At the inception of a global pandemic that cost millions of their livelihoods, Amazon announced it was slashing its affiliate commission rates. Do such actions in the face of increasing online shopping sound a death knell for the entire affiliate marketing sector? Is affiliate marketing dead already?
Affiliate marketing is not dead, and if anything, the sector is on a meteoric rise. In 2020, U.S.-based affiliate marketers earned an astounding $6.8 billion in commissions, a significant increase from $4.6 billion in 2016. Business spending on affiliate marketing will reach $8.2 billion in 2022.
Many pundits erroneously predict the death of affiliate marketing because they use a small subset of data.
Read on to find out why affiliate marketing is not on its deathbed and how you can cash in on this lucrative sector.
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What Is Affiliate Marketing?
Affiliate marketing is an online business model where an affiliate earns a commission for marketing a third party’s product or service. An affiliate searches for products they love and develop creative ways to get people to buy them from the vendors.
Business entities create affiliate marketing programs as part of their marketing efforts to grow their brand presence and increase their sales. These programs allow them to extend their reach and enlist the help of savvy internet marketers spread across the globe.
When an affiliate marketer joins an affiliate program, they form an informal business partnership with the company to ramp up the sales. The affiliate drives web traffic to the company’s eCommerce site and earns a commission from each converting sale.
The sales are tracked through affiliate links, which identify each member in an affiliate program.
How Does an Affiliate Marketing Model Work?
The affiliate marketing model spreads the sales and marketing efforts across a diverse selection of parties. It leverages the different skill sets and abilities of a diverse collection of individuals to grow the sales for a share of the profit.
Successful affiliate marketing models involve three parties:
- Product creators or sellers: They can be a vendor, solopreneur, large company, or a retailer with a popular product. The products range from physical objects to digital products such as software and course. Creators aren’t actively involved in marketing, but the sellers may also double as advertisers.
- The publishers or affiliates: These can be individuals or companies specializing in selling to a specific online crowd. They find creative ways to persuade the consumers that the products are valuable and worthwhile. If the prospect converts into a customer, the affiliate earns a small portion of the profit.
- The consumers: These are the people actively targeted by the sellers and affiliate marketers because they’re the primary drivers of affiliate marketing. Once a customer buys the product or service, the affiliate and the producers share the spoils. Consumers aren’t bothered by the agreement between the affiliate and the product producer because it doesn’t affect product prices.
How Do Affiliate Marketers Earn Their Money?
Affiliates don’t take part in the sale and fulfillment process, neither do they need to purchase and resell the products they promote on their affiliate sites.
Therefore, their contribution to the sales process uses different metrics than regular sales commissions.
- Pay per sale: This is the staple affiliate marketing structure, and the seller pays the affiliate a set percentage of the item’s sale price for every converting lead. The affiliate must drive a prospect to the merchant’s store and convince them to buy, then earn a commission from the sale.
- Pay per lead: This model rewards the affiliate for supplying the merchant with converting sales leads. The affiliate needs to direct prospects to the merchant’s website and prompt them to take a specific action. The actions include signing up for a free trial, downloading a file or software, placing a call, or subscribing to a newsletter.
- Pay per click: This model incentivizes affiliates to direct qualifying traffic to the merchant’s website. That entails engaging the consumer and convincing them to check out the product on the vendor’s website. The affiliate is paid to increase web traffic to the merchant’s store and website.
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Why You Should Become an Affiliate Marketer
Affiliate marketing is a popular way to build a residual income when looking to supplement your salary or transition out of a 9-5 job. With large programs such as Amazon Associates slashing their commissions to 1 to 3% on most items, is affiliate marketing worth it in 2021?
Here are some statistics to reinforce the value of and possibly underpin why this multi-billion sector is on charting the way forward into the future:
- 84% of publishers and 81% of American brands rely on the power of affiliate marketing to drive their sales and business revenue.
- There’s a 10% year-on-year growth in affiliate marketing spending in the United States from 2016 to 2020 and is projected to reach $8 billion in 2021.
- Affiliate marketing programs are the most lucrative customer acquisition channels for over 40% of U.S. merchants.
- Over 70% of the online shoppers in the United States check multiple affiliate sites before purchasing a product.
- America is the leading market in the global affiliate marketing sector, with a 39% market share.
- By 2018, there will be more than 11,000 affiliate marketing programs in the United States.
What Are the Perks of Affiliate Marketing?
Unlike a regular job or business that requires you to trade time for money, affiliate marketing allows you to mint money in your sleep.
Initially, you might have to invest a considerable amount of time, effort, and resources to get the site off the ground.
Once your affiliate site takes off and gains traction, you’re assured of continuous returns that could last you for weeks, months, or years.
An affiliate site follows the set it and forget it business model and requires little maintenance and upkeep.
As an affiliate marketer, you don’t handle any part of the sales or fulfillment process. The merchants manage all the tedious and laborious part of the sales process.
Your entire job is to link the seller with willing buyers, and you’re rewarded generously for your effort. You’ll never deal with customer complaints, offer customer support, or customer satisfaction.
Work From Anywhere
You can build an entire affiliate marketing empire from a laptop with a strong internet connection. You can launch marketing campaigns, upload content, and run an SEO campaign from the comfort of your home or virtually anywhere else in the world but an office setting, for that matter.
Low Entry Barriers
Unlike other business ventures, you don’t need bundles of cash or expensive loans to get into affiliate marketing. You only need to pay for a web domain and hosting, and you’re off to a running start.
Using WordPress, your first site on free themes such as Generatepress theme, write the content yourself, and run the SEO campaigns.
Once the site gains traction, you can upgrade to a premium and outsource your content needs to a virtual assistant.
Convenient and Flexible
You can build an affiliate site around your areas of interest, skills, specialization, or knowledgeability. That makes it easy to create fantastic content that attests to your subject mastery and in-depth knowledge.
Such an approach helps you capitalize on your skills and interest to strengthen your financial position by building a steady stream of passive income.
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Despite what some pundits say, affiliate marketing is not dead. If anything, the sector is recording massive gains each year.
The sector has registered a steady 10% growth each year from 2016 to generate $6.4 billion in 2020. Affiliate marketing revenue is projected to hit the $8 billion mark in 2022, demonstrating that it’s a viable business model.
- Review 42: 40+ Amazing Affiliate Marketing Statistics to Bring to Your Next Office Meeting
- SuperMetrics: Useful affiliate marketing statistics in 2021
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- Big Commerce: Affiliate Marketing in 2020: What It Is and How You Can Get Started
- Ahrefs: Affiliate Marketing for Beginners: 7 Steps to Success