Affiliate Marketing: The Ultimate Basic Guide for Beginners

Interest in affiliate marketing has soared in recent years. For many, however, the topic still presents various questions. That's why this article aims to shed light on the topic. You'll learn everything you need to know about affiliate marketing as a beginner.

We will explain what affiliate marketing is, how it works, what commission models are available, on what the earning potential depends, for whom affiliate marketing is suitable and much more. So let's get right to it.

What Is Affiliate Marketing?

Affiliate marketing originates from the USA and is a form of online marketing. In concrete terms, it is an internet-supported type of distribution based on performance-oriented cooperation among partners.

In plain English this means: Companies or individuals make their products and services available to other people, who then have the opportunity to act as an intermediary via the internet in order to receive a commission.

You're probably familiar with this scheme from the offline world. For example, if you subscribe to a newspaper and you recruit a new reader, i.e. the reader subscribes to the newspaper as well, you will receive a thank you. Often in the form of a gift.

The term “referral marketing” is also frequently used. However, there is a difference here. Because referral marketing takes place through conviction. Whereas with affiliate marketing, the commission is the incentive.

A Brief Historical Review

Almost everyone interested in the topic of “earning money on the internet” is familiar with the term “affiliate marketing.” But how did the affiliate marketing of today originate in the first place? Certainly, not everyone is familiar with the answer to this question. For this reason, we would like to give you a brief historical review of how it all began.

  • 1989: Affiliate marketing is born
    Affiliate marketing as we know it today was started by William J. Tobin in 1989. He is the founding father of the first affiliate program for his company PC Flowers & Gifts. Of course, compared to affiliate marketing of today, a lot has changed since then, but the basic concept is the same.
  • 1994: CDNow launches its BuyWeb program
    In 1994, the online music retailer CDNow launched its BuyWeb program. This allowed website owners to link albums or movies from the CDNow.com website via a banner or link and receive a commission for each successful sale.
  • 1996: Amazon Associates Program
    In July 1996, the American Amazon Associates Program is launched. It was one of the first affiliate programs ever. Now it is one of the most popular affiliate programs among affiliates worldwide.
  • 1998: Clickbank and Commission Junction are launched
    In 1998, the first affiliate networks, Clickbank and Commission Junction (now CJ Affiliate by Conversant), opened its doors. Both affiliate networks still exist and are among the largest in the industry.
  • Affiliate Marketing Today
    Currently, there are numerous affiliate networks and quite a few affiliate programs. It is almost impossible to list them all. We will nevertheless introduce you to a few of the most popular affiliate networks and affiliate programs below.

Classification of the Affiliate Marketing Industry

The affiliate marketing industry can be divided into four main points:

The Commercial Vendor

  • The commercial vendor is also called the merchant or advertiser.
  • This is the product owner who created the affiliate program in order to advertise their product or service.
  • Affiliate marketing is an excellent channel through which the product and business of this group is promoted by other people. Because they only pay for results.

The Partner Network

  • The partner network is called the affiliate network.
  • An intermediary provides and manages the affiliate programs as well as the offers.
  • The network acts as a facilitator between the vendor and partner. It makes payouts to affiliates, handles sales tracking and provides support.

The Sales Partner

  • The sales partner is known as the affiliate or publisher.
  • The role of the sales partner is to choose a program and to attract website visitors (also known as traffic) or convert interested parties into potential customers.
  • The sales partner has the option to join an affiliate program or, if possible, to cooperate directly with the vendor.

The Interested Party or Customer

  • The interested party or customer is generally known as the customer.
  • The interested party and potential future customer is the day-to-day user who surfs the internet. Often he does not even know that he has triggered the converting action of an affiliate program through his own action, e.g. by clicking on a link.

How Does Affiliate Marketing Work in Practice?

As the operator of a blog or a website, you provide an advertising space in which you advertise the affiliate product or the affiliate service via a banner or by means of a text link.

When a visitor or interested party clicks on your banner or text link, he/she will be directed to the affiliate's website. If the interested party decides to make a purchase there, you will receive a commission.

The successful completion of an affiliate offer is referred to as a conversion.

Affiliate Marketing Function

Most merchants will give you a certain amount of time (days or weeks) in which to convert the interested party to a customer. You will receive a commission only if the interested party becomes a customer within that time period. Otherwise, there will not be a commission. 

You're probably asking yourself the following question right now: How does the affiliate company know who referred the customer? That's a good question.

The answer: based on your affiliate link.

An affiliate link, also called a partner link, is an identifier with a special code that belongs to an affiliate program. This enables the affiliate company to determine which affiliate made the sale.

