Income Generation Series: Affiliate Marketing

Overview

Affiliate marketing is based around promoting offers for other merchants.  Offers are found through website affiliate programs or through CPA networks  Affiliate marketers are usually paid on the conversion of an offer.  Conversions can range from email submissions to the actual purchase of the product.  In this business model, the affiliate marketer focuses all his energy on marketing, while the merchant is solely responsible for the product they offer.

The conversion payout varies greatly by the type of offer.  They can range from $1.50 on simple email conversions to over $150 for highly competitive leads.  CPA networks are usually the most consistent source of offers to promote.  Affiliate marketers front the cost of marketing these offers, usually through PPC campaigns.  Campaigns become profitable by generating conversion revenue higher than the cost of traffic.  Many variable can effect the success of a campaign; landing page, demand for offer, cost of traffic, type of traffic, offer payout, the effectiveness of the ads placed.

It can be very difficult to find profitable campaigns.  Potential niches are found through keyword research.  Each campaign requires a great deal of front end testing to determine viability.  The variable are tweaked until the campaign is optimized.  Once a campaign is optimized, daily oversight it required but there is generally minimal maintenence.

Analysis

  • sendimageTime: Affiliate marketing requires a high time commitment to launch a campaign.  Each new campaign will require keyword research, multiple landing pages, ad writing, and PPC campaigns to be setup.
  • Capital:  The capital requirements for affiliate marketing are high.  During the testing phase of setting up a campaign, daily losses are expected.  These losses can continue for sometime before the campaign is optimized to profitable levels.  Once a campaign is deemed profitable, the amount spent on the campaign is greatly increased.  This increase in capital is generally done with credit.
  • Scaling:  The are terrific scaling opportunities with affiliate marketing.  Once a profitable campaign is found and optimized, it generally requires little work.  Campaigns can then be scaled by increasing capital or increasing the number of campaigns running.
  • Outsourcing:  Most of the work required in affiliate marketing cannot be outsourced.  Some of the landing page development can be if a reliable source is found for good content.
  • ROI:  This is highly dependent upon the variables of the campaign.  Profitable campaigns can return 50-1600% ROI on invested capital.

Recommendation

There are significant opportunities within affiliate marketing.  This business model will be incorporated into my business plan due to it’s scalability and high profit potential.  However it will be incorporated in the later stages of my plan, when I begin to work for my corporation full time.  This method is not conducive to outsourcing and will take a full-time effort to properly manage the testing and optimization.

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