LetsTalkSEO.com

Understanding the Pros And Cons of Affiliate Marketing

Ever wonder how to cash upon the traffic on your site? Well, there are a number of ways to do it, however, we will focus on one effective and popular way right now – Affiliate Marketing.

What is Affiliate Marketing?
Affiliate marketing is a method by which you earn from the sales made of some other products through your website. Sometimes you are even paid for the traffic you send to the product’s site from your site. You send traffic to the product’s site and if the transaction is completed, you get an appropriate commission from the sale. If a number of sales are made during a day, both the affiliate and the merchant can make a lot of money.

The benefits of affiliate marketing are that you don’t have to own a store, deal with merchandise or even transactions. There is no investment at all and you can make money just by sending the client to the merchant. The benefits for the merchant are that he doesn’t have to pay the affiliate unless the affiliate brings business to him. It’s a complete win-win situation for both merchant and affiliate.

In 2006, an estimate of US$6.5 billion was earned by the affiliates worldwide as a commission, and the figures are expected to increase each passing year.

Pros of affiliate marketing:

Ease of setting up - To become an affiliate, you just need to choose a product/service, sign up at its affiliate program (you might be asked to fulfill a few formalities) and paste the tracking code on your website. You’ll be making money from all the sales you make through your website from that point onwards.
Minimal marketing skills required – if you don’t belong to a marketing background or are not good at selling to people, you can still earn a lot from affiliate marketing. All you need to do is to concentrate on your real skill i.e. successfully running your website. If SEO (search engine optimization) is what you are good at, you can just concentrate on that and leave the marketing, sales, transaction and even legal issues for the merchant.
No investment - signing up for an affiliate program does not cost you anything and banking upon that program costs you just a little bit of your time and skill. Thus you can be an affiliate without any investments and even move to any other area, if that one doesn’t work out, without any loss.
Multiple areas of income – once you are familiar with the whole affiliate marketing process, you can apply your skills to other areas too. You can apply for as many affiliate programs as you wish and earn from different sources.
Automatic income generation – once you have a successfully running website, you can just relax and watch your bank balance grow automatically on each sale made through your site. You work on your own conditions and work comfortably at home.

Cons of affiliate marketing:

No control over programs – you don’t have any control over the programs offered by the merchant. If the competitors are offering better prices or services, you cannot do anything but wait for the merchant to change the offer. Also, you have the same offer as thousands of other affiliates, which make it difficult for you to stand out.
High competition - one of the pros of affiliate marketing is that it is really easy to sign up for a program, and so is it for everyone else. There are thousands of affiliates for the same program across the globe and the level of competition is really high. You are even competing against high skilled SEOs whose expertise is in generating traffic.
Pay on sale – this is the biggest advantage for the merchant and a disadvantage for the affiliate. The merchant only pays you when you make a sale through your website. This transfers all the marketing risk to you. You may send a lot of traffic to the merchant, but if the merchant loses the sale because of a bad offer, you don’t earn anything too. Thus, you pay for the merchant’s faults.
Middlemen - in affiliate marketing, you also have to pay a share of your revenue to the middlemen, the biggest one being the affiliate network. The affiliate network links the affiliates with the merchant and also provides a number of reporting and tracking tools, but you pay them from the revenue you generate through sales. They also reduce the contact level affiliate has with the merchant.

All the cons above, however, can be resolved by the method of direct partnership. Through direct partnership with the merchant, you contact the merchant directly, cut out the middleman and leave more profit for the affiliate.

How do you go about a direct partnership?
First, you need to choose an area which has a good potential for high returns and less competition. Then jot down a list of merchants in that area and contact the appropriate merchant directly. Most of the merchants will entertain you properly provided you can demonstrate potential traffic and sales level. Suggest a trial run to prove yourself, and once you prove yourself, negotiate with the terms and conditions. If the merchant still turns you down, go to his competition merchant and make the same offer.

A direct partnership brings transparency between you and the merchant. Since you have a close relationship with the merchant, you can also participate actively in changing the offers and services in order to remain competitive.

Thus, affiliate marketing can earn you a handsome living through your website, if implemented properly. You just need to be patience as it takes time for a business to grow and not lose hope if one program doesn’t work out for you.