Lead generation and affiliate marketing are popular digital business models that can generate passive income. Lead generation leverages online traffic to create a pipeline of potential customers. In contrast, affiliate marketing drives online traffic to offers that promote a brand's products or services for a commission. Each takes hustle, and they're far from easy. But do it right, and you will make money online.
But do you need specific skills to dominate the industry? Are the business models still profitable? Is one faster at generating a passive income? In this article, we'll take a closer look at the advantages and disadvantages of each business. We'll also cover the details of how they create a passive income. And why people (myself included) are quitting affiliate marketing to start a local lead generation business.
Lead Generation vs Affiliate Marketing:
Affiliate marketing and lead generation are popular online business models. But lead generation is a faster way to create a passive income stream. Do your research, target a relatively easy niche, and then use SEO tactics to climb the SERPs. (In as little as 6 weeks-3 months). Lead generation allows you to simultaneously build as many sites as you want (I have over 80). Then, once you understand the process, you can just rinse and repeat.
Affiliate marketing, on the other hand, takes more time to develop. You should focus on building an established online presence on one platform, which can take months (3-18+). You also don't want to add too many affiliate links right out of the gate. (Or people might lose trust in you and your brand). But you can leverage paid ads to start earning faster if you have the funds.
"The global affiliate marketing industry is worth over $17 billion." Statista
Lead generation converts prospective customers into leads by creating interest in a product or service. The business model targets individuals searching for a specific product or service. (The strategy is to obtain a person's contact information and determine if it's a qualified lead) ). With the lead generation business model, you own the leads. Then, you sell those leads to a local business owner for a profit to create a passive income.
By contrast, affiliate marketing is about driving online traffic to offers or building brand awareness. But you don't own the products you're promoting. Plus, the consumer belongs to the brand. So you don't benefit from recurring sales or have any customer loyalty. In addition, you need to drive even more traffic to your offers. Or tap into new audiences with a better offer or unique angle because not every person will click your link.
Affiliate marketers don't need to deal with customer service or interact with business owners. But you do have to publish valuable content consistently. Copy that educates informs, or entertains your target audience. You also need a lucrative affiliate offer from a reliable network like ClickBank or ShareASale. (If you want to make a passive income).
Lead generation focuses more on SEO or designing profitable sales funnels. However, you do have interactions with customers. (At least while your websites are ranking). Plus, you need to network with business owners and build trusting relationships with the companies who buy your leads.
How Lead Generation Creates Passive Income:
Lead generation will create a passive income as soon as people can easily find the service you provide. Be that a lead gen website/GBP ranked on Google. Or a sales funnel on a designated social media platform (like Facebook or YouTube).
Of course, it takes work at the front end to streamline your processes. (You need to rank your lead magnet and generate steady traffic). But once leads are consistent. And you've connected with a business owner willing to pay and care for your customers; your lead generation method runs on autopilot.
How Affiliate Marketing Can Generate A Passive Income:
Affiliate marketing can generate passive income. But you need to be prepared to invest some serious time and get paid absolutely nothing at the beginning. Building an organic audience requires considerable time, no matter your chosen platform. But if you can publish optimized content.
Focus on a niche that has an active online community. Then, you can create a traffic source that views you as an authority. You'll build an audience that will take action on your recommendations (affiliate links). You can also be particular about your offers. Target recurring commission deals found on affiliate network platforms like:
They don't just pay on conversion. Instead, it's a monthly payment for as long as the user engages in the subscription. (Digital products like web hosting, an online course, etc.)
But to generate passive income with both business models, you always need to have leads in your pipeline. For lead generation, Google is the best place. (Your strategy should look like this: niche + location). But you can leverage Facebook using the same principles. Or, as an affiliate, you can target channels like YouTube, Instagram, or Pinterest. Then decide how you will generate leads:
- SEO or Facebook?
- Which industry will you target?
- Do you prefer service-based or retail service businesses?
- How much will you charge per lead?
You need a compelling hook. (A way to 'get them in the door'). So offer a free recommendation, trial period, ten free leads, etc. Anything that provides value and builds trust between yourself, the business owner (lead gen), or your target audience (affiliate). But you also need to understand the formulas. So make sure that your content, funnel, or offer follows processes like:
Does Your System Answer These Questions?
If you can learn and apply these steps to your content or lead generation strategy. And drive online traffic to your website, landing page, or affiliate link. Then you can earn a passive income.
Lead Generation vs Affiliate Marketing: What Are The Similarities?
Lead Generation vs Affiliate Marketing: What Are The Differences?
Lead generation is generally more profitable than affiliate marketing. (Higher conversions=better ROIs).
Lead generation gives you complete control over every aspect of your business.
The lead generation business model concentrates on securing a potential customer's contact information.
Lead generation allows you to have control over the customer experience. (Which is why you need to vet your business owners).
