Affiliate Business Model

Affiliate Business Model

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Affiliate business is a performance-based online business model, which rewards a seller (affiliates) for each visitor or customer he brings on. Affiliate business is based on the affiliate marketing concept and is a relationship of three key players; Advertisers, Publishers and Consumers all integrated into the Network.

  • Network contains product offers, usually listed by the advertisers, for the affiliate to choose from. It also takes care of the payments to the affiliate once they earn from referrals. The common affiliate networks are commission junction, shareasale, amazon associates etc
  • Advertiser or Merchant (also known as ‘retailer’ or ‘brand’) is the one who owns the product. He makes the effort of listing the product in the network. A good example is a painter offering his paintings in Amazon.
  • Publisher (also known as ‘the affiliate’) is the middleman between the merchant and the client or customer. Affiliates usually publish the product offers on their websites, which acts as the point of contact with the client. Affiliates are the center of this business model.
  • Customer is the buyer of the product. For an affiliate to gain, the customer’s interest on the product must have originated from the affiliates media like website or email messages.

Affiliate business is a win-win business model that integrates the above listed stakeholders and through a structure marketing system, the product smoothly moves from the merchants to the consumers.

How does the affiliate business work?

Affiliate business is based on a small piece of technology called a cookie. A cookie works with web browsers to store information like user preferences, login or registration information, and shopping cart contents. A cookie is responsible for remembrance of password and username for online accounts or relevance of ads on websites while browsing.

Amongst all forms of cookies available, the affiliate marketing relies on a particular tracking cookie referred to as first-party cookies. This cookie remembers the link or ad the visitor had clicked on the website. It stores the date and time of the click.

Affiliate business is based on three simple steps; Join, Promote, Earn. So you simply join a network, you promote the products listed by the advertisers int he network and you earn commission every time you sell a product or achieve an action.

The affiliate business process starts with:

The advertiser lists his products for sale in the network. They either directly allow affiliates in the network to sell the product or approve each affiliate through an application process.

The affiliate or publisher acquires a product affiliate link or banner and publish it on his website. It appears on the website as a clickable link or graphical banner.

When a user visits the publisher’s website and clicks on the link or the banner, the visitor’s browser receives the cookie that identifies the advertiser, the publisher, the product and commission amount. This information can be stored for a varied length of time so that any time the visitor refers back to the product, then the affiliate still benefits from that single introduction. The period varies from 24 hours upto even 90 days depending on the network provider.

When a visitor makes an action like registering, buying or subscribing through the link or banner, the affiliate earns a commission. The commission accumulates in his account within the network and becomes available for withdrawal upon reaching a set threshold.

Compensation models

The affiliate can benefit from several types of compensation, depending on the form of customer interaction (click or a sign-up) and/or transaction (product purchase, a trade or a wager) :

Revenue share – This is where the affiliate is given a margin of the product price as remuneration. It is also referred as the commission and is mostly calculated as a percentage.

Cost per thousand impressions (CPM) – Here, the affiliate is paid a certain amount for bringing traffic to an advert. Its measured by the number of visitors that view the ad and is calculates per 1000 views/impressions.  The networks that offer this affiliate model are google adwords and chitika

Cost per click (CPC) is a model where an affiliate is rewarded for every click made by a visitor to the advert.

Cost per acquisition (CPA)  – The affiliate is paid once the visitors buy the product. This model pays higher that the rest through its harder to implement.

Affiliate business modes

Affiliate networks offer various affiliate marketing modes. Once you join a network, you can opt to use the links, the banners or the white label platforms.

Links – These are affiliate links that are title with works. The links are ideal for inlining with the content. If you are writing an article and you mention about web hosting, you can link the word web hosting with an affiliate link from a web hosting provider. Links are silent adverts with less ad monotony hence making them the most friendly.

Banners – These are graphical affiliate links. A smartly designed web banner is linked to an affiliate product. The banners are ideal to put on the website sidebar. They usually have high conversion rates due to their visibility but also they seem intimidating to the vistors.

White label are unbranded platforms that are linked to the merchants and provide an all exclusive right to an affiliate over the merchant product. White label are ideal for big affiliates that want to be like the merchant. In a white label, the products seem to be owned by the affiliate and the merchant  branding is not visible at all.

Affiliate business publishing platforms

When doing affiliate business, a publishing platform is necessary. Regardless whether you have a paid platform or a free one, you definitely need to set up a platform where you will publish your ads. Most affiliate networks do review these platforms before they approve the application.

Website – Most of the affiliates own websites and blogs. The websites mostly provide information and the need to monetize them is what leads the owners into the affiliate business. You can develop your own website or blog or subscribe to the free blogs. My favorite platform is wordpress. You can install wordpress from wordpress.org into your hosting and easily develop your website or blog. You can also get a free hosted version at wordpress.com

Email – If you have a list of people that you frequently communicate with online through email, you can use email to send the affiliate links to the list. This has become common and also quite effective in bringing in sales especially when your list quite trust you.

