More than 15,000 advertisers rely on affiliate marketing for part of their revenue today. According to a recent study carried out by Forrester Consulting, affiliate marketing is emerging as a key tool to engage consumers with compelling products. This is happening due to heightened user expectations for compelling and relevant content.
A whopping 84% of publishers are turning to affiliate marketing to get new opportunities for driving revenue to their sites and differentiated content as well.
Spendings in the US alone for affiliate marketing reached 4.8 billion dollars in 2016 - outperforming the Belize economy twice over - and affiliate marketing has been predicted to reach nearly seven billion by 2020.
These facts validate that affiliate marketing is in good health and continuously evolving. But what is it all about? Let’s first put it simply: what is affiliate marketing and how does it work?
Affiliate marketing by definition is a performance based business in which revenue is generated by independent marketers called affiliates who earn a fixed commission paid only when sales are made, leads are confirmed, or any qualified action takes place. This idea is based on revenue sharing - read more about it: Affiliate Marketing for Dummies: 5 Tips to Help You Start From Scratch.
Becoming an Affiliate
As an affiliate marketer, you become an independent promoter of a chosen product or range of products from a selected niche, on behalf of the vendors. Being an affiliate publisher means having absolute freedom to build your online presence. It’s your independent call on when or where your job gets done, how you reach your customers and optimize the whole marketing process. Sounds good? I bet it does.
Affiliate marketing is apparently the easiest online business model to start earning passive income online. It’s low-cost, high-profit industry. On the other hand, it also might happen to be a tough one. All the challenges are on you and performance relies on your determination, approach and the affiliate strategy you choose to follow.
All in all, the whole game is about earning a satisfying cut of sales. Like everything under the sun, affiliate marketing involves both advantages and disadvantages. If you’re wondering how to start with affiliate marketing, explore opportunities and challenges, then this business enables you to have a smooth start.
Ready? Let’s dive into my affiliate marketing pros and cons list.
The Objective Benefits of Affiliate Marketing
1. Billion-dollar Business
As I’ve already mentioned in the introduction of this post, affiliate marketing is a billion-dollar industry that is lately prospering pretty well, and this seems to be the primary advantage of it. It’s a big incentive to get your share, isn’t it?
2. Low-Cost Business Idea
The definitive advantage of affiliate marketing is the fact that it is a pretty easy industry to join, namely because there are no barriers to entry. It’s just the matter of your decision. All you have to do is to create an affiliate marketing website (but you can also become an affiliate marketer without a website), choose a compelling niche and finally a particular product or products (goods) that are relevant for you to market. Then you simply sign up for a selected affiliate marketing program, and you’re ready to start.
3. No Expertise Needed (because Practice Makes Perfect)
You don’t need to be a marketing expert right away to become an affiliate. The great thing about affiliate marketing is that you can learn along the way, testing various organic or paid campaigns. Also, there are plenty of ways to run and manage affiliate marketing programs. Leverage any your marketing experience gained before and try to identify what performs best and brings the most profits. Then optimize and repeat the successful patterns to get results.
4. Low Investment Costs
In the beginning, the operating expenses of the affiliate business are almost non-existent, comparing to other industries. You work online so that you can do it from your home well enough and then you only have the basic electricity and ISP subscription costs to cover. Optionally, there are additional expenses related to setting up a domain, web hosting operator and also some minor costs about designing layout, etc. - Provided that you decide to establish your affiliate marketing website.
Over time you can think of renting a desk at a co-working space, but this is your decision after all and depends whether you are going to miss the office environment or not. All in all, you are a freelancer, so there are no costs for hiring staff, customer service or inventory costs involved.
5. Secondary Source of Income
Starting up as an affiliate marketer doesn’t require you to leave your current job. You can do it as a side project and see what you can squeeze out of it over the few first months.
6. Convenience and Flexibility
Practically, you can continuously create multiple campaigns on different affiliate websites and landing pages to market your affiliate links so that you can abandon the poorly performing ones and optimize the successful ones.
Also, you don’t need to stick to one affiliate marketing program. Select a few various products from a chosen niche (or you can even test various niches if you aren’t sure which one) and promote them on a daily basis.
