What is Affiliate marketing? A complete guide

Threecolts
Kennedell Amoo-Gottfried
Published
September 13, 2022
Modified
September 19, 2022
Affiliate marketing

Affiliate marketing is about as win-win a situation as you can find in marketing. To put it simply, affiliate marketing describes the ability of marketers to provide third parties with links to their products, offering them a cut of sales that result from the links they spread around. 

According to Influencer Marketing Hub’s Affiliate Marketing Benchmark Report 2022, the affiliate marketing industry is expected to grow to $13bn this year and reach $15.7bn by 2024. The pattern is also reflected in search engine queries - Google Trends shows that over the past decade, searches for “Affiliate Marketing” have risen roughly four-fold. 

Searches for "Affiliate Marketing" over time
Searches for "Affiliate Marketing" over time - Google Trends

North America is by far the largest market - with nearly half of all affiliate activity - followed by APAC, Europe, then Africa.

global affiliate marketing stats
via Influencer Marketing Hub

The steps in the process are fairly simple:

  • Affiliates get a unique link from a retailer or other platform
  • Customers click the link, which is counted as your referral
  • If the click results in a sale, the purchase is recorded and confirmed by the store
  • Enjoy your commission!

The links can be shared on other websites, social media, blogs, or other platforms. Anyone who listens to popular podcasts will be familiar with the concept - every time you hear your podcast host say, “ Use promo code…,” they are engaging in affiliate marketing. 

It doesn’t even necessarily have to result in a sale - affiliates can be paid for people that sign up for trials, leads, or just the clicks themselves. 

As an affiliate, your risk is quite low - all you have to do is put the link up on your site, blog, or anywhere else you can drive traffic. The only real risk you have is in terms of opportunity cost: is the link you are showing the best one available? Is there another product that might get you more commission? Other than that, it costs nothing to be an affiliate. You don’t have to worry about making the product, shipping it, dealing with customer complaints, creating promotional offers, negotiating with suppliers, or anything else that actual sellers have to deal with, you just have to ensure your traffic is decent enough to get you some passive income. 

While it is easy to be an affiliate, you have virtually no control over how the program is run or how it is managed. It doesn’t really matter if you’re making a killing and getting a lot of people through to a company’s site, you still play by the rules that they set. 

Affiliate marketing is particularly useful for people who are in the early stages of setting up a new site and have not quite figured out how to monetize it despite having built up decent traffic. It’s also incredibly flexible - since it is mostly passive income and there is no downside for the merchant company, you have complete freedom over how much time and effort you put in, as well as where you do it from - the internet is global, after all. As with most things, of course, the more you put into it, the more you’ll get out of it.  

As a sector, retail typically gets the most revenue in the industry, followed by telecom and media, then travel and leisure. 

affiliate market revenue (by sector)
via Influencer Marketing Hub

How to get started

A lot of the time, if you’re getting into affiliate marketing it’s because you already have an existing platform from which to advertise products. That’s not always the case, though - you could just be looking to get into affiliate marketing for its own sake, but where do you start? 

Firstly, it’s important to keep in mind that if you are getting into it explicitly to make money as an affiliate seller, then you shouldn’t just expect the revenue you make to be passive - you’re going to have to work hard for it and it will take time. 

That said, let’s go through how you can get involved from scratch.

  • Pick your lane
    This is the first thing you need to think about: what kind of content are you going to create? Unless you are a well-known person whose opinions on a wide range of subjects would attract attention because of who you are, chances are you’re going to have to stake out a specific or specialized subject.
    You could take inspiration from anything: it could be a hobby, an interest of some kind, or some other topic that you have some form of specialized knowledge about. Travel? Food? Science? Finance? Fashion? Sports? Entertainment? Politics? History? Tech? All good choices!
    Whatever you end up picking, you must care about it enough to stick with it for the long-haul, because that’s exactly what this project is going to be, a long-term and consistent commitment.
    Also, consider the fact that some topics attract a broader audience and have a larger range of potential products than others. Astronomy, for example, which is an extremely interesting topic, has a more limited range of revenue potential than something like sports. You also want to consider any startup costs involved in the content you want to put out - are you going to be posting tutorials about producing electronic music and don’t already have the necessary equipment? You’ll need to take that into account.
  • Choose a program
    Amazon Associates is by far the largest affiliate network in the world, with a market share of 46.83%, according to Datanyze.
    By comparison, no other affiliate network has a market share in the double digits.
    After Amazon, the largest programs are:

