1. Introduction to affiliate marketing

I intend to make this a complete and comprehensive training course for people who are completely new to affiliate marketing. If you follow the course step-by-step, you will be guided through the process of developing a successful advertising campaign.

By running traffic to offers, you are essentially starting your own business.  You can either setup your business as a sole proprietor, or limit your liability by creating an LLC, Scorp, or similar business entity.  If you begin to run volume I highly recommend contacting an attorney for guidance.


What is affiliate marketing?

First off, what is affiliate marketing? Affiliate marketing (according to today’s usage) is an internet-based marketing practice in which a business rewards one or more affiliates for each visitor or customer brought about by the affiliate’s marketing efforts.” In short, companies (“advertisers”) that are selling a product or service pay salespeople (“affiliates” or “publishers”) on a per-action basis to generate leads and sales for them. For example, a company like Netflix might pay an affiliate who gets a customer to sign up for a “free dvd rental trial” a set fee, say $20. The affiliate would do this by posting ads online (let’s say, on facebook or yahoo) that entice visitors to signup for the “free dvd rental trial.”

Here’s another example.  A company that sells candles has its own advertising campaign running in local newspapers, magazines, tv ads, and maybe even on the internet.  Basically, the candle company goes to an affiliate network (like BananaAds) and agrees to pay it a certain amount of money (say $5) for each time one of the affiliate network’s publishers (affiliates) send a visitor to the candle company’s website (through a special link) to buy a special candle for $10 (the visitor to the candle website pays $10 to buy the candle).  The publishers create and post ads online (on myspace, facebook, yahoo, etc.) that redirect visitors to the candle company’s website through the special tracking link.  For every candle sold through one of these affiliate links, the candle company pays the affiliate network the $5, and the affiliate network, in turn, pays the affiliate (publisher) $3.  If the publisher only spent $1 on clicks to make that one sale, he makes a $2 profit.  The affiliate network makes $2 for managing the tracking system and the relationships with the publisher and the candle company.  The candle company makes $10 from the customer for selling the candle, but pays the affiliate network $5 for the sale… therefore it makes a net of $5 minus the cost of manufacturing the candle (let’s say $2).  Therefore, the candle company makes a profit of $3.   I know this is getting more complicated than it needs to be, but the point is that everyone in the game is making a profit in the end…. and everyone is better off than before.

How to setup your affiliate marketing business

If you are just getting started you can start out as a sole proprietor, and getting started is as simple as signing up for the affiliate networks and submitting W9s.  The affiliate network will send you a 1099 form at the end of the year that  shows your revenue (income) from the network.  You will track expenses (clicks, business expenses, etc.) and deduct these from your 1099 revenues to find your net income (profit).  This is what you will pay taxes on (it sucks, I know).

If you are more serious (and are generating serious cashflow) you can create either an S-corporation or an LLC (Limited Liability Company). Both are flow-through entities, which means you don’t get taxed twice.  When you are generating significant revenue, this could easily save you tons of money.  Remember that if you create a corporation or an LLC, although you are protecting your personal assets, it does cost something.  You will have to pay fees to the state in which you live (around $1000/year) and most likely need a CPA to do your taxes come April.  Just something to think about.  If affiliate marketing is your main source of income, I  highly reccommend creating a real business around one of these liability-limiting structures.

How do publishers send internet traffic through a tracking link to a company’s website to buy their product?

Basically, there are two ways to do this.  You can pay for it, or do it via free methods.  You can post ads on sites like Yahoo, Bing, Google, Myspace, Facebook, etc. and pay for each click to your ad (PPC – pay per click), or pay per thousand times your ad is shown to visitors (PPM – price per mille (aka thousand)), or pay a very small amount for each time your ad is shown – PPV (pay per view).  Or, if you want to take the free route, you can create a website to drive traffic to (that will have your affiliate links on it) through SEO (search engine optimization).  SEO is basically a way of getting your website to rank high in search engines like google/yahoo for free, so when someone types in a keyword that relates to a product you are trying to sell, your site shows up on the first page in the results.  SEO doesnt require you to try to rank a site in a search engine though… you can get traffic to your website by posting links on other sites like yahoo answers, blogs, forums, etc.  For example, lets say someone asks a question about how to lose weight on yahoo answers, you can post an answer to that person’s question with a link to your diet website that has your affiliate links on it.  Or, if you have collected 100,000 email addresses, you can send an email to all of those people for free with a link to your website in the content of that email.  Basically, you should be able to grasp now that there are literally hundreds of ways to drive traffic to your website (and ultimately your affiliate link), or to your affiliate link directly.

What is an affiliate network?

