What Exactly is Affiliate Marketing?

Making money online - that is what millions of people want to do. But there are so many ways to make money online that it is so easy to get overwhelmed before you even get started.

Well, I don't want that to happen to you, so today let me give you my #1 recommendation for making money online quickly and consistently.

You see, if you want to make a little money online, it's not that hard. You could start by completing surveys, writing articles, selling Fiverr gigs, building websites, etc. There are so many ways to make money online that it is impossible to list them all.

However, if you want to build a sustainable and long-term business online, the best way to get started is through affiliate marketing.

Thousands of people have made thousands of dollars a month through affiliate marketing, and there is no reason you couldn't be the next.


What exactly is affiliate marketing?

Affiliate marketing is when you refer a person to someone else's product, that person buys the product, and the merchant gives you a commission for your referral.

Now there's a lot of keywords in that statement that will be important to learn, so let me highlight them really quick.

Product – the item that you are trying to get people to buy. For this example, let's say you want people to buy blue widgets from bluewidgets.com


Affiliate – that's you. You are the affiliate. You are the one promoting blue widgets trying to get people to buy them, so that makes you the affiliate.


Merchant (or vendor) – the merchant is the person that actually sells the blue widgets. So if you as the affiliate are trying to get people to buy blue widgets from bluewidgets.com, the merchant is the owner of bluewidgets.com.


Referral – the person that you are trying to get to buy blue widgets. You refer the referral to the merchant and hope they buy.


Commission – the commission is the reward (i.e. income) you get once the referral buys the blue widgets.

It might sound more confusing than it is, so let me break it down for you with a real-world example.


DIRECTV example

You might see these commercials for the DIRECTV Friend Referral Program. DIRECTV isn't the only company that offers these referral programs, but they are a good example.

With DIRECTV's referral program, a DIRECTV customer can earn up $100 just by referring a friend to DIRECTV. Here's how their referral program works.

Say you are a DIRECTV customer named Sarah. Your parents use Comcast, but they aren't happy with Comcast, so they are looking to switch. Well, you happen to be completely satisfied with DIRECTV, so you tell your parents, "You should really switch to DIRECTV." Because you are such a loving and trustworthy child, your parents go to directv.com and sign up as a customer.

When your parents sign up, DIRECTV asks them if anyone referred them. They say yes, and then DIRECTV asks them to enter the customer number of the person who referred them (that's you, Sarah!)

DIRECTV sees your account number on your parent's sign-up form, and they say, "Hmmm. These guys must have been referred to us by Sarah. To reward Sarah for referring us a new customer, we are going to take $10 off of Sarah's bill for the next 10 months for a total reward of $100."

This is a a real-life example of affiliate marketing. You referred your parents to a product, your parents bought the product based on your recommendation, and DIRECTV rewarded you with a $100 commission.


A few things to notice

In this example, there are a couple of things to notice.

First of all, please notice that affiliate marketing is a pretty simple concept – there's really not a whole lot to the concept.

Secondly, note that affiliate marketing must be fairly effective if major companies like DIRECTV and Regions (and hundreds of other major companies) give refer-a-friend discounts. That's basically all affiliate marketing is – a refer-a-friend program.


Why is affiliate marketing so great?

Now that we understand a bit about what affiliate marketing is, let's talk about why affiliate marketing is so great for those just beginning their online business. I'll start with what I believe to be the main advantage of starting out as an affiliate.

The main reason I like affiliate marketing is because all I have to focus on as an affiliate is driving targeted traffic to the merchant's product. That's it. Of course, there's very much to learn about driving targeted traffic, but in the end, driving traffic is what you do as an affiliate.

It goes without saying, so I'll go ahead and say it. You can be an affiliate for the most awesome product ever, but if no one knows that you promoting a product, you aren't going to make any money. It's all about driving traffic. The more traffic you send to the product, the more money you make.

So to further make my point of how simple (simple, not necessarily easy) affiliate marketing is, take a look at this list of things you don't have to do as an affiliate:

• Create your own product
• Provide customer support
• Issue refunds
• Worry about shipping
• Hire a staff
• Invest a lot of money upfront
• Be an expert on a subject

As an affiliate, all of these things would take time and money away from driving traffic, and that's time that you don't want to spend in the beginning of your online business.

You might be interested to know that most of the huge internet rockstars that run successful businesses online started out as an affiliate. They learned how to drive traffic to merchants' products, how to engage people and how to close a sale. After they learned those skills, then they started creating their own products and building their own brand.

For an example, look at Pat Flynn from www.smartpassincome.com. He started as an affiliate and eventually branched out to selling his own products. But if you look at his earnings reports, he still makes the most money as an affiliate.