At the same time, an affiliate link is a unique web address that leads to an offer on a landing page. Let's look at how an affiliate link is built and how it works.

In its simplest form, an affiliate link is structured as follows: affiliatewebsite.com/affiliate-id

  • Affiliate website
    The affiliate website is the site where the product or service is offered. This is usually the sales page where the interested party is to be converted to a customer.
  • Affiliate ID
    The affiliate ID is your personal identification number which is connected to the affiliate link. The ID usually consists of your name or a string of numbers. Sometimes it is a combination of both.

Note: The affiliate ID can also be the name of your blog which you entered when applying to the affiliate program.

For a better understanding and to give you an idea of what an actual affiliate link looks like, we have listed some examples for you below.

When clicking on the affiliate link, your affiliate ID is forwarded to the affiliate website. With this, a cookie is set on the device of your website visitor which stores this information.

This allows the affiliate company to track things such as:

  • Through which channel the customer came
  • Which affiliate sent the customer
  • Whether it is a qualified sale

Affiliate Marketing Commission Models

The arrangement of how an affiliate is compensated, i.e. the amount of the commission and the commission model, varies from program to program.

We will now introduce you to the four most common commission models in affiliate marketing.

Affiliate Marketing Commission Models: Pay per Click

1. Pay per Click

In this commission model, you are paid per click. For example, if you include ads on your blog and one of your visitors clicks on them, you will receive a commission.

The best known provider offering this model of compensation settlement is Google AdSense.

2. Pay per Lead

A lead is defined as a qualified interested party. The pay per lead model is not about selling something directly. Rather, it is used to obtain the contact information of an interested party or a potential customer.

Thus, the affiliate company is able to make an offer for a product or service afterwards, which should entice the interested party to make a purchase.

But before that, the interested party must perform a specific action through your affiliate link. Here are some examples of what kind of action qualifies:

  • Registration for a newsletter
  • Participation in a raffle
  • Filling out an opinion poll
  • Installation of an app
  • Request for information material
Affiliate Marketing Commission Models: Pay per Lead
Affiliate Marketing Commission Models: Pay per Sale

3. Pay per Sale

In this model, a commission is paid per sale. The pay per sale compensation model comes into play particularly with affiliate programs that offer physical products through an online mail order business or an online shop. The commission is calculated on the basis of a percentage of the buyer's sales.

For you as an affiliate, this can be quite rewarding! Because a customer often buys more than one product. Thus, not only the content of the shopping cart or the revenue are higher but also your earnings.

An example of this is the Amazon affiliate program. In this program, as an affiliate, you receive a commission on the entire shopping cart of the buyer. No matter what is purchased (with a few exceptions).

4. Lifetime Compensation

With a lifetime compensation, you will be compensated several times as an affiliate, usually on a monthly basis. Very often this type of compensation is offered in affiliate programs where the interested party can join with a membership. By doing so, he/she agrees to pay a certain monthly amount.

Affiliate Marketing Commission Models: Lifetime Compensation

Affiliate programs with lifetime compensation are very popular among affiliates. Although, on the other hand, they are not easy to facilitate. Therefore, we don't necessarily recommend these types of programs to you as a beginner. Later, when you have gained more experience, you should definitely include lifetime compensation programs in your promotional activities.

Here are a few examples from domains that pay lifetime compensation:

  1. Online Marketing Tools
    A lifetime compensation is, above all, paid with online marketing tools, such as SEO analysis tools or email marketing service providers.
  2. Member Pages
    Also, many membership sites with an affiliate program compensate their affiliates with a lifetime commission.
  3. WordPress Products
    Likewise, there are providers of WordPress products, such as Thrive Themes or Digistore, that pay a recurring commission for each new customer.

Note: There are still other commission models. However, these are of minor importance which is why we have not listed them here.

Advantages and Disadvantages of Affiliate Marketing

As with any sector, there are both advantages and disadvantages to affiliate marketing. Before you decide to get started as an affiliate, you should be aware of the following points. Just so you know exactly what you're getting into.

Advantages

  • Having an own product is not necessary
  • Very low investment costs
  • Free selection of the affiliate program
  • Sales process is omitted
  • No support to customers
  • Success is possible even with few website visitors

Disadvantages

  • Lack of transparency
  • Commissions can be reduced
  • Affiliate program can be terminated or dissolved
  • Advertising material is not always available
  • No control over the product
  • Some programs offer a small commission

We'll now go into a little more detail about the advantages and disadvantages so you can get a better picture.

