Affiliate marketing is a performance-based business. You get paid a commission for every sale you make for a third-party company. The goal is to promote their product or service and drive online traffic to their offer to increase sales and brand awareness.
The industry is worth an estimated $8.2 billion in the USA. But it's super competitive. Not to mention that you're going up against some of the best online marketers in the world.
In this article, we share the pros and cons of the business model. Plus, the dark side of affiliate marketing that people don't talk about. And the hidden issue experts don't want you to know. Learn why an alternate business model like local lead generation might be a better choice. (If you want to make money online in 2023).
What Are The Advantages & Disadvantages Of Affiliate Marketing?
3 Affiliate Marketing Advantages
A low-barrier and low-cost business model
A chance to diversify your income stream
Easy to set up, and you don't need any prior experience to start
3 Affiliate Marketing Disadvantages
The business model has a high failure rate (90%-95% of people will fail with affiliate marketing)
Lack of control over the affiliate programs or your commissions
No customer loyalty or chance for recurring sales
What Is Affiliate Marketing & What Are The Pros & Cons?
Affiliate marketing is a performance-based business model. First, you act like a commission-only salesperson. Then you get paid for affiliate sales made through your affiliate links. So unlike ecommerce or Amazon FBA, where you're selling physical products. As an affiliate, you don't need to invest in inventory, secure suppliers, or deal with customer service. Instead, your only job is to promote product offers and drive online traffic to make sales.
But it's a popular digital marketing business model. Plus, it's becoming a key component in engaging consumers to purchase online products. (It represents 16% of global ecommerce sales and is one of the most straightforward online business models to start). In addition, affiliate marketing is a low-cost investment with the potential for high-profit margins.
But because the model is commission-based, you rely on a steady stream of traffic. Plus, this traffic can be inconsistent and hard to come by. The industry is also very competitive; over 80% of brands have affiliate programs. So you need to have an irresistible offer and a unique angle. Or you need to have a product that fills a gap in the market. Finally, of course, there are other pros and cons to affiliate marketing that you need to consider. So let's take a look:
Affiliate Marketing Pros:
1. Low Investment Costs
Low cost doesn't mean free. So you need to plan for a budget of $500-$3000 to start. This amount will cover the costs of things like:
- Hosting (like Interserver)
- Spy Tools (like Anstrex)
- Tracking Software (like Post Affiliate Pro)
- Landing Page Builder (like Instapage)
- Ad Budget
But there are ways to score a few quick wins that won't cost you big bucks. For example, you can publish a blog and find keyword opportunities that aren't too competitive. Look for ones with a low cost per click, and focus on long-tail keywords so you can make money faster. (For example, create low-competition blog posts on topics like 'best' or 'review hacking').
You can set up a YouTube or YouTube automation channel (like alux.com) and drive free traffic. Or leverage social media platforms like Facebook and TikTok and design creatives with virality potential.
But you need to build a substantial audience and deliver high-quality content. Or create videos that address a pain point or fulfill a desire in your target audience. You need to demonstrate how your offer(s) will solve a problem or enhance their lives. So you have to build trust, engage with your viewers, and provide value so they'll be compelled to click your affiliate link.
2. Market-Ready Audience
There are a plethora of untapped products and services you can promote in any number of markets. But it's about finding the best offers-ones that coincide with your niche and target audience. You can promote as many offers as you want as long as you comply with the affiliate platform. (ClickBank lets you have 500).
You get paid a flat commission whenever you influence a sale on a website. But you need to have a good offer. One that weighs in with your audience and that they're likely to buy. And your audience needs to be aware or actively searching for what you're promoting (like weight loss, where you offer a keto-based solution or supplement to help people lose weight).
You can work wherever you have an internet connection and choose offers from anywhere in the world. You just need to create unique and engaging content and leverage purchase power in a popular niche or trending market. But you need traffic and eyes on your offers. So you're either publishing dynamic organic content or paying cash to invest in paid ads.