Yep, you read that right. Pat Flynn made over $87,000 in one month simply through affiliate marketing!

As you can see, being an affiliate marketer is very, very powerful, and can earn you a lot of money. And once you learn how to attract traffic and convince people to buy, you'll never have to worry about making money again because it will be so natural.

Affiliate marketing is a skill, and, once mastered, it can make you more money than might think is even possible.


You could start affiliate marketing today

There are, of course, other benefits to being an affiliate marketer, For one, becoming an affiliate takes very little money upfront. You could even start as an affiliate right now without spending a single penny to do so.

You don't have to be an expert in anything to become an affiliate. You'll need to start becoming an expert to be extremely successful, but you don't have to start as an expert.

In fact, there is no reason you couldn't start affiliate marketing today. There's just no reason at all.


How much money can I make?

People always want to know how much money they
can make as an affiliate.

Well, I just showed you an example in Pat Flynn. Now let's not fool ourselves when we mention Pat Flynn. Pat is at the top of the food chain when it comes to affiliate marketing. He's been doing this for more than 10 years, and has built his empire over time. But he clearly shows that, in time, you could earn more than $87,000 a month.

But right now, let's look at a more realistic figure you could aim for.


Affiliate option #1 - ClickBank.com

To start with, we'll head over to ClickBank. ClickBank is an affiliate marketplace that works as a middleman between merchants and affiliates like you.

ClickBank has thousands of products in dozens of markets that you can be an affiliate for. There is no approval process to join ClickBank or to promote any product inside ClickBank, so you don't even have to apply to be an affiliate. It is really simple to get started in affiliate marketing through ClickBank.

Just take a look at all the markets you could be an affiliate for through ClickBank. You can find products to promote for just about any market you want to enter.

• Arts & Entertainment
• Betting Systems
• Business / Investing
• Computers / Internet
• Cooking, Food & Wine
• E-Business & E-Marketing
• Education
• Employment & Jobs
• Fiction
• Games
• Green Products
• Health & Fitness
• Home & Garden
• Languages
• Mobile
• Parenting & Families
• Politics / Current Events
• Reference
• Self-Help
• Software & Services
• Spirituality, New Age & Alternative Beliefs
• Sports
• Travel

So for an example, let's take a pretty common market – health and fitness. Specifically we'll look at a product called The Beta Switch: Stubborn Fat Loss for Women.

Below is a look at the merchant's landing page for their product.

The Beta Switch Landing Page

These pages are called landing pages because they are the pages your referrals "land on" when they click your affiliate link.

Now if you scroll down to the bottom of the landing page, you can see that they are selling a digital product - a combination of guides, manuals, and success trackers for $19.

Now the cool thing is that ClickBank gives us several important figures that give us an idea of how much we can make as an affiliate for this product. Let's take a look at them now.




Initial $/sale

This Initial $/sale statistic means that, for every referral that buys this product from you, on average you will make $23.66 on the initial sale. So if someone buys this product through your affiliate link, $23.66 eventually makes it to your bank account.

But isn't the Initial $/sale more than they were selling the product for at $19?

Why, yes it was!

So how do you make more on commission than they made selling the product?

Well, they probably offer upsells.

Upsells are additional products that are offered immediately after a customer buys. Studies have shown that the best time to get buying customers to buy even more is to offer them more options at the initial time of purchase. You know, like when you go to McDonald's and order the #3, they ask if you'd like to supersize your order? That's an upsell.

Now, not every customers buys the upsell product, but for The Beta Switch: Stubborn Fat Loss for Women product, on average, you'll make $23.66 for the initial purchase.


Avg. $/sale

But there's another number – a much larger and important number, that you want to look at here. It is called the Avg $/sale.

The Avg $/sale means that, on average, from every customer you get to buy the program, you make $124.99 from that customer. In other words, for this product, the average lifetime value of a customer is $124.99.

Now you don't make $124.99 all at once. But a good merchant will continue to sell addition produts to their customers. They might sell them a monthly subscription to a membership site, or a larger training course worth hundreds of dollars. As the customer continues to buy, you continue to get commission for each purchase.

This means that for every referral that buys The Beta Switch: Stubborn Fat Loss for Women through your affiliate link, you get an average of $124.99 over time. Some customers will be worth a lot less, and some will be worth a lot more.

But regardless, once you've gotten that referral to purchase once, you can pretty much bet that they are going to buy something else that is going to make you even more money! That, my friend, is what makes affiliate marketing so darn powerful!


Some fun math!

So let's do a little quick math. I'll throw up some numbers, and you tell me if you like them.

Affiliate Sales Projections

Are these the kind of numbers that might excite you? I tell you what, they sure do something for me!

If you could just make one sale a day, you would be making almost $45,000 a year. That is some pretty good spending money!

