Affiliate marketing is a type of digital marketing where a business compensates a third party for promoting its product or service in their online content.
Since payment is on commission, investment is low for businesses and the payout is high for effective affiliates. It’s a marketing strategy that can truly be a win-win for both parties.
In the internet age, content creators, reviewers, and influencers have entered customers’ circle of trust — and businesses have taken note. Beginners of a new hobby might watch YouTube videos for tutorials and inspiration. Customers considering a new product might scan review sites and read blogs for recommendations.
Unlike marketing channels such as email marketing, customers often seek out affiliate-produced content. Customers enjoy watching videos, listening to podcasts, reading blog posts, and learning from online content produced by people they can relate to.
For businesses, affiliate marketing is a powerful way to connect to customers through the people they’re already looking to for purchasing decisions. For content creators, affiliate partnerships can be a lucrative source of income with little effort. Many times, they’re getting paid for marketing products they’ve already been using.
How affiliate marketing works
Affiliate marketing has been made possible by the internet. This marketing tactic works through tracked links that allow businesses to identify which affiliates promoted a sale and pay them in an agreed-upon way.
1. A business makes an agreement with an affiliate
Affiliate marketing starts with a business finding and making an agreement with an affiliate. Businesses can find affiliates through affiliate networks that vet potential partners. The agreement outlines compensation and the specifics of how and when to promote the product.
Affiliates can be anything from bloggers, influencers, podcasters, YouTube channels, or even other online businesses with a strong content marketing program or social media presence. Generally, an affiliate will be an individual who has a consistent online presence and an engaged audience. Ideally, affiliates should use or have a connection to the product or industry being promoted.
Once an affiliate is identified, the business provides guidelines for how a product should be promoted, and the affiliate signs a contract to promote the product in exchange for a commission.
Contracts should include specifications for how to feature and talk about the product. Agreements also need to outline details like how long tracking cookies from affiliate links stay active, commission percentages, and the schedule for payouts.
If a company’s affiliate marketing business gets big enough, they may hire affiliate managers to guide this process.
2. The affiliate features the product in their content
Once the agreement is finalized, the affiliate shares insights about the product with their followers and connections. They might host ads, showcase the product in their content, or produce product reviews, roundups, tutorials, or listicles featuring the product.
Content creators need to be explicit when producing affiliate content since the FTC requires a disclosure whenever a post contains an affiliate link or paid promotion. Transparency is important for maintaining audience trust as well. Disclosure doesn’t have to be complicated. Generally, a note in the caption, description, or title or a verbal disclosure that the product uses an affiliate link will do the trick.
A good affiliate program should also offer brand support. Businesses should provide affiliates with resources such as brand assets, training, and whatever else they need to promote the product effectively.
3. Visitors are tracked using cookies
The affiliate includes a unique URL when they promote the product. The link generally takes customers to an online store or landing page where they get assigned a tracking cookie linked to the affiliate. That cookie stays attached to the customer through their browser or mobile app.
That cookie lasts for a specific period of time — often about 60 days. If that user makes a purchase within that time period, the cookie assigns the affiliate sale to the partner whose link was used, and the affiliate gets a payout.
4. The affiliate gets a commission for purchases made through their link
Commission can be paid out for traffic, clicks, or impressions, but it is usually a percentage of sales. Different contracts have different terms for payouts.
Affiliate commission rates are generally between 5-10% of a sale, though some agreements have been known to go as high as 50%. Some contracts pay on a time-based schedule, while others trigger a payout whenever the affiliate has earned a specific dollar amount. Subscription commissions may be a one-time payment or may payout monthly through the customer’s engagement.
Affiliates’ potential income is performance-based and dependent on the fit of the partnership. Creators need to produce quality content and choose partnerships that align with their brand. Brands also need to choose affiliates that are well-matched in order to increase conversion rates and generate sales.
The financial results are also directly linked to the size of the affiliate’s audience. If their audience is small, their payout will be too. Affiliates should use search engine optimization (SEO) to reach a larger audience and get better results.
Types of affiliate marketing
There are three main ways you can approach affiliate marketing. Businesses can choose to have partners feature simple ads or find creators who can produce full reviews and tutorials. Affiliates will generally choose a style that fits the type of content they produce.
Unattached affiliate marketing
Unattached affiliate marketing is a low-involvement, pay-per-click (PPC) model usually using Google Ads, Facebook ads, or similar programs. Affiliates feature links to the partner in or beside their content without editorializing. With this type of affiliate marketing, creators do not have any expertise or specific connection to the product they are promoting, and they offer no opinion.
Unattached marketing will generally take the form of ads featured in blogs or videos. It is low-effort and low-return. However, it can bring in good money if a large volume of visitors see the ads, even if only a small percentage click.
Related affiliate marketing
If the affiliate has a connection to the product or service they are promoting, that’s related affiliate marketing. The product may be related to their content niche and relevant to their audience.
However, affiliates still do not make specific claims about the product. They don’t personally recommend or advocate for it. This is sometimes called paid-to-click marketing.
An example might be a video creator wearing a specific piece of clothing in a video, or visibly using a specific brand of microphone without commenting on it. In either case the content creator features the content but doesn’t endorse or review it.
Involved affiliate marketing
Involved affiliate marketing is when the affiliate has direct experience with the product and an opinion to share. This might involve reviews or tutorials of the product on the affiliate website or social media platform. They bring their expertise to the table and are a trusted source of information for their audience.