Affiliate marketing is a popular way to make money online and is cost-effective for business owners. But it's not a get-rich-quick scheme; it takes work and perseverance to succeed. And you're either paying for your promotions with your time or money. But you can sell as many products as you want, and there's no set schedule for when or where you work. There's also no limit to the platforms you leverage or how many networks you sign with (as long as you're in compliance).
4. High Income Potential
There's no cap on how much money you can make as an affiliate marketer, but affiliate marketing is a numbers game. So if you want to be successful with the business model, you have to understand the formula. (The more sales, the higher your commission rate):
- Searches (visits)
- Affiliate clicks (click rate)
- Conversion rate (affiliate link clicks)
- Number of sales=Commission rate
The goal is to drive traffic to your offers and get people to take action. But affiliate marketing's not about publishing as much random content as possible. Instead, you need a plan that includes effective marketing and advertising techniques.
So you need to develop strategies that monetize and optimize your platform and tap into buyer intent with methods that focus on creating targeted content and information people are actively looking for. (Customers on the precipice of taking action).
You also want to look for high-ticket front affiliate offers that have a complementing backend offer in a profitable niche. (One that resonates with your target audience). Again, there's no limit to your income potential. But to achieve consistent traffic, you need to either leverage paid ads or publish valuable content on a consistent basis.
Pick residual commission offers that create passive income streams. This tactic will make you more money and help build your long-term security.
5. No Customer Service
Because you're not selling a product or service, you don't need to worry about customer service. Affiliate marketers just need to entice people to click the link to their offers. The rest is up to the brand or company you're promoting. But because you don't own an actual entity, there's no brand loyalty.
So you need to constantly generate interest for the products and services you're promoting. And you don't own the customer. They belong to the network. So you're always on the hunt for a new audience, and need to do the legwork to create a buzz around the product or service you're promoting.
You can scale quickly with affiliate marketing because you're not tied to a specific product or service. You can promote multiple offers and leverage platforms to drive traffic to your links. You can also include upsells for products you promote.
Use spy tools like AdPeriscope or do a Google search for things like 'how do I earn' to see what competitors are promoting or what other people are ranking for. Use other marketing techniques like email or SMS marketing, or scale using methods like:
- Create organic content on multiple channels (blog & YouTube channel)
- Run paid ads with more than one profile or have various ad campaigns (Facebook)
You can also increase the number of affiliate links you promote. But don't add too many links to the same body of content, or you risk losing the trust of your viewers.
7. A Thriving Industry
Affiliate marketing is one of the best ways for a brand to reach its target audiences faster or discover new audiences for its products and services. It's also one of the most effective ways for a business to monetize its products and services or generate leads.
Affiliate marketing is the driving force behind global sales and is an ecommerce powerhouse. (It's worth 16% of USA ecommerce orders). And affiliate programs that want to get the word out in a lucrative niche will pay better commissions.
In fact, 83% of marketers use affiliate marketing to increase brand awareness. As a result, the industry will continue to grow, creating more opportunities for affiliate marketers in the future.
Affiliate Marketing Cons:
1. You’re Building Someone Else’s Brand
As an affiliate marketer, you're growing another business's brand. You don't own a product or service and have no customer loyalty. Instead, you're doing the hard work to find new and innovative ways to deliver content and drive traffic to affiliate links. But once that consumer clicks on the link, they belong to the business.
So you've spent all that time, effort (and maybe money) for a commission of 1%-50%. You also rely entirely on the affiliate program for your income. You have zero control over any changes to policy, product, or payment. As an online marketing coordinator, you're doing all the heavy lifting but don't have anything tangible to show for your efforts.
2. Traffic Is Unpredictable
Traffic is your lifeline. As an affiliate marketer getting purchase-ready traffic is the crux of your business. You need to master traffic, so you have to do research and understand your readers.
You can't control how well your content ranks or if your affiliate marketing campaign will be successful. And you can't manage platforms that you leverage for your paid ads. But you can become an expert marketer with an advertising strategy to drive traffic to your offers. Consider:
- What platform will you use?
- Organic or free traffic?
A few of the more popular options for generating traffic include:
Find the best product offers for your niche. But remember that when there are a lot of affiliate marketers promoting the same products and services, the market becomes saturated. So it takes more time or money to get a sale.
