How Does Affiliate Marketing Work?

Affiliate marketing is EVERYWHERE. You’d be surprised just how prevalent it really is. Here’s some examples of affiliate websites…

Affiliate Marketing Review Site

The site above come up as one of the top Google results when searching for ‘antivirus software reviews’. A lot of us like to review products before we buy them, to make sure we get the best deals.

What many of us don’t realise is that most of these review sites have been created with the purpose of earning money. That’s not to say that the reviews are biased (that can be the case) but what it does mean is that whichever product you choose, the website owner will earn a commission.

In the example website above, the ‘Buy Now’ buttons take you to the antivirus’ product website using this review site owner’s affiliate link. We’ll go into more details about affiliate links and how they work in the coming chapters, but for now let’s just say that an affiliate link is a unique link that allows any sales to be traced back to the person that referred the sale.

For every antivirus software that is sold from visitors that have first been to the review site above, the review site owner earns a commission. Typically it is anywhere from 50 to 75% of the sale. Commissions are very high for digital products.

Affiliate Marketing Review Site - Physical Products

The site shown above specialises in providing information about digital cameras. Many sites that review physical products will have affiliate links going back to the product’s purchase page on Amazon.com. Amazon’s affiliate program pays affiliates anywhere between 4 to 15% commission on purchases referred.

The affiliate commission percentage on physical products is much lower. This is because there are much higher overheads for physical products, including product creation, delivery and support.

However, when you consider that there are literally millions of different physical products out there, and that some of these physical products sell for a lot of money, it is still a great opportunity.

Let’s say you only earn 4% commissions for billiard tables. If you sell one billiard table for $15,000, your commission would be $600. That’s a lot of money, especially if you never had to purchase it as a reseller in the first place, nor have to do any of the shipping, etc.

Here’s another example of a typical affiliate site…

Affiliate Marketing Before and After Site

The blog above is typical of the type of site that takes you through the ‘before and after’ story about how someone was able to achieve something important. In this case the lady in the blog was able to lose a lot of weight within just 4 months. They will then recommend a resource that they followed to help them to achieve their goal.

Of course, there will be a link to this resource on the site…

…and, yes, that link will typically be an affiliate link.

These ‘before and after’ stories are particular compelling and make very good money for their owners. It works so well, that many affiliates began to create a lot of these sites but, unfortunately, many of them were making false and misleading claims.

It got so bad that the Federal Trade Commission in the U.S. (FTC) released new guidelines that came into effect in 2009. These guidelines require that affiliate sites clearly indicate that they will be receiving compensation on any purchases made from products they recommend.

The guidelines also require you to state the average result of your product or service, particularly if you are using testimonials. For example, if you have a testimonial on your site about Bob, who was able to lose 20 pounds in just 6 weeks, but the typical user of the product only loses 4 pounds over 6 weeks, you have to make a disclaimer that Bob’s results are not typical.

Now that you know what affiliate marketing is, keep your eye on this blog because over the next few weeks I’m going to go into the mechanics of how it all works. Don’t worry, this is easy stuff!

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