Many bloggers, podcasters will happily use affiliate links to make some money. I don’t, because it puts 100% of the risk onto your shoulders and none on the advertiser.
Here’s how affiliate advertising works:
- You sign up as an affiliate with the advertiser.
- You post special links to products on the advertiser’s site or to the advertisers’ store.
- Every time people follow the link and spend money there, you receive a fraction of that money.
Here’s a concrete example:
- You sign up with Amazon partnernet.
- You post a link to the Amazon blog on your homepage.
- If someone clicks the link and then shops on Amazon, you receive a percentage of that sale.
The height of that percentage depends on a few parameters (type of product, amount of sales, etc). As of writing this, it’s between 4% and 8.5% at Amazon – though I guess the majority of people are on the lower side of that scale.
Traditional advertising
Here is how a lot of traditional advertising used to work and still does in many cases: the advertiser and the media outlet (blog, podcast, etc.) negotiate the sponsorship conditions, usually the result is a CPM – that’s the price per 1000 ad impressions. So for every x people that you tell about a product or company, you get y amount of money. It’s usually a linear relationship.
To earn money with this approach, you have an incentive to use your platform to bring the ad to the attention of as many people as you can. The more people you reach, the more you make. It’s a SHARED RISK between you and the advertiser. Your risk is to antagonize your audience. They might feel that you’re too salesy. The advertisers’ risk is the loss of money, as there’s a chance they don’t make their money back during the campaign.
Or in short: You sell your visibility in exchange of money.
Affiliate advertising
In affiliate advertising, you still have the same incentive: to use your platform to present the ad to as many people as possible. BUT… you will ONLY get paid, if your audience spends money with the advertiser. And this is where things don’t pan out for me as the risk distribution goes down the drain.
WITH AFFILIATE MARKETING YOU CARRY THE FULL RISK.
Your now carry two risks: 1) the risk to antagonize your audience and 2) the risk to not make any money. In turn, the advertiser now carries ZERO RISK. Actually, the advertiser gets the one thing for free that they want most: exposure. Their risk of losing money is ZERO.
| Traditional advertising
(distributed risk) |
Affiliate advertising
(100% risk on your side) |
|
| Your risk | Antagonize your audience. | Antagonize your audience.
No money earned. |
| Advertiser’s risks | Loss of money. | None whatsoever. |
“But, isn’t that the only way for most to earn some money?” Yes, many advertisers won’t give you a sponsorship deal, either because you’re too small or exactly because it would mean they’d have to take part of the risk. It’s much more convenient for them to let you carry the burden alone.
“But don’t you use affiliate links yourself?” Yes, they go to my own products/books. This affects both the risk side as well as the win side of the equation. I lower the risk to antagonize my audience, because now the ad is about something we both are passionate about. I change the win side too. Even though the advertiser still gets free advertising and I still have no guarantee to make money, I use this space to advertise my own product.
“Isn’t it a bit shortsighted to only see this from the money angle?” There are clearly more things to it than money. The perception of status is one of those. Partnering with “big brand company x” might reflect on you in a good way, your status with your audience might rise. I still don’t think that is enough to make up for the risk you’re taking.
In the end, it’s of course your own choice if you want to take the bigger risk in exchange for the possibility (but not guarantee) to make money. I personally see one of my biggest assets (and the one that I could lose easiest) to be the trust of my audience. Lose your integrity and you lost everything. That’s why affiliate marketing is not for me.
PS: By the way, in some areas of affiliate marketing, advertisers further minimize their risk by capping the amount that you can earn for a single sale. Amazon for example caps advertising fees for personal computers (laptops etc.) at $25. Where 4% of a $1500 ASUS gaming laptop would be $60, the actual fee in this case would be $25 or about 1.7%.