3. No Control Over Affiliate Programs
Unfortunately, not every partner is a good partner. And there are bad affiliate partnerships that might not pay you. Or ones who have 'fine print' in their contracts. In addition, not all companies are ethical or stand behind the product or services they sell. So you need to research networks carefully to ensure they're legit. (And even then, you're still not involved in the decision-making).
As an affiliate, you have no control over pricing and commissions. You can't negotiate your rates, and your sales need to be verified for you to qualify for commission. The other issue is that the product can be discontinued. Or the network can change leadership. (Which is also out of your control but can directly impact your income potential).
Affiliate marketing is a low-barrier entry business model. You don't need a lot of skills or upfront capital, resulting in a pretty crowded online space. But this isn't a killer. You just need to niche down. You also need to recognize that new competitors are entering the game every day, and everyone is vying for the number one spot and audience.
In fact, most affiliates fail. So if you don't want to fail, you need to make really good things happen. You need to become a producer. Put out valuable content, do more, and be better than the competition. You need to create content with value and a stellar angle to stand out to drive organic traffic. Or you need to be willing to shell out big bucks to pay for ads. And the more popular the product, the more you'll need to spend to get clicks that convert to sales.
5. Time Or Money
It will take you at least 3-6 months before you start generating income. And you need dedication and discipline to earn consistent affiliate commissions. Affiliate marketing is a long-term business strategy that takes time to establish. You need to:
How To Become Established:
Either way, you need to do a ton of upfront work to see results. Affiliate marketing is not a passive business model. It's an active business you need to work on consistently to stay ahead of the curve. You're a tiny fish in a huge pond. So if you want to succeed, you need to treat this like a real business and be prepared to do the work.
6. Fraudsters & Hijackers
There are a lot of lies in the affiliate marketing space—course creators touting their success on YouTube. But you can't copy and paste course creators' stuff and think you'll get sales. Most of these so-called gurus aren't telling you the whole story. Like how long it took them to achieve that level of sales. Or the countless hours of work they did behind the scenes. It's also really easy to fake screenshots, and most of them only show short-term gains.
Questions For The 'Gurus'
A few YouTube masters in the space share some valuable and honest information. But even the best affiliate marketing courses won't be enough to generate consistent traffic if you don't publish quality content. Or be willing to pay the bucks for advertising.
The reality is you'll need more than a course to get clicks. And you need a lot more clicks than you think before you make any real money with this business model. The other issue is hackers—unscrupulous affiliates or people who have figured out how to insert their codes into your links.
Never embed a direct affiliate network link onto your website or platform. Instead, use a link cloaking tool like Pretty Links for your affiliate business. Software that makes it harder for them to hack and easier for you to track.
What Is Affiliate Marketing?
Affiliate marketing is a way to make money online without owning or creating products. So you don't need to deal with customer service or supply chain issues. Instead, you're like the middleman between a search and a purchase. Your goal is to drive traffic to offers that you promote either organically with things like a blog or podcast. Or by using paid advertising on platforms like Facebook and YouTube.
The three main types of affiliate marketing business options include:
You don’t need any previous experience to become an affiliate marketer. But you're always on the hunt for a new audience, and you need to make sure that your offers match the needs of your target market.
Join an affiliate marketing program or network to find an affiliate product or service in your niche that you can sell or link to and make an affiliate commission. But you need to do your research and make sure you connect with reputable sites. A few of the more popular quality networks include:
You can also conduct a Google + search query + affiliate program or even contact businesses directly and ask them if they have an affiliate marketing program. (But make sure you pick the right offers-ones with a good commission in your niche). Then select your marketing platforms.
- How are you going to drive traffic to your offers?
- Will you leverage paid or organic traffic?
Organic traffic is free. But it takes time and consistent effort to rank your site or build a substantial following. You need to become a content creator, share high-quality and valuable content and build trust with your audience.
Paid advertising is a way to get quick wins, but it's expensive. (Facebook's CPM rose 89% in 2021). And it takes on-point copy or scroll-stopping creatives and money if you want to achieve high conversions.