For instance, you can join the LiveChat Affiliate Partner Program and start promoting this super straightforward and useful tool within your campaigns, then also enrich your portfolio with MailChimp, plus add some other online marketing tools on top of that, such as Mention, provided that they offer an affiliate marketing program.
While each tool belongs to the same business niche, they serve to manage different online marketing activities, so they complement each other. This way you add beautifully diversified software products to your portfolio, and one can outperform another.
If one product proves to be difficult to sell, the other might be much easier, more profitable and act as a solid backup. And no one tells you to stay on a sinking ship; if a single program doesn’t work for you, just drop it.
Such an approach will mitigate the risks of failure and maximize the opportunity to earn a favorable income. Be careful and don’t put all your eggs in one basket, so that you keep your marketing portfolio diversified.
7. Customer Service is not in Your Interest
Retaining customers and managing customer service related issues gets problematic at times. Fortunately, as an affiliate, you don’t need to bother about that. All you care about is your commission, so anytime you get a post-sale query, you just pass such requests on to the merchant’s customer service team and wash your hands clean of the entire matter.
Of course, if you care to create user generated content under your reviews - which can significantly boost your SEO, you should comprehensively (and quickly) reply to product related questions that appear under your posts.
Apart from that, customer service is your call, and no one is going to impose this on you or expect it from you.
8. The Independence
The flexibility of making your working environment on your own and according to your will, is also a strong incentive. Whether it’s in the Bahamas or a picturesque Italian village - you decide where your office is located. You can work everywhere as long as you have, obviously, an Internet connection. Does this concept speak to your imagination?
Moreover, the bureaucracy is limited. As a freelancer, you don’t need to follow any company regulations according to monthly or weekly reports or manage other people from a team that also can get problematic to handle at times. Here you don’t have to worry about company relations because it’s only you and yourself who sets all the rules, decides about proper dress code (so that it can even be in your Pajamas) and other small things and habits that otherwise might be distracting at a loud and crowded office.
9. Marketing Kit at Right Your Disposal
Usually, all marketing materials are provided by vendors, so you don’t often need to produce any banners or any promotional materials. You are all set.
10. Passive Income - Earn Money While You Sleep
The other strong pro feature of becoming an affiliate marketer is the general idea of getting a passive income. Yeah, that’s right, this is a widely promoted motto by Neil Patel “Make $$$ while you ZZZ”. The opportunity to make a passive income means to earn money while you sleep.
Wouldn’t it be great to wake up in the morning, open your laptop and just discover additional revenue in your account? The fruits of your hard work.
It’s accessible for you to wake up in the morning like this once you get a deeper understanding of what affiliate marketing is all about.
11. The Sky’s the Limit
There are many ways to market your affiliate programs. You can set up an affiliate blog and post regularly about a given niche, come up with affiliate emails or create PPC campaigns. You can even use social media and platforms like Quora to market your affiliate products. Furthermore, you can combine all your organic and paid marketing activities into a cross-channel campaign if this suits you best.
12. Own Business - Sole Proprietorship
As an affiliate partner, you usually work as a freelancer and have to establish your business activity. The best part of it are the costs, such as laptops and mobile phones, which can be claimed as tax write-offs.
13. Flexible Working Schedule
An at-home business means you are making your framework and daily working schedule. So if anything unexpected comes up like, your friend’s birthday or family errands you can always make time for it.
Also, you decide when you go on vacation and how many days off you take.
14. Performance Based Income
This can be perceived either as a benefit or a disadvantage. Affiliate marketing will verify if you are good at online marketing and at what campaigns specifically. Are you an online review master? Are you more successful at writing articles or recording videos for YouTube? Or perhaps paid campaigns to bring you more revenue?
This will be tested over time. Success comes to those who work hard and are persistent.
Persistence here is the essential factor - because it takes time to amass enough traffic to make money at it. Once you start with affiliate marketing, give yourself about six months or up to one year, to see if it works for you and brings satisfactory commission to the table.
The Disadvantages of Affiliate Marketing
1. You Don’t Control Affiliate Marketing Programs
Logically, you don’t own affiliate marketing programs, so you just have to use existing ones.