While these numbers are very enlightening, there are affiliates that sell more than 1 a day – way more. Needless to say, they are making a ton of money promoting products as an affiliate.


There's more!

And this is just one example of one product in one market on ClickBank. Take a look at how many products are available in each category.

• Arts & Entertainment - 371 products
• Betting Systems - 200 products
• Business / Investing - 707 products
• Computers / Internet - 142 products
• Cooking, Food & Wine - 142 products
• E-Business & E-Marketing - 1,021 products
• Education - 158 products
• Employment & Jobs - 143 products
• Fiction - 12 products
• Games - 94 products
• Green Products - 42 products
• Health & Fitness - 1,902 products
• Home & Garden - 532 products
• Languages - 58 products
• Mobile - 23 products
• Parenting & Families - 157 products
• Politics / Current Events - 14 products
• Reference - 177 products
• Self-Help - 132 products
• Software & Services - 35 products
• Spirituality, New Age & Alternative Beliefs - 218 products
• Sports - 327 products
• Travel - 48 products

Talk about thousands of products to choose from!


Affiliate option #2 - Amazon.com

To make the idea of affiliate marketing even more compelling, there are thousands of companies that you could become an affiliate for. ClickBank is just one of the them.

Think of Amazon and how many millions of products they sell. Did you know that you could make a commission on just about every single product they sell? They have millions and millions of products to choose from, so no matter which market you choose to sell to, you can make money.

Let's take a look at Amazon's current affiliate commission structure.

• 1-6 products - 4%
• 7-30 products - 6%
• 31-110 products - 6.5%
• 111-320 products - 7%
• 321-630 products - 7.5%
• 631-1570 products - 8%
• 1571-3130 products - 8.25%
• 3131+ products - 8.5%

Amazon has a volume-based commission structure, so the more you sell every month, the more you make.

So let's say you sell 103 products in one month. That means you would make 6.5% of the purchase price as commissions.

Now there are some notable exceptions. For some categories like cameras and electronics, you will only make a 4% commission no matter how many you sell a month. That is because the margins on online electronics are so thin that they choose not to pay a graduated commission structure. But still, if someone goes through your affiliate link and buys a $1,200 laptop, that's still a $48 commission coming your way.

Also, Amazon has a huge advantage over many other merchants in the way they pay commissions. We'll talk more about that later on.


Affiliate option #3 - CommissionJunction.com

Let's look at one more example to get an idea of how much money you can make with affiliate marketing.

Commission Junction is another affiliate store that serves as the middleman between you and the merchant you are selling products for. Again, Commission Junction has thousands of products you can promote.

Here is just a random screenshot of some of their products.



Commission Junction tracks statistics in a different manner from ClickBank. They track their statistics through EPC – that is, earnings per 100 clicks.


Let's talk earnings per click (EPC)

So in the top example, the 3-month EPC is $19.97. That means, on average across all affiliates that promote this product, for every 100 clicks the affiliate sends, they made $19.97.

Here's a simple formula for calculating earnings per click (EPC).

EPC = commissions / clicks * 100

Let's use some made-up numbers to get to this figure. Again, these are completely made up, but they will show how the calculation works.

We'll say the following:

• Total commissions earned was $19,970
• Total clicks sent was 100,000

If we plug the numbers into our EPC formula, we get:

EPC = commissions / clicks * 100

EPC = $19,970 / 100,000 * 100

In this case, EPC = $19.97. Again, the numbers I plugged into the formula were fictional. Only Commission Junction knows the real numbers, but regardless, the real numbers show a $19.97 3-month EPC.

So what's the difference between 3-month EPC and 7-day EPC?

For the 3-month EPC, the total commissions and total clicks were calculated over a 3-month period.

For the 7-day EPC, the total commissions and total clicks were calculated over a 7-day period.

In our example above, you'll see the 3-month EPC was $19.97, but the 7-day EPC was $39.76.

So over the last 7 days, on average, affiliates that sent 100 referrals made $39.76.

Why did this go up? Maybe the merchants were running a sale so more referrals purchased. Maybe they changed their website to convert better. It could be a lot of reasons, but in this case, the EPC is trending up quite dramatically.


More about earnings per click (EPC)

EPC doesn't mean that all of your 100 referrals have to buy to get that EPC. Some will buy and some won't. But for this product, for every 100 clicks sent, on average for the last 3 months. the affiliate earned $19.97. So if you sent 500 referrals to the product, on average, you made $99.85.

Now you'll notice I keep using the very important words "on average." The reason is because there may be hundreds of affiliates sending referrals to this product.

Some affiliates have very focused traffic. That is, their referrals are already very interested in buying the product. Subsequently, that affiliate probably made a lot more than $19.97 for every 100 referrals.

