Affiliate Marketing: How You Make Money

What Is Affiliate Marketing?

Before you can make your first profits by writing articles, you need to understand exactly how you make money with affiliate marketing. So let’s start by covering the following:

a. What is affiliate marketing?
b. What is an “affiliate program”?
c. Signing up for an affiliate program
d.Compensation: How do you get paid?
e. Two types of commissions
f. Cookies

This is Affiliate Marketing

Affiliate marketing is a way of making money on the Internet. The basic concept has been around a long time paying someone only when they produce results.

1 In affiliate marketing, you are paid when you send sales or leads to a merchant who sells goods and services on the Internet.

Affiliate marketing is big business. It is responsible for an estimated $14 billion in annual online sales (source: Marketing Sherpa).

When you hear people talk about “pay-for-performance” marketing, they’re talking about affiliate marketing. As an affiliate, you are paid a fee usually a commission for helping sell somebody else’s products or services online.

What is an “Affiliate Program”?

When you sign up for a merchant’s “affiliate program,” it means you are signing up to be a member of the merchant’s online sales force.

Basically a merchant starts an affiliate program so they can get as many people as possible promoting their product online. The merchant is willing to give you a cut of the sale from a few percentage points to as much as 90% as a commission.

The commission compensates you for the time and money you spend advertising and promoting the merchant’s products on the web. This works out for the merchant, too, because you get paid only if you generate sales or leads. If you don’t get results, you don’t get paid! Some other terms you’ll see for “affiliate programs” are “associate programs,” “bounty programs,” “referrer programs,” “partner programs,” or “revenue sharing programs.” They all basically mean the same thing.

Compensation: How Do You Get Paid?

In affiliate marketing, you make money primarily from commissioned sales that’s the most commonplace compensation method. However, there are also other ways you can get paid. Let’s look at ALL the ways you can make money:

Pay-Per-Sale

Pay-Per-Sale is basically earning commissions. When someone buys a product or service through your affiliate link, the merchant pays you a percentage of the sale. Pay-per-sale commissions range anywhere from a few percent to 90 percent (or even more!).

Commission sales on digital products such as e-books really match up well with article marketing.

Residual Income and Recurring Revenue

In residual income programs, merchants pay you a recurring commission on subscriptions and monthly services, such as web hosting.

Even though you may not make a large percentage on these programs, they can be very beneficial to you. This is because you sell the subscription only once, but you receive commissions for as long as the customer pays their monthly fee.

Pay-Per-Lead or CPA (Cost Per Action)

This type of affiliate program pays a flat fee, or “bounty,” for each qualified lead you send to the merchant site through your affiliate link. The visitor has to give their contact information to the merchant to be considered a real lead.

With pay-per-lead programs, you can make anywhere from 25 cents for a simple lead, to $50 or more for a completed loan application.

Remember, the MERCHANT decides who is a “qualified lead.” Some of the best pay-per-lead programs come from insurance, mortgage, and loan applications. There are about 50 different networks right now they’re called CPA networks that specialize in these types of programs.

I have had excellent success with promoting selected CPA programs with articles. The only downside to CPA is that if you’re a new affiliate, most CPA networks won’t approve your application. That’s because most CPA merchants absolutely demand a certain volume of traffic and leads.

Until your website gets at least 5,000 unique visitors a month, you probably won’t be able to get approved for most CPA networks. While you build up to this level of traffic, stick to commission-based programs.

Pay-Per-Click Contextual Advertising

Normally merchants don’t pay you when someone clicks your affiliate link — only when someone BUYS after clicking your affiliate link. But certain special advertising programs do pay just for clicks. You give the program ad space on your site, and make a small amount of money from each click on an ad.

Today’s most popular contextual advertising program is Google’s AdSense. You show anywhere from two to five Google ads on your site, and when visitors click the ads, you receive a small percentage of the amount the advertisers pay Google.
In most of my testing, sending your article readers to a web page with contextual ads isn’t as profitable as commission-based sales, but still does make money!

The trick really is to have a nice enough website to get approved by Google. This can be tricky.

Hybrid Programs

Sometimes merchants combine different payment programs. They might offer 10 cents per banner click and then 15% on sales made after someone clicks. These programs are very rare, but can be found if you look hard enough. Some will also offer bonuses after you make a certain number of sales. Others offer a scale that pays higher commissions the more sales you make.

I haven’t tried this model much. It’s often used for physical products. I’d recommend it only after you’ve mastered promoting commission-based products.

The Two Different Types of Commissions

There are basically two types of commissions:
SINGLE-TIER COMMISSIONS are straight commission payments. You get a percentage or a fixed dollar amount per sale
TWO-TIER COMMISSIONS pay on two levels. You get a commission on your own sales, and also a small percentage on sales made by new affiliates you refer.

Two-tier programs can be beneficial because even if you don’t make many direct sales, the affiliates who sign up under you will. Over time, this can add up to a substantial passive income.

For example, you may get paid a 25% commission on your own sales, and a 5% commission on affiliates you refer. Even if you make only a few sales of your own, if you have a large team of affiliates under you, you will make money.

Two-tier programs are becoming more rare, mainly because of the complex tracking required. However, if you happen to find a two-tier program in a niche that fits well with article marketing, you might end up recruiting many second-tier affiliates through your articles. Those small second-tier commissions can slowly add up!

But honestly, don’t focus too hard on two-tier programs. They have a couple of disadvantages. One, merchants can change their programs and compensation plans. And two, unfortunately, most affiliates never do anything (not you, of course).

Cookies

Finally, you need to know about “cookies.” Cookies are tiny programs given to a visitor’s web browser when they click your affiliate link.

The cookie stores information on that person’s computer. This information identifies you as the affiliate whenever the visitor returns to the merchant’s site.

Cookies generally last for a certain period of time, anywhere from a few hours to days, months, or even years. Then they expire.

Cookies can also be “reset” if the visitor clicks on a different affiliate link after they click yours. It all depends on how the tracking system is set up. Of course, if a customer gets a new computer, the cookie is gone. And if they buy from a different computer, cookie gone! That wraps up the basics of affiliate marketing.