- CJ (7.56%)

- Rakuten affiliate network (7.23%)

- ShareASale (6.97%)

- Awin (5.53%)

- Skimlinks (3.47%) 

top competitors of Amazon ssociates
via Datanyze

Each has its pros and cons, which typically revolve around their respective commission rates and what they pay commission on. Some programs might not pay that much for each sale, but then do pay out smaller amounts per click, meaning you can still make money even if shoppers don’t convert.
Pay attention to what kind of payment structure each program has. Flat rates are the most common, with Influencer Marketing Hub showing that 48.9% go that route, while 42.4% opt for a percentage of the sale, while product-level payments and tiered incentives are far less common. 


Average eCommerce affiliate network commission rates
via Influencer Marketing Hub


You should also think of these as investments - don’t let any one program make up too big a chunk of your affiliate revenue stream, let alone the entire thing. Affiliate programs are mostly free to sign up for (there’s no cost to them, after all), so spread yourself around and see which one works best and pays out most. This also protects your downside in case one of them decides to cut commission rates, as Amazon did twice in the past two years.

  • Choose your channel
    Where you end up setting up your operation will depend partly on the products you are linking to - not all products are compatible with all channels.
    For simple products that don’t require much explanation, like shoes, furniture, or plants, you can choose short-form or image-based platforms like TikTok, Instagram, or Pinterest. If, on the other hand, it’s a more complex product like an advanced telescope, piece of software, or smart home equipment, then you might have better luck through longer-form channels where you could provide explainers and tutorials.
    Each platform has its advantages, but also its downsides - Instagram is great for pictures, but not ideal for search. YouTube is the most popular video platform in the world, but that also makes it massively competitive and will make it far more difficult for you to grow an audience. Similarly, TikTok is great for informal content creation that does not need a huge amount of production value, but the competition is similarly intense and it is difficult to direct people to clickable links. Something like LinkedIn will reach audiences effectively, but only if you’re going after a B2B segment.
    You also have to consider the costs associated with different platforms. Social media is free, but if you’re going for a text-heavy approach like a blog, you might have to pay a monthly hosting fee. The fee might not be too big - you have to spend some money to make money, after all - but depending on your situation, you might not be in the position to. Blogging is still a massively popular route, however, with over a quarter of brands using bloggers in their affiliate marketing campaigns, according to Influencer Marketing Hub.
    Another risk of going to the social media route, even though the costs are low, is that all it takes is one hack or one unlucky report and you can lose your entire audience and will have to start over (this is another reason email lists are important - more on that below). Algorithms don’t do you any favors either - remember that social media sites make their money from advertising, so they will try to funnel you towards buying ads.
    If you do have a budget, you can advertise across different media, including over-the-top, to drive traffic.
    Ideally, of course, you’ll be employing a multi-channel strategy and not relying on any one of them individually. 
  • Choose your products
    As you can read more about further down, there should be a strong link between the theme of your content and the product that you’re advertising.
    If you do already have an audience, one really great way to figure out what to sell is to listen to your audience. Who are they? What is it they want? What are they likely to buy? You have to find a gap in the market to grow the audience in the first place, so you don’t have to do it again to find a product - just take their lead!
    Whatever it is you sell, do make sure that you actually know the product you’re advertising. Don’t just hawk some random stuff that you know nothing about because your audience will see right through that, especially if they know you well enough (which is what you’re going for!).
    Do your research, and make sure the product is of a good enough quality and useful to your viewership. The more you know about it the better you will be able to sell it.
    To the extent that it makes sense for your product, take advantage of seasonal spikes in demand. People spend more money on the holidays - Christmas, Mother’s Day, Black Friday, Valentine’s Day, etc. -  and there’s no reason why you shouldn’t get in on that action. 
  • Grow and interact with your audience
    Now comes the hard part - you cultivate a base of followers that will be exposed to your affiliate offerings, you’ll have to be consistent about your content, make your channel attractive, and maintain your audience’s trust (all of which are explained further below in the How to maximize affiliate income section).
    One thing that will always be true about the internet is that if your audience has some way to interact with you, for example through a comment section or a chat function, they will do so. Responding and interacting is always a good idea - it will strengthen their bond and open up their receptiveness to your suggestions. It also builds momentum - if they see you interacting with others, they will reach out more and more. 