An affiliate network manages the relationship between companies selling a product (“advertisers”) and internet marketers (“affiliates”  or “publishers”) who post ads on the internet with special tracking links to sell those products for a commission.  The affiliate network   collects money from the advertiser, keeps some of it, and gives the rest to the publisher who spent money to direct traffic to the advertiser’s website so that some of that traffic (customers) would buy the product.  In a nutshell,  the affiliate network is basically an  advertising agency.

A publisher can sign up to join an affiliate network, and, once approved, can view hundreds of different products or services to promote.  In one place, they can find out how much they can get paid to generate each sale or lead.  All they need to do is take their affiliate link (which will track that they were the person to send the visitor to the company’s page) and use it in their ads on the internet.

The affiliate network makes a little bit of money for each sale/lead that is generated.  Since thousands upon thousands of leads are  generated daily, the affiliate network makes a lot of money for itself.

Why don’t affiliates work directly with advertisers?  Why go through an Affiliate Network?

Affiliate Networks take advantage of the ability to get higher commission rates from advertisers due to their high volume, which, in turn they pass down to their publishers. If a publisher works directly with an advertiser to promote its product, he/she will usually get paid a lower commission because they may not be able to generate the required volume to negotiate higher payouts.  An Affiliate Network, on the other hand, has thousands of publishers promoting a limited number of products, so volume can be scaled and used for negotiating higher payouts.

In addition, advertisers don’t want to deal with thousands of affiliates.  It is much easier for them to have the affiliate network manage the thousands of publishers who may be promoting their product.

Furthermore, an advertiser can go out of business, lose its merchant account (ability to take/process payments via credit cards), or decide to not pay for leads and sales generated.  If an affiliate was running directly with an advertiser and this happened, the affiliate could possibly lose massive amounts of money.  When an affiliate goes through an Affiliate Network, this risk is greatly reduced.  An Affiliate Network can almost always be trusted for payment on legitimate sales and leads, not only because it is legally  obligated to make such payments, but also because it wants to protect its reputation and attract quality publishers.  Only work with networks that you know have a good and solid reputation.

How does an Affiliate Network operate?

When leads or sales are generated (“actions”) the Affiliate Network collects money from the advertiser, keeps some of it, and pays out the rest to the publisher, who spent money to direct traffic to the advertiser’s website so that some of that traffic (customers) would buy the product. In this way, the affiliate network acts as an advertising agency.

Who’s Who At An Affiliate Network?

Like any company, there are certain business functions in place at an Affiliate Network.  First off, you have someone in charge of the company, usually a CEO, who manages all aspects of the business — from hiring employees, to basic logistics.  One of the most  important roles of the CEO, however, involves cash flow risk management. Next you have an accounting department, which oversees AP/AR (Accounts Payable/Accounts Receivable).  AP includes the publishers who are paid commission checks for generating sales.  Most publishers are paid on a monthly basis, but many high volume affiliates are paid weekly.  AR involves collecting money from the advertisers who owe the Affiliate Network for all of the sales and leads its publishers have generated.  Although it varies, advertisers typically pay the affiliate network on a biweekly or monthly basis.  This can create an enormous cash flow problem for the affiliate network if it is paying out its high volume affiliates on a weekly basis, and only gets paid monthly.  Sometimes an advertiser will refuse to pay (referred to as non-payment), and the Affiliate Network is still stuck paying the affiliates who generated those leads.  This is one reason affiliates go through an affiliate network and don’t usually drive traffic directly with advertisers.

The real face of the Affiliate Network, however, are the Affiliate Managers (AMs) and the Business Development Managers.  The AMs deal directly with publishers by managing their accounts and advising them on which products to promote. AMs manage hundreds, if not thousands of business relationships. The Business Development Manager’s role involves working one-on-one with advertisers to acquire more products (offers) and also negotiate higher payouts.

What can a publisher expect when signing up with an Affiliate Network?  How can a publisher get the most out of an Affiliate Network?

First of all, a publisher must complete an application and be interviewed by an Affiliate Manager before being accepted as a publisher into a network.  The typical application includes basic information such as contact info, payment info, and general questions about how you plan to promote affiliate offers online.  Affiliate networks can receive hundreds of applications each day, so it is a good idea to contact the network via email/phone to ask them how you can have your application approved more quickly.  Typically, you can call in, speak with an Affiliate Manager (AM), and you’ll have your application approved within 10 minutes.  The AM might ask you questions about how you heard about the Affiliate Network, what type of traffic you run, and you also might be asked to show some of your websites and advertisements to prove that you know what you are doing.  Affiliate Networks receive a ton of fraudulent applications (from people overseas who commit illegal fraud by filling out their own affiliate offers to make a few extra bucks), so they will probably really grill you and ask you a lot of questions to make sure you are legitimate. Many times, overseas scam artists will pay American actors to call into the network and conduct the interview with their legitimate sounding American accents.  This is just one of the reasons you will be grilled and asked a lot of questions during your interview.

