What is Affiliate Marketing? | A Guide to Affiliate Marketing in 2022

To many, the holy grail of online marketing is earning yourself a sizeable passive income. Once you have done some preliminary work, you can sit back and wait for the cash to roll in. Of course, for most people, it isn’t as easy as that, and like the knights of King Arthur, many people never find their nirvana.

But some people succeed in making a decent level of passive income. The most common method of achieving involves affiliate marketing.  You promote other people’s products, make sales, and get to keep a portion of the profit. Other people make the products; you promote them and receive a commission for your efforts.

Of course, there are some pitfalls along the way. It is hard to sell on the internet if nobody knows of your existence. But if you already have a sizeable online following – perhaps you already qualify as an influencer, for instance – you have the potential to make that lucrative and much desired passive income.

Notable Highlights from our Affiliate Marketing Report

  • Affiliate Marketing Industry is set to grow to approximately $13 Billion in 2022
  • Affiliate Marketing platforms and services raised more than $300M in funding in 2021 alone
  • The global number of Affiliate Marketing related service offerings grew by 26% in 2021 alone, to reach a staggering 10,000 firms offering or specializing in Affiliate Marketing services
  • Amazon Associates remains the largest affiliate network with more than 20% market share.
  • Affiliate Marketing averaged 9% of marketing budget allocation in 2021
  • More than 67% of brands worry about affiliate fraud, less than 30% have been affected by it
  • Interest in affiliate marketing rose more than 300% between 2017 and 2021
  • More than 25% of brands utilize bloggers in their affiliate marketing campaigns

What is Affiliate Marketing?:

What is Affiliate Marketing?

In many ways, affiliate marketing is a modern version of traditional commission selling. Somebody (an affiliate marketer) sells products on behalf of somebody else (an affiliate merchant) and gets to keep an agreed percentage of the proceeds.

The affiliate marketer promotes the products to his or her online audience. If any of these people follow through a unique web link to a website selling the products and buy the product, the affiliate marketer earns a percentage of what they spent as a reward for sending them there.

It is a form of revenue sharing. People who have products, but not a captive audience, can increase their market by working with people who have an audience, but not a product.

Influencers make good affiliate marketers because they come with a ready-made online audience.

Who are the Parties in Affiliate Marketing?

Affiliate marketing involves either three or four parties, depending on the individual situation. The Consumer pays the money.  Each of the other parties takes a cut of that money. The relevant groups in these transactions are:

  1. The Product Creator (or Merchant) – these are the firms that provide products for sale. There are multiple names for this party: creators, merchants, sellers, brands, retailers, or vendors. In short, they have products that they wish to sell.
  2. The Affiliate Network – this is the optional party on this list. Although some product creators interact directly with affiliates, many others use an intermediary instead. Indeed, in some cases, such as Amazon, affiliate networks also double up as retailers. Affiliate networks work with product creators to collate a catalog of products, which they make available for affiliates to sell.
  3. The Affiliate Marketer – these people select one or more products and encourage their online readers, viewers, or contacts to buy them. Affiliates can promote and create sales links on their websites (or even build specialist sites to review the products) or social channels.
  4. The Consumer – ultimately, somebody has to buy the products. The Consumer takes notice of recommendations made by the affiliate marketers, follow their customized links, and purchase the products.

How Does Affiliate Marketing Work?

Product creators make, import, or acquire products to sell. They decide to share a proportion of the sales revenue with the people who sell their products.

Depending on each creator’s size, they will decide to either work directly with affiliate marketers or to work through an affiliate network.

The affiliate networks act as an intermediary between the creators and the affiliate marketers. 

When somebody decides to act as an affiliate marketer, they usually sign up to one or more creators or affiliate networks. At this point, the affiliate merchants often decided on which products they wish to sell. 

The creator or affiliate network will give a personalized code to each affiliate marketer. This means that the affiliate marketer can include their code in the URL when they link to products they wish to promote, and the creator/affiliate network will know who sent each customer that makes a purchase. 