Advantages of Affiliate Marketing

  • Having an own product is not necessary
    As an affiliate, you earn your money on the internet by referring the products of companies or individuals. So you don't need your own product, nor do you need to create one if you want to get started with affiliate marketing.
  • Very low investment costs
    In the beginning, the only costs are for the domain and hosting. These are very minimal at about 5 euros per month. For example, with the hosting provider bluehost, the domain name is included for the first year. Usually their shared hosting starts at €7.48/month, but at the moment you even get the first term (36 months) for €2.45/month only.
  • Free selection of the affiliate program
    You can freely choose which affiliate program you want to promote. There are a variety of programs for digital and physical products.
  • Sales process is omitted
    You don't have to worry about the sales, payment and delivery process of the product. All you have to do is take care of potential customers who you send to the affiliate website through your affiliate link.
  • No support to customers
    The product owner is responsible for support requests and cancellations, so, as an affiliate, you do not have to deal with them. You simply refer the clients and get a commission; the other factors are not your concern.
  • Success is possible even with few website visitors
    The more traffic you send to your blog or website, the higher your income potential is. However, you don't necessarily need masses of visitors to make money. Even just a few visitors a day can generate sales.

Disadvantages of Affiliate Marketing

  • Lack of transparency
    There is no direct transparency because you can't really check sales or leads yourself. So you have to trust in the honesty of the product provider and assume that your payout is correct.
  • Commissions can be reduced
    Your commission can be cut at any time. A variety of circumstances can be responsible for this. In any event, you should think carefully in such a case about whether it is worthwhile for you to continue applying to the program or not.
  • Affiliate program can be terminated or dissolved
    The affiliate program you use can be canceled overnight. Reasons could be: The offer is no longer available, or you have violated a condition of participation and have therefore been booted from the program.
  • Advertising material is not always available
    There are some programs or providers who provide little or no advertising material. This is always disadvantageous for you as an affiliate! As such, without suitable advertising media, you are limited in your advertising activities.
  • No control over the product
    The program or product you are promoting as an affiliate is not your own. Therefore, you have no control over it, neither in terms of quality nor in terms of customer service. You also cannot control the price or the sales process.
  • Some programs offer a small commission
    Some programs offer a relatively small commission. This is not necessarily a bad thing. What matters most is how well the product can be communicated. Nevertheless, you should make sure that the commission is reasonable.

Affiliate Networks and Affiliate Programs

There are quite a few affiliate networks and affiliate programs. It is not possible to list them all, nor is it our intention to do so here. However, to give you a rough overview, we'll name a few of the most popular networks and affiliate programs.

So, if you are still starting out and are looking for a good affiliate network or affiliate program, you can use the following providers as a type of guide. All these providers have a good reputation, and we can highly recommend them to you.

Awin

Awin is by far one of the largest affiliate networks. The network includes a number of well-known brands in its program.

Essential information

  • Niche: All
  • Type: Digital and physical products
  • Commission rates: Varies by program
  • Duration of cookies: Varies by program
Affiliate Marketing - Affiliate Network: Awin

Amazon Associates

Amazon Associates is not an affiliate network, but, nevertheless, it is one of the largest affiliate programs.

Essential information

  • Niche: All
  • Type: Physical products
  • Commission rates: 1% – 10%
  • Duration of cookies: 24 hours
Affiliate Marketing - Affiliate Network: Amazon Associates

Digistore24

Digistore24 is a reseller platform and an affiliate network. The program includes many digital information products.

Essential information

  • Niche: All
  • Type: Digital products
  • Commission rates: Varies by program
  • Duration of cookies: 180 days
Affiliate Marketing - Affiliate Network: Digistore24

CJ Affiliate by Conversant

The affiliate network CJ Affiliate by Conversant is one of the oldest and best known networks in the industry.

Essential information

  • Niche: All
  • Type: Digital and physical products
  • Commission rates: Varies by program
  • Duration of cookies: Varies by program
Affiliate Marketing - Affiliate Network: CJ Affiliate

How Much Money Can You Make With Affiliate Marketing?

Quite a few people generate passive income online with affiliate marketing, either as additional income or as primary income. However, the earnings differ significantly among many affiliates. For this reason, we can't tell you exactly how much money you can make.

However, we will outline for you what essentially determines the earnings.

Key Factors for Earnings

Basically, we can tell you that earnings depend on the following five factors:

  1. Niche
  2. Affiliate Program
  3. Content
  4. Website Visitors
  5. Trust

We will now look at why the above-mentioned factors are decisive.