Social media networks – Networks like facebook, twitter, linkedin and the like provides a profile where users interact with their networks. This is a great platform where you could share a few products (affiliate links) that you think are beneficial to your audience.

How to start an affiliate business

Starting an affiliate business is among the fastest and least expensive ways to make money online. In affiliate business you choose products you want to promote, and the specific ways to promote them. You simply generate sales for other companies and earn income in sales commissions.

Below are fives steps you can follow while starting your affiliate business:

Select the niche that you would like to focus on. Once you have the niche market, then you will identify the needs to address and also the products to offer. Ensure that you niche market is specific. For instance, you would easily target newly married women as a niche and chose to promote products like baby clothes, toys and nursing apparatus, as opposed to picking women in general as your focal market.

Choose the affiliate business model you plan to use. Your business models should work well with the selected products and niche. Whether you choose direct advertising through Pay Per Click, search engines such as Google, information publishing through your own website, reviews or referrals through social networks, your model should suit perfectly.

Select about five products you would like to market. Depending on your chosen business model, you may decide to market products you enjoy or with highest profit potential. A few products in the beginning will give you a chance to learn and grow.

Sign up with an affiliate network and merchant who offer affiliate programs selling the products you have chosen to promote. Before setting up new affiliate accounts, be sure to read through the terms of use and policies for affiliates to ensure that you are not restricted on the marketing methodology to use. Most merchants and affiliate networks do not charge for signing up.

Set up a publishing platform. Depending on how you want to conduct your affiliate business, you can set a website. For email marketers, setting up an emailing platform will be necessary. If you plan to use a website and online publishing for your affiliate business you will need to register a domain name, acquire web hosting account and develop a website or blog.

Set up other platforms. Depending on different strategies that you want to use on your affiliate marketing efforts, you might be required to sign up with other extra providers. The common providers to sign up with are:

  • Search engines advertising accounts for PPC marketing. These are like google adwords, chitika, adbrite etc
  • Emailing platforms for email marketing like mailchimp, aweber, get response etc.

Five reasons why you should start an affiliate business

  1. Happy business model – Affiliate business is a win-win model. The merchant get a sale, the affiliate earn commissions, the consumer get the product and the network earn the listing fees. Every stakeholder in this business is happy.
  2. Low start-up costs – Starting an affiliate business is a very simple operation, costing as little as $50 to secure the domain name and web hosting. With the right guidance, you can easily set it up within a few hours. Once the publishing platform is set, then you are ready to start. The fact that you do not need your own product makes the whole business easy. In this business, there is no stock, warehouse, office or staff to employ. The reduced overheads ensure that the business easily gets profitable.
  3. Freedom and flexibility – Affiliate marketing affords you flexibility of operations. All you need to operate your affiliate business is a computer, internet connection and of course part of your time. No matter where you are, holidaying, at home or traveling, you will be able to run your business effectively. The affiliate business model is easily interchangeable across several sectors, which allows you to identify opportunities, utilize them and diversify your risk. It’s easy to find a blogger publishing affiliate websites spanning across several sectors. For instance blogging in online business, personal development and travel sectors.
  4. Adaptable revenue streams with high profit margins. Your affiliate website can easily skyrocket if the right strategy is utilized. Tactics like market mapping, proper domain selection, original content development and whitehat SEO initiatives will quickly see your website growth sprouting upwards. When your website start gaining traffic, you are then in a position to monetize through revenue share, CPM, CPC and/or CPA deals. You should monetize your website depending on the content and the users.
  5. Following your passion – Affiliate business is the kind of business that can be centered on your passion. Most of the successful affiliate marketers are bloggers blogging on their favorite topics. There are numerous affiliate businesses that have started as a hobby, in the form of a personal blog or community, and has eventually generated enough traffic to monetize them. Regardless of your passion basis on area of interest, group of people, product or sector, there is always room for an enthusiast to develop an affiliate business based on her passion and interest.

Conclusion

Apart from the sturdy business model and financial incentives, affiliate business has enormous impact on an entrepreneur’s personal development.  You acquire an array of skills on internet marketing, Pay-Per-Click (PPC), Search Engine Optimization (SEO), social media advertising, website development, B2B negotiation and domaining.

While creating you affiliate business, it’s always advisable to base your business on a niche market that you are very passionate about or a product that you really love. I always recommend that you market a product that you have already used. This creates an enormous passion that drives you into effectively selling the product.

Initially, work on one website at a time. As you proceed, you can have a diverse portfolio of websites that tackle on different issues. This breaks the seasonality of your income.

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