This type of marketing is the most effective for the audience, but it takes the most effort to produce. The affiliate is also openly advocating for a product, so they need to choose wisely as they are staking their reputation on the recommendation.
An example would be an outdoor video blogger reviewing a new pair of hiking boots, or a makeup blogger talking about their recommendations for the best long-lasting lipsticks.
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The pros and cons of affiliate marketing
Affiliate marketing can make businesses and affiliates significant income without too much effort. However, a poorly structured affiliate program can waste creators’ time, expose your businesses to fraud, or even damage your reputation.
Benefits of affiliate marketing for content creators
It can be hard to make content creation — or any sort of creative work — profitable. Affiliate partnerships are a great way for content creators to generate a consistent income stream.
Financial support for creative work
An affiliate program allows creators and businesses to monetize their websites or support creative projects. A well-matched partnership can provide full-time content funding or be a side hustle with a significant income stream.
Passive income stream
Once the content is produced, an affiliate’s referral links can continue to generate income. Content that is evergreen or has a long shelf life, like a video roundup of products or an in-depth tutorial, can generate passive income over its lifetime.
Free or reduced-cost products
Affiliate marketing agreements can include free subscriptions, complimentary products, or exclusive access to things that creators like to use.
Risks of affiliate marketing for content creators
Content creators can lose the trust of their audience or put effort into a project that doesn’t pay well if they choose a poorly matched affiliate partnership.
Damaged reputation with your audience
If you promote products that are misrepresented, poor quality, or not aligned with your brand, your audience may lose trust in your content. Creators that become overly sales-y can alienate their audience and see a decline in engagement.
Low reward for high upfront effort
Affiliate marketing offloads the cost and risk of creating marketing materials onto the affiliate. If the partnership isn’t a good fit, affiliates can end up spending money and time creating content that doesn’t pay off. Similarly, a contract with a short cookie life or low commission percentage might not pay out well, even if the affiliate generates a lot of leads.
Benefits of affiliate marketing for businesses
You can use affiliates to advertise your products or services, reach your target audience more effectively, increase brand awareness, and expand your customer base.
Drive sales and traffic at a low cost
Since it’s a revenue share model, affiliate marketing is a fairly low-risk investment, and there is little upfront cost. You’ll connect target audiences to the products they might be interested in without a huge expenditure.
Increase brand awareness
Affiliate marketing can raise awareness of your brand and generate positive associations with your audience. If you are using involved affiliate marketing, a strong recommendation from someone your audience trusts can build your brand’s reputation and drive sales.
Entrepreneurs can use affiliate marketing to raise awareness of a new startup. Established brands can promote a new product or revive an existing offering. Businesses can tie affiliate promotions into their online marketing campaigns or new products to boost their reach.
Expand your customer base
Affiliate marketing can expand your reach into new markets. Affiliates’ audiences may overlap with your target audience. They can also expose your brand to new audiences who may be aligned. You can reach new potential customers through your affiliates and grow your reach by finding relevant affiliates in peripheral markets.
Risks of affiliate marketing for businesses
Businesses need to choose affiliates well to avoid negatively impacting their brand image or exposing themselves to fraud.
Misrepresentation or negative associations for your brand
Your marketing efforts can backfire if affiliates don’t represent your brand well or they behave in a way that damages your reputation. Since affiliate marketing is a marketing platform with less direct control, it is important to vet your partners well.
Create a contract that outlines what is and isn’t appropriate for your brand. Strike a balance with your contract. An overly strict contract can make advertising seem forced and fake. An overly permissive one can lead to your product being featured in inappropriate or off-brand ways.
Fraud and dishonest affiliates
There can also be a risk of fraud in affiliate marketing, especially when paying for traffic generation. Businesses have had problems with affiliates using bots to generate clicks and similarly deceptive practices. Choose affiliates that are reputable and trustworthy to avoid these risks.
Examples of effective affiliate programs
Affiliate marketing can be an especially effective marketing channel for businesses and startups with products people are passionate about that want to broaden the reach of their brand. Here are two affiliate programs that have done that effectively.
The Webflow affiliate program works well because of the large community of people who like to share their techniques and experiences with other designers.
The community shares reviews, teaches other users how to build on Webflow, and creates tutorials for exciting techniques. The affiliate program helps Webflow demonstrate its value to a wider audience and allows designers to get paid for the work they’re doing for their community.
Tom Bekkers grew an entire business, Flowbase, out of the affiliate program and his existing interest in creating useful content for the design community. Jan Losert was already an avid Webflow user before becoming an affiliate. The affiliate program allowed him to benefit from the useful content he was already posting to Instagram and Dribbble.
Amazon Associates is another great example of a successful affiliate marketing program, with tens of thousands of affiliate partners. Affiliates of all sizes can talk about the products they use and love and get paid when their audience takes them up on their recommendations.
Amazon’s affiliate program can be very involved, but it can also be more passive since it offers such a wide range of products.
This video from Graceful Designs DIY showing how to use a drill attachment for DIY furniture restoration is an example of simple, directly involved affiliate promotion. It’s a product she genuinely uses; it’s useful to her audience members who are following her because they want to learn. Her video demonstrates how the product is helpful, and you can purchase the product through her Amazon shop immediately if you’re convinced.
Choose a partnership that aligns with your brand
It’s about trust. Creators want to provide their audience with trusted advice and build the relationship between them. Businesses want their product represented well to audiences who are interested in what they have to offer. Potential customers want good recommendations, real advice, and useful tutorials for products that will improve their lives.
With effective, well-matched affiliate programs, they all win.