Your relationship with the AM is key in determining your success as a network publisher.  In fact, your online business will not grow without developing relationships across the board – whether it be with other publishers, web designers, graphic designers, and other industry players whose relationships will be very beneficial when you have questions or need an expert’s opinion on something.  Since the AM has control over which offers you will be able to view and run campaigns with, you will want to prove yourself to him/her as an honest/trustworthy person who wants to learn the business and drive traffic in an ethical manner.  Once this rapport has been built and you begin your first campaign with the network, you can begin to ask for payout increases (called “bumps” as an industry slang term) on offers to help cover your testing costs.  Once you begin to drive traffic and generate more and more volume, you can ask for another payout increase on the offer you are running.  Keep in mind that the higher the payout you get, the higher you can bid on your PPC/CPM/PPV/CPV campaigns, and you will ultimately put your competition to rest since you can outbid them on traffic.

Most likely, your Affiliate Manager will be available via phone, email, and via an instant messenger such as AIM or Gtalk.  Since he/she is most likely to be online all day long on instant messenger, this is usually the best way to contact them.  It’s an easy form of communication in this business because the AM can manage multiple conversations at one time, and the publisher can share links, get help on code, among other things – effectively collaborating in real time witth the AM.   If you have multiple chat clients, you can use a program such as Digsby (Windows), Pidgin (Linux), or Adium (Mac) to chat on multiple platforms at the same time (Facebook chat, AIM, Gtalk, etc.).  You should use your chat tool to ask your AM questions on new offers, EPC/conversion data, tips on traffic sources, tools, and other informative information.  Normally, AMs are paid a base salary plus commission based on your sales, so the AM is dedicated to your success and wants you to make money driving traffic to offers.  If you don’t make money, neither do they – so they absolutely have a vested interest in your success, and you should utilize this relationship to the max.

What are some tips for getting approved into affiliate networks?

Provide only truthful, complete and accurate information that represents yourself and your intended promotional method.  Don’t overstate anything on your application, and under-impress during the interview.

Follow the application instructions carefully and complete all fields.

If you work with other affiliate networks, know the names of your AMs, the offers you have been promoting, and be able to explain how you were running traffic to the offer.

Have a plan in mind for what type of offers you are looking to promote.  Tell the AM that you are looking for ____ type offers in ___ vertical.

When and how do I get paid?

Most affiliate networks work on a tiered program and pay out more frequently if you drive more revenue/volume.  Most networks pay at the latest Net 30, which means you are paid 30 days after the end of the previous month for the previous months commissions.  For example, if you made $1000 in commissions in August, you will be paid that $1000 on September 30.  Some networks pay Net 15, which means your August commissions would be paid September 15th.  Once you start to drive large volumes of traffic (in excess of $1000 per week, for example), you may be paid on a weekly basis.  Every network is different.  The industry standard for payment is usually a regular check via snail mail, or a wire payment directly into your bank account (this usually incurs a fee of around $10).

How many networks should I join?

In short, you should join as many as you can, especially all of the large, major networks.  Although most of these networks have hundreds of offers each, sometimes one network will have 3 or 4 great offers that another network does not have.  Finding these ‘diamond in the rough’ offers can mean the difference between making $100 a day and making $5000 a day.  Plus, the more networks you join, the more AMs you will have to talk to and learn from.

Once I’m approved into an affiliate network, whats next?
Once you get approved to an affiliate network, introduce yourself to your AM.  Try to find out what offers are the best for beginners, where to buy your traffic, what to set your bid prices at, and so on and so forth.  The AMs want your business, so they will most likely share a good deal information with you so that you can run a successful campaign. One of the first things you should do when you decide on an offer to run is to ask your AM for a payout “bump.”  In essence, you are asking for more money per lead/sale you generate on an offer.  For example, if an offer pays $30/sale, ask if you can have $35/sale.  You can tell your AM that you would like this increased payout so that you can cover your “testing costs” or something similar.  Many times the AM (including myself) won’t give a significant bump until a decent amount of leads are being generated on a regular basis.

As a new affiliate, never fill out your own leads.  Don’t send incentivized traffic (i.e. telling your visitors they will get a “free ipod” or something else if they complete the offer you are promoting) to offers that don’t allow it.  On any offer you run with the network, ask  your AM what is allowed, and what is not allowed (usually you can find this information in the description of the offer), but it doesn’t hurt to double check.

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