also cloak your links so your audience doesn’t easily know that you’re an affiliate.

The best link management tools for affiliate marketing include:

• PrettyLinks (WordPress plugin to shorten and cloak links)
• ThirstyAffiliates (Link management + reporting)
• Bit.ly (Free URL shortener with analytics)

Analytics and conversion tracking tools

Analytics and conversion tracking tools help you measure which content converts, which traffic channels drive the most sales, and where you can make improvements. Advanced tracking tools drive 35% improvement in affiliate marketing performance, according to WeCanTrack.

The best analytics and conversion tracking tools for affiliate marketing include:

• Google Analytics 4 (Traffic + behavioral insights)
• Google Tag Manager (Event-based tracking)
• RedTrack.io (Advanced affiliate attribution & split testing)

Content creation and SEO tools

Content creation and SEO tools help you understand which keywords to target and what kind of content gives you the best chance at ranking for your target keywords.

The best content creation and SEO tools for affiliate marketing include:

• Surfer SEO (On-page optimization via NLP and competitor gap analysis)
• Ahrefs / SEMrush (Keyword + backlink research)
• Jasper AI or ChatGPT (AI-assisted content drafting)

Email marketing tools

Email marketing tools help affiliates capture leads and promote affiliate offers to their list long-term. Email marketing is an important aspect of a successful affiliate marketing strategy. In fact, a survey by Authority Hacker found that affiliates who use email marketing earn 66.4% more money than those who don’t.

The best email marketing tools for affiliate marketing include:

• ConvertKit (Made for creators + affiliate-friendly)
• MailerLite (Great free plan with automation)
• ActiveCampaign (Advanced automation for scaling)

What are the pros and cons of affiliate marketing?

The pros and cons of affiliate marketing are:

Pros:

• Low startup costs - You can start for as little as $0 because you don’t need to create a product, hire a team, or manage fulfillment and most affiliate programs are free to join.
• No customer service or inventory- You just refer traffic and the brand handles the rest.
• Scalable with content or ads - Once your content ranks or your funnel works, you can scale through SEO, paid ads, email, or YouTube.
• Location-independence - Everything runs online, so you can work from anywhere with Wi-Fi.
• No cap on income - Your earnings aren’t tied to time or clients, they grow based on how well your systems convert.

Cons:

• Third-party risk - The brand can change pricing, cancel the program, or reduce commissions without warning. Your reputation is also tied to the brand’s product.
• Trust takes time to build - With affiliate marketing strategies that have recurring income potential, like website SEO and YouTube, it takes 1 - 2 years to build a positive reputation and loyal audience base.
• Low entry barrier brings high competition - Affiliates compete for sales against everyone selling products online, that includes millions of other affiliates and millions of Ecommerce stores selling their own products.
• Platform dependence - Affiliates rely on platforms like Google, Meta, TikTok, & YouTube to generate traffic. An algorithm change or penalty from one of these platforms can destroy your ability to generate sales.
• Thin margins for low-ticket products - Many affiliate marketing programs have low ticket offers with low commission rates. For example, Amazon Associates average commission rate is just 4% and most products on Amazon sell for $20-$150. That means Amazon affiliates can expect just $0.80-$6.00 per sale.

Why do most affiliate marketers fail?

Most affiliate marketers fail because they:

• Expect to make quick or easy money without consistent effort
• Lack the necessary digital marketing skills to produce successful campaigns
• Choose to broadly target high competition niches like personal finance or travel
• Fail to build trust with a niche audience over time
• Neglect setting up proper tracking to understand campaign bottlenecks

These are some of the main reasons that affiliate marketing has an estimated 90-99% failure rate.

One affiliate marketer on Reddit says they failed because Google Ads rejected them, many affiliate programs rejected them, affiliate programs adjusted their affiliate link so their earnings couldn’t be tracked, and because website visitors didn’t click on their links and buy their products.

Is affiliate marketing still worth it?

Affiliate marketing is still worth it if you:

• Focus on building a loyal audience base that values your opinion
• Solve problems with valuable content and relevant product suggestions, not just push links
• Target a niche where you can have a competitive advantage through your expertise and experience
• Set a realistic timeline that it will take at least 6 months to start making money and a few years before you’re earning a decent income

Affiliate marketing is not worth it if you:

• Expect to run PPC ads to a landing page to make a quick buck as a beginner
• Want to create a faceless niche or authority site to generate traffic (leading affiliate courses like Authority Site System and Affiliate Lab have shut down because this model no longer works)
• Aren’t willing to invest time and money into building digital marketing skills like funnel building and content marketing

How does affiliate marketing compare to other online business models?

Affiliate marketing vs freelancing

Affiliate marketing vs freelancing summary: Freelancing gives faster income and more control early on. Affiliate marketing offers better long-term scalability, but requires patience and traffic.

Affiliate marketing vs dropshipping

Affiliate marketing vs dropshipping summary: Dropshipping offers faster income potential but carries high operational risk. Affiliate marketing is slower but safer and simpler to manage solo.