Rely on the commission structure of affiliate programs (anywhere between 3%-100%).
Affiliate marketers need to follow the rules of the network/program.
Affiliate marketing focuses on getting a click.
AM has no control over the customer experience. (Once they click your links, they belong to the brand you're promoting so there's no customer loyalty).
Affiliate marketing is a low barrier to entry and doesn’t require you to have specific skills. While lead generation, on the other hand, involves learning a skill set that you need to excel at before you can build profitable processes for your business.
What Are The 3 Top Skills You Need For Lead Generation?
Data Analysis & Research:
Lead generation takes critical thinking and data analysis. In addition, you need to be skilled at specific digital marketing techniques, like SEO, SMM, and email marketing strategies. Use third-party tools like SEMRush, Whitespark, and Keywords Everywhere to assess things like:
- Population (Target locations that aren't too populated but still have enough demand for the product or service you're selling)
- Demand (Are people actively searching for this service? Is it seasonal?)
- Competition (Don’t be afraid of competition-you want to have enough business owners to choose from to find the right fit)
Networking & Communication:
You need to be personable and good at networking. The goal is to connect with a reliable business owner. One who sees the value of your service and is willing to pay for your leads. But be sure to vet each potential candidate and determine:
- Do they supply the service I'm selling?
- What level of work do they provide for their customers? (do they have online reviews?)
Build a professional relationship so you can rely on the business owner to handle the call volume and provide stellar service. Then you don't have to interact with customers or prequalify leads. And can create a passive income.
Sales & The Art Of Negotiating:
Lead generation takes hard work out of the gate. So you want to be able to achieve the best compensation possible. There are a variety of ways you can structure payments, including:
- Flat Fee
- Percentage Based
But you need to tap into the power of persuasion. So you need to know your niche and target market as much as possible. Then, demonstrate to a business owner how your leads can solve a problem (not enough business) and make them more money. You can offer a trial period, a certain number of free leads, etc., to build credibility and vet your business owner.
What Are 3 Qualities That Make A Successful Affiliate Marketer?
Copywriting & Content Creation:
Affiliate marketers need to be masters at content creation. In addition, you need to publish high-quality copy that provides value to your target audience.
- How does your content solve a problem?
- Does it make their life easier?
- What's your unique angle?
You need to understand the psychology behind the content. Then, tap into pain points by leveraging tools like Google Keyword Planner or Answer The Public. Look for terms or questions in your niche people are searching for. Then write content around them to be viewed as an authority.
You need to be authentic and share affiliate links that you can stand behind. So it's less about the high-ticket commissions. And more about what offers best resonate with your audience. Because when you provide genuine value, you earn your readers' trust. (Plus, they'll be more inclined to click on your offers).
Consistency & Patience:
Building an organic following on any platform (Google, Facebook, YouTube, etc.) takes time and a willingness to publish valuable and informative content on a consistent basis. Plus, affiliate marketing has become super competitive. And there are a ton of new players all vying for the same customers. So you need to stand out from the competition and have a clear content marketing strategy.
- What platform will you target?
- Where does your audience hang out?
- How can you stand out from the competition?
But you can invest in paid advertising to expedite the process by using Google Ads or run a Facebook ad. Paid ads also give you access to a fresh audience (and a lot more viewers). But paid ads are pricey. So you'd better have a solid offer with a lucrative commission if you want to make a profit.
What Are The Advantages Of Lead Generation?
Creates A Passive Income
Lead generation takes work at the beginning. First, you need to conduct research. Then decide on your methods (websites or funnels) and generate consistent leads. But once you have your systems and processes, you have a passive income. Connect with a reliable business owner(s). And the money comes in on autopilot.
You can build as many websites or sales funnels as you want in various niches or geographical locations. Plus, the more leads you generate, the more money you make. So there's no limit to how big you can scale.
There are hundreds of niches to choose from. In fact, there are 41,683 zip codes in the USA. And each one represents a local market you can target. In addition, you can niche down on a specific industry to create even more opportunities. (Pick profitable or obscure niches for even bigger payouts).
What Are The Disadvantages Of Lead Generation?
Connecting With The Right Client Can Be A Challenge
To generate high-quality leads quickly, you need to target hyper-local keywords. But you risk being unable to find a receptive client willing to pay for your information in that specific area and niche. And finding the right client can be time-consuming.
Plus, there's a chance that they won't pay for your leads. In addition, if your client can't handle the volume of leads. Or doesn't provide stellar service, you're faced with customer backlash or unfilled leads. (So you'll need to find a new business owner).
Time-Consuming At The Front End
Lead generation isn't a get-rich-quick scheme and requires some hustle before you see a passive income stream. For example, it takes time to rank your sites on Google. Or money to cover ad costs. (If you plan to leverage paid advertising on platforms like Facebook or AdSense).