Types of People Who Become Affiliate Marketers

There is a wide range of people who choose to become affiliate marketers. Some of the most common include:

  1. Influencers -these people already have a sizeable social audience, as long as they promote products relevant to their followers. They can easily impact the purchasing decisions of many people in their specialist niche
  2. Bloggers – again, many successful bloggers already have an inbuilt audience, to whom they can promote relevant products. They usually have an excellent understanding of SEO so know how to write reviews and other promotions in a Google-friendly style
  3. Creators of specialized micro-sites – this is one way that people who have not yet made a name for themselves online can still get into affiliate marketing. They create a dedicated website devoted to a product and supply in-depth reviews. These can take some time to be visible to Google, however, so you probably would need to design sponsored ads elsewhere linking to this site
  4. Email marketers – if you specialize in products relating to a particular niche, you may be able to build up a sizeable email list over time. You can use email marketing to promote your affiliate products

How Do You Become an Affiliate Marketer?

If you decide to become an affiliate marketer, you need to follow a series of steps.

  1. Decide the niche in which you choose to specialize. If you are already an influencer, this should be simple – you would sell products that are of interest to your existing followers in your niche. When Pat Flynn of Smart Passive Income decided to become an affiliate marketer, he looked for products that appealed to people wishing to make money online – they are the types of people who come to his website and listen to his podcasts every day. He chose to sell the kinds of tools he knew his audience would use, e.g., Bluehost web hosting, ConvertKit email marketing, and Teachable online courses. 
  2. Review affiliate products in your niche. Now you know the types of products you wish to sell, you need to decide upon the exact products you want. Again, many influencers and top bloggers restrict themselves to products they use themselves. Other people don’t necessarily do that, but they do ensure that the products are of acceptable quality and not likely to harm their reputation because of their association with them.
  3. Apply to become an affiliate marketer for the product in question. You will either apply to the appropriate affiliate network or direct to the affiliate merchant, depending on how they set things up
  4. Collect emails and build your audience. The exact methods you use here will differ from affiliate to affiliate. You aim to build up as many leads as possible. Some people create a new website for each affiliate product, where they write reviews and relevant blog posts. Others use their existing sites and social pages to promote the products to their current followers. Influencers have an advantage over others here. 
  5. Consider scaling your affiliate marketing with Pay Per Click (PPC) online advertising on Google and Facebook (or other social networks depending on your audience)
  6. To gain access to a broader audience, some affiliate marketers outsource some of their marketing to other influencers, in the expectation that the additional reach of the influencers will generate sufficient sales to more than pay for the influencer costs.

Why Influencers Make Good Affiliate Marketers

On the surface, affiliate marketing seems like an easy way for somebody to make pocketfuls of income. The problem is unless you already have a sizeable online audience, it can take much time and considerable hard work to build a large enough audience to whom you can sell your products.

But, there is one notable exception to this rule. Influencers already have a sizeable audience. And by definition, influencers have sufficient clout with their audience, that they can convince them that it would be a good idea to purchase these products.

How Do You Become an Affiliate Merchant?

Many affiliate merchants are large companies looking for additional ways to sell their products. The best-known affiliate merchant is Amazon, who uses their Amazon Associates program to sell products using affiliates as salespeople. This program was so successful that Amazon adapted it when they set up the Amazon Influencer Program in 2017.

However, you don’t have to be a large company like Amazon to become an affiliate merchant. You just need to be somebody with a product to sell. Quite a few small businesses and even solopreneurs create knowledge products that they sell online using affiliate marketers. These people are more likely to work through the affiliate networks, so they don’t have to go through the hassle of arranging payment and product delivery (although they may still send online knowledge products themselves).

Many people begin as affiliate marketers, and then decide to increase their incomes by creating products themselves – a genuine case of passive income. Affiliate marketing can be a hard job for marketers, even influencers with sizeable audiences. By creating a few products that other affiliates can sell, these people can have a foot in both camps and double their income-earning potential.

If you want to become an affiliate merchant, you need to follow these steps:

  1. Have a product idea – you can’t become a creator if you haven’t got a product to sell
  2. Validate your idea – not all potential products will sell well. Some may sound great as you discuss them having a few beers with your friends, but are not so good in cold reality. Ideas are only useful if somebody wants to buy your product
  3. Create your product – you need to make your product. This could mean sitting down and writing your knowledge-based product. Or it could mean finding a manufacturer to produce the first batch of your physical product. Digital products are much easier for individual people or small businesses
  4. Either join an affiliate network or find affiliates yourself to sell your product – finally, you need to find the people who will sell your product on your behalf.

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