What Is Affiliate Marketing [Simply Explained + How To Start]

Affiliate Marketing Definition and Example

In simple terms, affiliate marketing an ecommerce business model built on revenue sharing. It is selling something on behalf of someone else and earning a commission for it. If I have a product that I want to sell more of, I can start my own affiliate marketing program.

By inviting people to become my affiliate partner, they’ll promote products that I offer. Whenever someone visits their site and clicks on their unique affiliate link, then buys my product – I’d pay a commission to that affiliate marketer.

For small businesses, an affiliate program is a cost-effective way to build a sales team. Since money doesn’t need to be paid unless a conversion is made, it doesn’t cost the business as much as hiring a full-time sales team would.

If I wanted to make money as an affiliate marketer, I would build a website around a niche, then create content around it to build traffic. Then, I’d sign up for affiliate programs and include links to products I promote. Any time someone clicked my link and made a purchase, I’d earn money.

According to the Oxford Languages, affiliate marketing is, “a marketing arrangement by which an online retailer pays commission to an external website for traffic or sales generated from its referrals.”

An iconic example of a successful affiliate marketing website is This is Why I’m Broke. 

It’s an Amazon affiliate site full of fun, quirky, things to spend money on. It started on Reddit from the Futurama “Shut Up and Take My Money” meme. What began as a curated list of products to share on a subreddit grew into something massively popular. 

The awesome domain name and traction from Reddit gave them what they needed to successfully build a site based on stuff that people can buy but don’t really need. And now, they’ve got so much traffic, most people don’t realize they started on Reddit. 

Since people can start browsing products right away, there’s plenty of income potential. The press they get, along with the sheer volume of content on the site helps them rank well in the search engines, too. 

A twist on the affiliate marketing model can be seen with websites like Swagbucks and Rakuten. In exchange for making your purchases through their sites (affiliate links!), you’ll earn rewards. Swagbucks rewards you with a currency that you can redeem for gift cards. Rakuten gives you a percentage of your order back in cash and sends a check every quarter.How Affiliate Marketing Works

There are several pieces to the affiliate marketing puzzle.The Retailer AKA Merchant

The merchant is the person or business selling the product or service. They are the entity that created the product and needs to sell it. The advertiser can be anyone – from a blogger to a major corporation. This is the party the affiliate marketer works with. The Affiliate Marketer AKA Publisher

This is where entrepreneurs who want to make money selling other people’s products and services come into play. You build a website, either as a personal brand or specific to a niche. Then, you use that website to draw in and market to your target audience. 

You use the space to persuade your audience to learn more about and hopefully purchase, the products you’re promoting. You can use text links, banner ads, text ads, etc. to promote the product.The Affiliate Network

This is optional, yet a common piece of the equation. An affiliate network is an intermediary between the merchant and the affiliate marketer. Generally, merchants can offer their products on it, and the affiliates can choose to participate in one or more programs of their choice. The affiliate network also manages the affiliate signup and commission process, so there’s less for the merchant to have to handle. Businesses use networks as affiliate managers so they don’t have to focus on running the affiliate program.Share a Sale

This platform handles affiliate programs for more than 4,500 merchants. It’s great for the solo entrepreneur who wants to manage multiple programs from a single dashboard. Major brands that use Share a Sale to manage their affiliate merchants include:NFL ShopWayfairCricutUniversal YumsButcher BoxMabel’s Labels

You can find physical and digital products to promote here. Your commission rate and cookie expiration depend on the specific merchant you sign up with. The platform has a minimum payout of $50.CJ Affiliate (Formerly Commission Junction)

Like Share a Sale, CJ Affiliate brings a variety of affiliate programs under a single dashboard. Though it’s fewer programs than Share a Sale – there are still more than 2,000 to choose from.

Merchants using CJ Affiliate include:Barnes & NobleOffice DepotOverstockPricelineJ. CrewIHG Hotel Group (Holiday Inn & Holiday Inn Express, Hotel Indigo, Crowne Plaza, and 12 other hotel brands)Amazon Associates

This program is exclusive to products sold on Amazon. It includes products sold by third parties. The amount the affiliate earns is a flat rate depending on the item’s product category. It ranges from 1% to 10%.

What’s really great about this program is that you earn a commission on everything that someone buys, (within the cookie duration) whether it’s the product you linked them to or not. If it wasn’t already in their cart, you’re good to go.

For example, let’s say you linked to a non-stick pan for $15. But, the person ended up buying a $500 TV on sale for a lightning deal later that day, instead. You’d get the commission on the TV.

Cookies last for 24 hours, but if someone directly adds a product to their carts, you’ll get a 90-day cookie for that specific product. The minimum payout is $10.Clickbank

Clickbank is a network primarily focused on digital affiliate products. Though it is focused on smaller brands, there are some physical products available, too. The great thing about Clickbank is you’ll find a lot of niche products that you won’t find anywhere else. For certain niches, this can be an advantage.

The average commission rate depends on the merchant you sign up with. Some programs offer a flat rate, while others offer a percentage.  The cookie duration also varies depending on the merchant you sign up with but ends to be around 60 days. There is a $10 minimum payout.The Consumer

These are the website visitors that use your website to learn more about your niche. When they read your product reviews and comparisons, for instance, they move forward in their purchasing decision. 

Ultimately, when the customer is ready to buy, they’ll do through your link. Part of the purchase price covers your affiliate commission.

Without the consumer, there is no revenue to share. 

Affiliate marketers are becoming increasingly transparent about the process and letting customers know where they fit in. According to the U.S. Federal Trade Commission (FTC), if you may receive compensation in exchange for promoting a product or service, you need to disclose this information to consumers. 

Consumers, and people in general, are more likely to distrust a paid endorsement. You’re more likely to believe what someone has to say about a product if they’re doing it because they like the product – not because they’re getting paid to promote it. According to the FTC, if you get paid to promote a product but don’t make that clear to consumers, you’re deceiving them. 

What do you disclose and when?The fact that you receive some kind of compensation (a commission on sales, free product for the review, etc.) Your relationship with the company. If the company paid for the ad, or you own stock in the company, disclose it.Disclose early, and often. You must disclose every time, and no one is exempt. Even if you post one sponsored tweet on your social media, you’re subject to disclosure rules.

Bloggers and social media influencers often include a disclosure statement page in the footer of their website to cover their bases. However, if it’s not prominently displayed, it may not be enough. Ideally, you should include an affiliate disclosure statement in every post. There are some unscrupulous affiliates out there that do not disclose anything, ever. That can lead to legal trouble.Why Become an Affiliate Marketer

Many solo entrepreneurs decide to become affiliate partners with businesses so they can earn a passive income. It’s something you can do from home, on your own schedule. You won’t become rich overnight, but with consistent effort, you can build a steady income. 

The affiliate marketing model is scalable. Once you get one website up and running, you can build out more properties in other niches. The more properties you have, the more revenue streams you can earn from. Getting Paid