Affiliate marketing on Amazon

Amazon Associates is the most prolific affiliate program in the world, and it makes it easy for people to use. 

Given that you just need to get people to click, being an Affiliate can become a pretty lucrative side gig. Amazon has fixed commissions in place, which depend on what kind of product you’re linking to with a rough breakdown below:  

  • 20%: Amazon Games
  • 10%: Luxury beauty
  • 5%: Music (physical and digital), Digital videos
  • 4.5%: Kitchen products, physical books, automotive parts
  • 4%: Amazon devices, shoes, handbags, accessories, office products, and other miscellaneous products. 
  • 3%: home and home improvement goods, beauty products, business, baby products, gardening products, watches, jewelry, luggage, outdoors, musical instruments, pet products, headphones, furniture, sports, business, and industrial supplies
  • 2.5%: PC and components, DVDs and Blu-Ray
  • 2%: Digital video games and televisions
  • 1%: health and personal care, Amazon Fresh, groceries, physical video games, game consoles
  • No commission: Alcohol, digital Kindle books, gift cards, subscription-based services (though you can get one-off bounty payments for getting people signed up to Amazon subscriptions)

Depending on any promotional offers in place, the commission rates could go up, typically by a percentage point or two. 

How to maximize affiliate income

  • Stick to a topic
    When you’re picking which products to advertise, the single most important factor is how relevant it is to the audience that you’ve already cultivated a relationship with. If your website is related to music production, it’s probably not the best idea to only have affiliate links to hiking equipment: Turntables, speakers, and vinyl records - good. Boots, thick socks, tents - probably not as good.
    This might be a by-product of writing about a theme constantly anyways, but make sure you keep up with trends in your area of focus. Keeping up with the latest movements and hot topics in the space won’t just attract people to your content, but also give you more and better ideas of products to sell.
  • Keep up the content
    Affiliate links are only useful if there is enough traffic to keep people clicking on them, and the only way to maintain consistent traffic is by putting up consistent traffic. It’s not only about quantity, but also quality - there’s no point having loads of sub-par content. Keep it interesting, keep it fresh, keep it relevant, and keep it constant.
    Be mindful that different visitors to your channel will be at different stages of their buying journey - some may already be aware of the products you’re selling, or may have already identified a need they have for something similar, while others have neither heard nor considered that they want something. It is your job not just to provide the link, but to create the funnel itself. Make them consider the need, make them aware of a potential solution, and give them the means by which to choose your product.
    In practice, this can mean producing content such as:
    Product reviews:
    We’ve all seen reviews before - is a product good or bad, and why? Obviously, it would be best if you only provide links to products you find to be good (this is not the same as making the review good just so you can sell it!)
    Tutorials:
    Not all products are simple. Teach your readers/viewers!
    Comparison piece:
    Kind of like a review, but with multiple products. Which are the best ones between them? What are the pros and cons for the varying needs that people may have?
    and create tutorials - which are highly effective because most online shoppers look for.
    Gift lists:
    If holidays are just around the corner, people will be looking for things to buy. Even if there’s no seasonal event, people have birthdays every day!
    Most shoppers look for things like reviews and tutorials before they make purchases anyways, so you’ll be positioning yourself well by providing them to create demand in the first place. Whichever you choose, just make sure you disclose the fact that you’re getting a cut of the sale.
     