Factor #1: Niche

A niche is a sub-segment of an overall market. We'll give you an example: paleo diet. This is a niche in the healthcare market. Your niche should always be monetizable, either by means of a physical or digital product. If there are no products for your niche, you can't sell anything and therefore will not earn anything.

Affiliate Marketing Earning Factors: Niche

We explain how to find niche ideas and test whether they're profitable in these posts:

Affiliate Marketing Earning Factors: Affiliate Network

Factor #2: Affiliate Program

A good affiliate program is important in order to generate sales. However, the amount of commission is not a decisive factor when selecting a suitable partner program. Beginners, in particular, believe that they will earn more through a program with a high commission. However, it is more important that the program converts well; that is, it convinces customers to commit to making purchases.

Factor #3: Content

You will use your content to present your offer. If your content is exclusively oriented towards sales and doesn't add value, you will have moderate success with it. See to it that you provide some value to your visitors in the form of tips, guides or detailed informational posts. Your content doesn't have to only be in text form; you can also use videos (preferably, a combination).

Affiliate Marketing Earning Factors: Content
Affiliate Marketing Earning Factors: Visitors

Factor #4: Website Visitors

Your earnings also depend on your website visitors. Without them, you will achieve nothing! However, your visitors need to be the right visitors. You will find it difficult to convince website visitors who are not interested in the topic of your website.

Factor #5: Trust

If your website visitors don't feel they can trust you, they won't buy through your affiliate link. Therefore, always be honest with them and do not tell lies! For example: When you present a product, you should not talk about a test if you have not actually bought and tested the product. Instead, you can, for example, give a “product presentation”.

Affiliate Marketing Earning Factors: Trust

Furthermore …

Your earnings as an affiliate also depend on how much time, energy and motivation you put into it. If you stay on the ball and do your thing, you will be rewarded for it in the end. However, don't expect this to happen overnight! Because affiliate marketing is a process that takes time.

Some generate their first earnings after just a few weeks and others need months to do so. And then there are those for whom affiliate marketing doesn't work at all. The reasons for this may vary.

At any rate, be prepared to make sacrifices. Because it's not going to be a walk in the park! You have to do quite a bit to build your affiliate business. As the saying goes: “No pain, no gain.”

Who Is Suitable For Affiliate Marketing and Who Is Not?

Let's get one thing straight: Affiliate marketing is not for everyone! However, the great thing is that really anyone can learn it. You too! We guarantee that a special skill set is not required.

Nonetheless, it takes a certain amount of determination, dedication and commitment to make it work. You should also have basic PC skills and be somewhat familiar with the internet.

Affiliate marketing is suitable for individuals who

  • scour the internet for a source of revenue
  • are partial to working on the internet
  • already have a blog or website and want to earn money with it
  • are willing to invest time, energy and motivation in the pursuit

Affiliate marketing is unsuitable for individuals who

  • are eager to earn money quickly
  • are not willing to learn new things
  • think that with minimal work, they will become successful
  • are convinced that you can't make money on the internet

Conclusion

As you can see, affiliate marketing is a great opportunity that is recommended for anyone looking to gain a source of income on the internet. Essentially, the principles of affiliate marketing are very simple. Due to the various commission models and affiliate programs as well as the countless niche opportunities, this method of making money online is theoretically a good option for everyone. However, even though the barriers to entry are low, affiliate marketing is not for everyone. In addition to technical affinity, it also requires patience, stamina and that one enjoys the work.

The easiest way to find out if affiliate marketing is right for you is to just go ahead and try it. So what are you waiting for? Good luck!

Frequently Asked Questions

In conclusion, we will answer some frequently asked questions.

Note: We are not lawyers. The following answers only reflect our opinions. This is not legal advice.

Is affiliate marketing illegal?

No, it's not. It's a serious online business model.

Do I need my own blog?

Just about all affiliate networks and affiliate programs require you to have your own blog or a website with relevant content. Without these, it will be difficult to get approved as an affiliate.

Do I have to be 18 to practice affiliate marketing?

Yes, you should already be of age or have full legal capacity.

Is a business registration necessary?

Yes, in most countries you have to register a business. Depending on where you live, the requirements for this can vary. It is best to find out more from a local source.

As an affiliate, am I permitted to use advertising material that I have created myself?

Some programs allow you to create and use your own advertising material. Others do not. It's best to read the program's terms and conditions before using your own advertising materials. If in doubt, write to the affiliate program and ask explicitly.

It depends on the program and its eligibility requirements. If you are not sure if you are allowed to shorten or mask the link, you should check with the affiliate program.

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