Affiliate marketing vs local lead generation

Affiliate marketing vs local lead generation summary: Affiliate marketing is easier to start but harder to monetize consistently. Local lead generation gives faster income, higher control, and builds a business you fully own.

In my experience, local lead generation made me the most consistent passive income online for the last 10 years, today I earn over $50K per month with this model but with affiliate marketing the most I made was $8,200 per month and it was only for 4 months. It is very difficult to earn long-term and consistently with affiliate marketing.

Affiliate marketing FAQs

Is affiliate marketing legal?

Affiliate marketing is legal, but affiliate marketers must follow certain laws and regulations to operate legally. These include:

• Disclosure requirements: Affiliates must clearly disclose their commercial relationships, such as sponsorships or commissions, to maintain transparency. For example, the U.S. Federal Trade Commission (FTC) requires “clear and conspicuous” disclosure of affiliate links, while the UK’s CMA demands disclosures that are unavoidable and unambiguous.
• Data privacy and protection: Affiliates must comply with data protection laws such as the EU GDPR, California’s CCPA, Canada’s PIPEDA, and Brazil’s LGPD. This includes obtaining explicit consent for data collection, limiting data use to necessary purposes, securing cross-border data transfers, and respecting user privacy.
• Truth in Advertising: All claims made by affiliates must be accurate, evidence-based, and clearly labeled when sponsored or native ads are used. This is especially true for affiliates promoting products in regulated sectors, like health and finance.
• Intellectual property rights: Affiliates must use trademarks and copyrighted content only with proper permission and licenses, respecting brand guidelines to avoid infringement.

Affiliate marketing can be illegal if you don’t follow the laws and regulations of the jurisdiction that you’re promoting affiliate links.

Is affiliate marketing a scam?

Affiliate marketing is not a scam . It is a legitimate and legal business model, with approximately 81% of companies globally leveraging affiliates to generate revenue, according to Rakuten.

How much do affiliate marketers make?

Affiliate marketers make between $0 to $2M+ per year. However, the majority 80% of affiliates make $0 to $80,000 per year, according to a survey of affiliates by the affiliate marketing community STM Forum.

Is affiliate marketing passive income?

Affiliate marketing can be passive income. Affiliate marketing is passive income when you create a blog post or piece of social media content like a YouTube video that keeps generating views and clicks on your affiliate link long-after you post it. However, affiliate marketing requires active work to create this content and there’s no guarantee as to the amount of time your content will generate traffic.

Do you need to pay taxes as an affiliate?

Yes, you need to pay taxes as an affiliate. Affiliates are treated as independent contractors for tax purposes. US affiliates are responsible for paying income tax and self-employment taxes. They should make estimated quarterly tax payments to avoid penalties from the IRS.

What’s better than affiliate marketing?

Local lead generation is better than affiliate marketing from my experience because:

• Organic SEO is still a powerful channel when targeting local keywords
• Local competition is easier than global
• Owning the offer gives you more control
• Conversions are easier when your audience is actively looking to purchase
• Home service leads are high-ticket

Affiliate marketers like Pat Flynn used to make millions by targeting informational search queries to attract website visitors. However, those days are long gone now with AI becoming mainstream. A study by Pew Research Center found that when Google AI overviews are present, searchers click on a traditional website link only 8% of the time. Even so, these Google AI overviews typically don’t appear for local, transactional keywords like local lead generation websites target. Even if they did, local service seekers still need to click into business websites to get the service and contact information they are looking for. That’s why local lead generation websites still generate consistent traffic with website SEO.

Affiliate marketers compete for visibility on a global scale. There are tens or even hundreds of thousands of people targeting the same niches with lucrative affiliate offers. With local lead generation, your competition is limited to at most a few dozen small business owners in a specific geographic location. As such, getting visibility and traffic is much easier.

Affiliate marketers are susceptible to reputation issues and payment issues because they rely on the offer of another brand. Brands can deliver a poor experience to an affiliates audience or change affiliate terms without notice, such as lowering commission rates. With local lead generation, you own your website assets completely and can decide who you want to sell your leads to and for how much money.

Affiliate marketers often attract their audience with interesting content and then promote a relevant niche product. The audience isn’t necessarily looking to buy a product, so conversion rates can be low. Local lead generation websites target transactional keywords specifically, such as “plumber Dallas.”. People typing these types of search terms into Google are actively looking to pay for this service because they need it. As such, local lead generation conversion rates are generally higher than affiliate marketing.

Most affiliate marketing products are less than $100 and affiliates can expect anywhere from a 4-20% cut of the revenue. The home service niches that local lead generation websites target are often high-ticket, such as kitchen remodeling, roof replacements, or siding installation. Earning 5-10% of a job that generates tens of thousands of dollars means you’re earning hundreds or thousands of dollars per lead.

Check out my local lead generation training program if you’re interested in learning more about this online business.