How Do You Become An Affiliate Marketer?
Start by choosing a profitable niche with some competition and growth potential. But narrow your scope, and don't pick a niche that's too broad. You want one with multiple products or services you can promote. Some niches get better sales, and you can make more money. So even if you're passionate about a topic, if there isn't a substantial selection of affiliate product opportunities, you won't make money.
Use tools like Google Trends or Keywords Everywhere to check out search volume. Look at social media platforms like Facebook and TikTok. What niches are popular? Where does your audience hang out? Spend their time or money Then evaluate market demand using spy software like Adplexity or SpyPush and access things like:
- What's the competition like?
- Are people actively searching for this niche?
You can also use tools like ahrefs or Google Keywords Planner to find new and emerging keywords you can rank for on Google quickly. (16%-20% of Google searches are new every year). You want some competition to ensure that there's an audience.
Is It Worth It To Do Affiliate Marketing?
Yes, it's worth it to do affiliate marketing in 2023 because there are always new products and services. In addition, the global social media reach is 4.62 billion(10.1% YoY from 2021-2022), and 76% of consumers have purchased a product they saw on social media. Let's compare Amazon FBA vs. affiliate marketing. You don't need to wear as many hats as an affiliate marketer (like worrying about supply chain issues or having to store inventory).
But despite the simplicity of the business model, only 5% of affiliates are successful. So why do 95% of affiliate marketers fail? Most people don't succeed because they choose the wrong niche. Or they lack a content strategy and neglect the importance of video marketing. Others don't treat it like a legit business and focus more on the money than on providing value.
To succeed with affiliate marketing, you need to build trust with your audience and be the best marketer-one that gives value to your viewers.
- Why should people click your link?
- How does your offer enhance their life?
You need to understand customer psychology and how to leverage impulse or emotional purchases. Take the time to learn about your audience and access things like What platforms does your target market like to congregate? Where are they spending the most time online?
Then access the competition: Where are they making money? How can you execute a better offer or fill a void in the market?
To be successful with affiliate marketing, you need a marketing strategy that will get your audience to sit up and take notice. It takes an irresistible offer and on-point content or scroll-stopping creatives. You need copy that hooks your audience and makes them buy what you're promoting.
Become a trusted authority and shift your focus to providing value. And pick products you can get behind offered by reputable networks. Affiliate marketing isn't a get-rich-quick scheme. But if you're willing to hustle and do the hard work, it can be worth it in 2022.
The Hidden Truths About Affiliate Marketing
The biggest issue with affiliate marketing is your lack of control. You're at the mercy of affiliate networks that can change the offer, alter the commission structure, or stop selling the product you're promoting. Sales need to be verified, so even if a person clicks your link, you might not make a commission.
The other issue is traffic. You need to constantly generate new and purchase-ready audiences with your organic content or paid ads. So you either spend time or money. And with a business model becoming increasingly competitive, generating a steady income stream (let alone a passive one) is often an uphill climb.
The other problem is the business partnership between a brand and a publisher or blogger. Affiliate networks and their managers have revenue goals tied directly to affiliate marketing. So offer's aren't always based on the best product or solution for your target market. But more on who's willing to pay the most or who can make the best offer. This issue can result in clickbait tactics to drive sales that might not gel with your moral compass.
Affiliate marketing is a low-cost way to make money online. But you need to be willing to invest the time to build a trusted audience or do the work to create a following on social media. Then you can leverage organic methods to drive traffic to your affiliate offers. Your other option is to pay for paid advertising on platforms like Facebook, TikTok, or Instagram.
Affiliate marketing takes consistent work and might not be the best online business. Your affiliate income isn't guaranteed-especially in the long term. You need to constantly find new and high-converting offers that invoke purchases from your target audience.
But with the lead generation business model, you leverage organic traffic and drive leads to your website. Plus, once your systems are in place, you can automate the process to secure a passive income. Of course, you can be successful with affiliate marketing. But you need to develop a strategy. Hone in on a specific target audience by influencing free or paid traffic to drive customers to your links. And be prepared to invest the time and money before you reap the rewards.