So you need to be willing to test and research. And find profitable niches that you can rank for quickly. (But still have enough competition to provide options when it's time to sell your leads).
It Takes Negotiations & Stellar Sales Strategies
The leads belong to you, but you need stellar sales strategies to negotiate the best price. For example, will you opt for pay-per-lead, a flat monthly fee, or commission based? And how will you qualify your leads?
What Are The Advantages Of Affiliate Marketing?
Low Risk & Minimal Investment Costs
Affiliate marketing doesn't require significant start-up capital. (Plan on an initial investment of $100-$1000+ to cover domain, hosting, paid ads, etc.). You don't need your own product or service to make money online. You're only job is to drive traffic to links and sell another person's products to earn a commission.
Easy To Execute
Affiliate marketing takes a lot of work to develop an audience. But you don't have to deal with payment gateways, returns, or customer service issues. (Like dropshipping or ecommerce). So it’s a painless and hassle-free business opportunity.
Plus, you can make it 100% passive once it's set up correctly. You just need to have the right systems to drive consistent traffic to your offers. Then you can step back and still make money.
Can Scale Quickly
Affiliate marketing offers unlimited potential for financial growth. You can promote as many products in as many niches as you want. Plus, you can test products quickly. (And as many as you like). So there's no limit to how fast or large you can scale your business.
What Are The Disadvantages Of Affiliate Marketing?
Competitive & Risk Of Market Saturation
It takes time and consistency before you start making any real money. Becoming an established affiliate marketer is not a solution for quick cash. Instead, it's a long-term strategy and can take 18-36 months to rank and gain the trust of your target audience.
Performance-Based Pay Structure
AM requires a tremendous level of self-discipline. There's no established routine or guidance. So you need to be able to set your own goals and stick to them. Plus, because you're not generating a consistent income, you don't generally have the funds to outsource tasks. So you need to stay motivated to work on your business.
A Lack Of Control Over Affiliate Programs
AM isn't like a traditional job. You may run into bad affiliate partnerships. (Unfortunately, not all partners are good ones). Some don't pay you; others no longer offer the products you promote or even go out of business.
So you need to research and read the fine print before signing. In addition, you have no control over pricing or commissions. And don't get a chance to negotiate product pricing for higher payouts.
Why People Are Quitting Affiliate Marketing:
The biggest reason people leave affiliate marketing is their lack of control over their business. Not only are you competing against 600 million blogs on Google. And over 300 hours of new content on YouTube every minute. But you have no control over the affiliate networks. Plus, some of the unsavory methods you need to employ to get in front of your target audience often lack value (and sometimes integrity).
Because AM is a low-barrier business model that anyone can do, there's a ton of competition. And as the market becomes more competitive and specific niches face market saturation, affiliate marketers need to up the ante. So you need to constantly up your game to beat the competition and make sales.
But this often causes affiliates to deploy the worst internet tactics just to make a buck. Alternately, many affiliates find themselves chasing the next dollar. And they forget that their recommendations can directly affect people's lives. Eventually, these tactics stop working as you focus on pursuing the highest-paying offers. (Ones that don't gel with your target audience).
In contrast, others rely solely on paid ads. But this can result in a need to make ridiculous claims or create ads with cut-throat urgency. The need to sell causes affiliates to move the ethical line. (Which they then justify by their increased CTR).
But because the ads are often contentious and push impulse buys, you risk them being shut down. Or even worse, having your account suspended. Add to the equation that results are inconsistent even with paid ads. And people get frustrated and look for a better way to make money online, like local lead gen. (That has less competition and a better return on investment).
Why I Prefer The Lead Generation Business Model:
Local lead generation allows you to control every aspect of your business. You own the leads, and you control the payment arrangement. You build professional relationships with small business owners. So there's a level of trust and lasting value.
Certain parameters make the business model less competitive. And because it requires a specific skill set, you don't need to rely on paid ads to rank your sites. Plus, once you understand the fundamentals, you can scale quickly. (And generate a passive income). I saw pretty decent financial success with affiliate marketing. But the monthly income I've secured with my lead generation business has far surpassed my vigilant efforts as an affiliate marketer.
Conclusion: Which One Is The Better Choice For You?
You can earn passive income online through affiliate marketing and lead generation. But both have pros and cons, and there's no wrong answer. So you need to decide which business model is the best fit for your skill set:
- Do you enjoy copywriting?
- Are you skilled at publishing valuable and informative content?
- Do you like the challenges of SEO?
- How do you enjoy interacting with people?
If a passive income is your end goal, you'll get there faster by starting a lead generation company. But you can still establish a passive income with affiliate marketing if you establish a solid online presence and connect with high-paying affiliate offers. Of course, both business models take hustle, patience, and persistence. But once you have a proven system, there's no limit to how much money you can make.