Of all the different online business models out there, affiliate marketing is the most popular, and there are many good reasons why. But is it a model that is going to work for you personally as an individual? Like any business model, affiliate marketing has its pros and cons.
If you don't understand the model really well and work to its strengths (and yours), then you could simply be wasting your time and probably missing out on better opportunities. Of course, there are many people who have mastered the model and have enjoyed great success from it. This is definitely one of those areas where knowledge is power, so read on to discover the good, the bad, and the downright ugly side of running an affiliate site.
1. It's super-affordable
Compared to other business types, the start-up costs are almost ridiculously low. In some cases, depending on how you're going to operate, your only direct cost will be to purchase a domain name and a hosting deal. Not only that, but you have no inventory to fill, no stock levels to maintain, no concerns about your products spoiling or becoming obsolete before you can sell them. You never have to deal with customers, and you don't have to worry about the insane world of credit card charge-backs or being locked out of your PayPal account.
2. You'll have to be willing to work hard (or pay somebody else to do it)
Newcomers to affiliate marketing often think that it's just going to be a “set and forget” kind of deal, where they build a website, put up some ads, and then wait for the money to pour into their account. The reality is massively different.
You have the choice to design your own website and create your own content, or you can pay professionals to do one or both of these jobs. Even with professionals on the job you still don't get time to be lazy because you need to track the performance of your site and make the necessary adjustments to keep it profitable.
Your other choice is active or passive advertising. In the latter scenario, which is bizarrely the most popular, you simply add in some pre-made advertisements from your affiliate partner or Google. There are a few problems with this method, namely:
- You may not always know or be able to control what ads are served. This sometimes may create inappropriate, insensitive, or even offensive impressions on your audience. As an example, you might be politically inclined towards the implementation of tighter gun control laws, so you create a blog on that topic. Some big killing spree takes place somewhere, and you know your readers will want to know your views, so you faithfully create a blog post about it. Then the ad server analyzes your page, detects the main keywords, and serves up ads for instructions on how to convert your rifle to fully automatic, or huge discounts on extra capacity magazines.
- The ads can sometimes be ugly, and may not fit into your page design well.
- The ads may be poorly designed and introduce significant delays to your page loading time.
- Many users have software that blocks ads, meaning you lose 100% of the revenue potential of those visitors. These users—not entirely without justification—resent having their bandwidth “stolen” by ads they're not even interested in seeing.
- Even more, users take no notice of the ads and simply don't see them. That's because ad serving is overdone, and many affiliates use the same ad providers, so the users see the same ads on site after site. It greatly reduces the odds that they'll click on the ad on your site.
This approach relies on high volumes of traffic for success, and that is not always easy to achieve. Even when you are getting the traffic, you can't be sure users will click on the ads, and you're not supposed to request for them to do it.
Then assuming a user does click on the ad, many advertisers these days are not paying for clicks, they just pay straight commissions on sales. So assume that 1% of your users bother to click on the ad (and this is a generous figure), then 10% of those users actually make a purchase, you are converting 0.001% of your traffic.
This is why the active model is better, even though it requires more work from you or your content producers (and if you're hiring people to write for you, you'll definitely be paying them more for this work than for work under the passive model).
With the active model, you create the ads, and they are usually in text form, embedded right into your copy. This in itself is an art form and requires great skill in writing in order to be effective. Even so, this approach offers a number of advantages over the passive affiliate model:
- Doesn't rely as much on high traffic volumes
- Users can't block the ads or fail to see them
- The ads are relevant to the user's interests and the user is actively engaged with the content
- You can control the wording and style of the ad
- You decide which products will be marketed to give you the best chance of earning a commission
3. It will take a while to build momentum
Unless you're the most ingenious marketer in the world, your website is unlikely to be an instant hit. You'll have to work patiently and cleverly, build up a following, and gradually success will happen. Because of this, you shouldn't be too discouraged if you're not earning much in the first few months that you're in business. It takes time, but if you've done a good job, you should get rewarded for it eventually.
4. To maximize the potential, you need to combine
Don't make the common mistake of thinking you only need to make an affiliate site to make money. You either need to combine it with other successful online business concepts such as direct marketing or drop shipping, or you need to create multiple affiliate sites.
You can use some of the profits from the first site to fund content creation for the second and subsequent sites. One site bringing in $100 to $200 per month is not going to give you the most comfortable life, but if you have 10 or more sites going for you at one time, you'll be in quite a good place, even with the fees you're paying to your writers taken into consideration.
Affiliate marketing is typically a slow starter, and it's not the lazy way to riches that many people think. But if you are prepared to put in the necessary effort and work at developing high quality sites with good content, you can make quite decent money from it after some time building up enough of an audience to make your efforts start paying off.
Affiliate marketing certainly isn't going to be suitable for everyone, but in any case it sure beats alternatives like having a job or being unemployed. Because it's such a low risk business model, there's no harm in giving it a go if you're already considering it.
header image courtesy of Axel Herrmann