Now other affiliates might not send focused traffic at all. Maybe they run ads on general websites, and the majority of the people that click on the ad are just curious about the product, but not really interested in buying. In this case, the affiliate probably made a lot less than $19.97 for every 100 referrals.

This is just one of the intricacies of affiliate marketing. Focused traffic results in much larger earnings; unfocused traffic results in much smaller earnings.


Affiliate option #4 - too many to list

We've listed three very popular companies that provide many opportunities to you as an affiliate. But there are thousands more that you can find just by searching online. Just Google the name of your market + "affiliate".

So if you are good at training dogs and want to start promoting dog training books, courses, or classes online, just search for "dog training affiliate." You'll come up with plenty of options.


How do you promote products?

The way you promote products as an affiliate is by getting people to click on your link. That link then forwards the visitor to the merchant's landing page where they can learn more and have the option to buy.

It really doesn't matter where your referrals find your link. If they click on it, they will be forwarded to the merchant. Then if they buy from the merchant, you get your commission.

Let's say you have a website that you use to promote a product. Someone clicks on your link promoting the product, and off they go to the merchant's landing page. Or they could have clicked on your link in an email. Or on Facebook. Or on Twitter. Or on an ad you were running.

There are literally dozens of ways to promote products as an affiliate. Some methods work better for certain products - it's just a matter of trial and error to find which one works best.


How do merchants track your commissions?

How do merchants know that it was actually you that made the referral? After all, if there are dozens of affiliates promoting the same product, how do the merchants know it was you?

Once you sign up as an affiliate, you get your own affiliate ID that is unique to you. Whenever you choose a product to promote, the merchant gives you a link just for you with your unique affiliate ID in it.

When your referral clicks on the link that you were given, your affiliate ID is passed to the merchant, so now they know you are the one that made the referral. It's much like your account number we used in the DIRECTV example above.

Obviously, if your referral buys from the merchant immediately, you'll get the commission. But the problem is that very few customers buy immediately.

Most of the time, they have to think about it, read more about the product online, see what others are saying, and then eventually they might come back and buy.

So all that work you put into getting the referral made you absolutely nothing because your referral didn't buy immediately. Right?

Well, no. Here's a cool thing about most merchants.


Tracking referrals with cookies

Merchants know that most customers don't buy immediately, so when your referral visits their website, the merchant keeps track of your referrals through data called cookies.

Cookies are small pieces of data stored on your referral's web browser (i.e. Internet Explorer, Firefox, Opera, etc.) Cookies tell the merchant that the referral visited and when they visited. Then when the referral comes back, the merchant looks at the cookie and says, "Oh, they've been here before, and Sarah referred them then. So if the referral buys something, we know to give Sarah the commission."

Pretty cool, huh?

Now these cookies don't last forever. How long they last are set by each individual merchant.

For example, let's go back to ClickBank. ClickBank has a 60-day cookie duration. That means if your referral buys within 60 days of first visiting the merchant's website, you'll still get a commission.

If that customer waits 61 days to buy however, I'm afraid you would be out of luck. You won't get a commission because the customer didn't buy in time.

As you can see, cookie duration is something you really want to look at when choosing which products to promote, and, of course, the cookie duration can vary greatly between merchants.


Cookies and Amazon.com

Do you remember above when I told you there is an interesting twist on how Amazon gives commissions? Well, here's the bad part.

Amazon just has a 24-hour cookie duration. So that means your referral has to buy within 24 hours for you to get a commission.

Wow, that sounds rough! So what's the good part?

The Amazon cookie works for 24 hours no matter what they buy. Even if they don't buy the product you were promoting, you'll still get a commission.

So let's say you are promoting blue widgets again. Your referral goes to Amazon through your link about blue widgets. They get to Amazon and realize that they don't want to buy blue widgets after all, but they absolutely love this red thingamabob they saw. So they buy the red thingamabob.

Well, as long as they bought within 24 hours, you'll get a commission on selling the red thingamabob even though you were promoting blue widgets.

This means when you refer someone to Amazon through your affiliate link, the potential commission can be endless. It's usually not endless, but it could be.

In fact, in my experience as an Amazon affiliate, just about every customer purchases different products than I was promoting. Sometimes they buy the product I was promoting; sometimes they don't. But I still get a commission!


Affiliate Marketing Summary

All of this should be a pretty good primer to get you started on affiliate marketing.

As you can see, there is a ton of potential by being an affiliate marketer. The potential is really astronomical. If done correctly and consistently, you could make a full time income being an affiliate.

Don't forget your 5 free resources for making money with affiliate marketing!

And if you have any questions, please ask and I'll get right back you!