  • Make your channel attractive
    This should be the case regardless of whether you’re trying to make affiliate money, but it’s worth repeating anyway. If you have a website but not the budget for a designer, it is still definitely worth looking at website design tutorials. Better yet, set up your site through a platform that allows for a lot of customization and creative input. All things being equal, people are just more likely to spend more time on sites that look better and are easier to navigate.
    Make plenty of use of features like charts, banners, comparison tables, and even popups. Make them visually striking and easy to understand - don’t make people work for the information.
    Keep in mind that your competitor affiliates will be largely operating under the same rules that the company sets for you, so you need to differentiate yourself. 
  • Don’t lose their trust
    Much of your success as an affiliate marketer will depend on how much your audience trusts you. It’s not too different, in that way, from celebrity endorsements. Does this person actually believe in this product? Do they use it themselves? Does their word mean anything or are they just trying to make money off me? How likely are they to peddle an inferior product just to make a profit at my expense? Have past endorsements been for quality products? If your reputation suffers, so will your referrals.
    This is especially true when it comes to giving your review of the product you’re trying to push - if people don’t believe you, it can actually be counter-productive to say anything about it.
    Keeping their trust also means being up-front with them about the fact that you’re advertising something. You need to tell them that you’re taking part in affiliate marketing. This is not necessarily a bad thing, however, as you can make it work in your favor by explaining to them why you’ve chosen to advertise this product. You can create a narrative that not only helps them overlook the fact that you’re getting a cut of the profits but also makes them more likely to buy it.
  • Showcase the link
    Give your link pride of place on the page - don’t bury it where it won’t be found. You can even create storefronts with images and marketing copy for the product, showcasing it for visitors to see and driving them to click.
    The more you tell people about the product, and the easier you make it for them to understand, the higher your chances of converting sales will be. 
  • Link localizer
    To make sure the right potential customers are going to the right sites. If you’re linking to Amazon, for example, use link localizers to make sure that UK-based customers get directed to the UK store, US-based customers to the US site, and so on. 
  • Be patient and experiment
    It takes time to build up a good affiliate revenue stream. Unless you already have a huge audience, don’t assume that you will just get the link, post it and put your feet up to watch the money roll in. Just as with building any kind of following, you need to try different approaches, different channels, different tones of voice, and different types of content to see what your audience is most drawn to. 
  • Use email
    Email is among the highest-converting marketing channels out there. Even if you’re not doing any affiliate work, building an email list is a great way to cultivate and form a stronger connection with your audience. Depending on the type of content you put out, your emails can contain anything from weekly highlights, newsletters, updates, entire blog posts, personal stories, or other content that you can also use as a vessel for spreading your affiliate link. Don’t include links with every email, though, or people will start to distrust the rest of your content as just a vehicle for your sales.
  • Use promotions
    This will also depend on the nature of your content and on how much effort you want to put into pushing your affiliate revenue up. If you have any assets that you can offer users as added value when they make a purchase, you can communicate it as a promotion or bonus for a converted sale. This could be anything from a free trial to a webinar series, a book you’ve written, a ticket to a live show, a voucher for lessons, or some piece of merchandise. If you can’t guarantee a value-add asset with each conversion, you can always have a “potential” good such as a place in a raffle to receive something of actual value.
    Additionally, the merchants themselves also tend to provide a wide range of promotions that their affiliates can use to convert more people. To a shopper, there’s nothing sweeter than getting a discount on something - sending them discount codes will make them much likelier to follow through with the purchase.
  • Measure everything
    Don’t forget that this is a business. Just as you keep tabs on how much your audience is growing, and just as you would track any other marketing effort, you need to measure your progress as an affiliate. What proportion of your daily, weekly, or monthly visitors end up clicking on your product links? How many of those that click end up converting?
    You can either track these yourself by including a SubID parameter to your links, or you could even use an automation tool to do it for you (though that would carry a small cost but free you up to focus on other things).
    With these stats in hand, you can test and calibrate your approach to see how you can maximize not only the overall traffic to your site but your ability to funnel your visitors to your revenue streams. 

Increasingly, brands are looking for partners, not just affiliates. The difference is subtle but important - they want someone they can team up with and be proud to call a partner, not just someone who can help them spread the word. If you can grow your reach, demonstrate good follow-through, and maintain the trust of your audience, you can make that jump and reap the benefits. 

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About the author
Kennedell Amoo-Gottfried
Kennedell is Head of Account Management, Onboarding, and Operations at Threecolts. He began working in ecommerce in 2020 with OldStreetMedia, where he was General Manager. While getting his MBA from London Business School, he worked as part of Manchester United’s media strategy team and Twitter’s Global Content Partnerships team. He also worked for several years in finance departments for the oil & gas industry before turning his talents to the ecommerce sector.