In this way, you are entirely dependent on your merchant’s rules and respect their conditions. A program that may look appealing at times, later can become less and less competitive, but you won’t be able to adjust the terms yourself, all you can do is to communicate the need for further adjustments regarding discounts on the given products, etc.
And then wait for the merchant to implement changes.
2. You Don’t Control Your Competition
Competition varies depending on the industry. As there are strong benefits of joining affiliate business, such as low costs of investments, high-profit opportunities and no expertise needed, a lot of people try their hand at affiliate marketing. Practically anyone can join and be successful.
Highly talented affiliate marketers from the same niche make up a fierce competition, which is an obvious danger to your performance and a significant disadvantage.
However, this shouldn’t scare you. Remember that the obligatory factors of success are hard work and persistence.
3. You Can’t Establish Your Customer Base
The truth is, once a referral is made, a repeating customer won’t ever purchase from you again.
Of course, he will do it directly to the affiliate vendor to repeat the purchase. That’s the nature of affiliate business. You commit to driving new leads again and again. Unless you engage into marketing affiliate programs that provide recurring commission.
Some of SaaS affiliate marketing programs offer recurring licenses and because of this, fixed recurring commissions. To give you an example of such an approach, take a look at the LiveChat Affiliate Program.
You will find out that the 20% commission is paid monthly or yearly as long as the customer stays with the company. This makes the cooperation fair and also easy to calculate. And the best part is that statistically, the customer stays with LiveChat for about 2,5 years. Whoa!!!
4. No Guarantee of Revenue
Pay-per-performance can be a tremendous opportunity as well as a significant risk.No one promises that working as an affiliate marketer will be easy and that you are going to earn the expected revenue right away. It’s a challenge you have to face and put all your efforts into maximizing the opportunity, but all in all, it’s difficult to predict how much money you will make on it in the end.
5. Freelance Jobs are not for Everyone
It takes a particular personality to feel comfortable with such a working style. In some circumstances, it can result in feeling blue like loneliness or stagnation. But there are ways to minimize and overcome such a mental condition.Just don’t close yourself away from people at your home. Find your working space somewhere outside and go there every day.
I bet that there are lot’s of coffee shops designed especially for remote work in your city, so just look around and discover one that suits you best.
Lately, coworking spaces are becoming more and more popular. Consider this idea: you can rent a desk at a space established just for people like you - for other freelancers. And if you’re a social butterfly, you are going to build new connections pretty fast.
6. Quantity Approach
Affiliate marketing is sometimes associated with spammy marketing campaigns, and there is some truth to that. Some short sighted affiliate marketers produce spammy and misleading content everywhere and expect quick and small wins.
Beware, once you step into black hat affiliate marketing methods and false advertising, your days are numbered. By entering this shady path, you’ll eventually lose the credibility, and even worse, you’ll put your merchant’s reputation at risk.
Furthermore, spammy affiliate campaigns lead to a cooperation breakup from the vendor’s side and then you are done and can’t expect any commission at all. Better focus on the long-term affiliate strategy and invest in quality instead of quantity - this will bring you sustainable and recurring revenue.
Be legit and act legit, that’s the only way you will gain the trust which will let you cooperate with the best vendors.
7. It’s Possible to Hijack Affiliate Links
Although this doesn’t come often, and the vast majority of affiliate marketers won’t do it, there are cases of hijacking affiliate links so that the fraudster gets someone’s commission. Then it’s hardly possible to get it back. So you can just hope that such an affiliate scam won’t target you.
It looks like we’re done with Pros and Cons of Affiliate Marketing for the time being. I hope that after reading my article, you’ll have a better and deeper understanding of the nature of this business and will be capable of evaluating this business model better to decide if it’s the job for you.
Noticeably, there are more benefits than disadvantages. So if you are ready to start making money with affiliate marketing, I strongly encourage you to join the LiveChat Affiliate Partner Program which is one of the best affiliate programs available.
I’ve tried to discuss this topic objectively and thoroughly, however, if you see that I’ve missed something about it or you disagree with any of these points mentioned above, feel free to get in touch with me on Twitter and let me know.
Hope you all have a great start in Affiliate Marketing!