What Is Affiliate Marketing and How Does It Work? (Ultimate Guide)

What Is Affiliate Marketing And How Does It Work Featured Image

You’ve been on the lookout for legit MMO (Make Money Online) opportunities for a while now.

Maybe you’ve tried a couple but to no avail…

Very recently someone introduced you to affiliate marketing.

The concept surely caught your attention but you’re still not quite sure what affiliate marketing is, how it works, and whether you should give it a go or not.

If so, then you couldn’t have landed in a better place…

In this article, I’m going to fully cover every single question you might have about affiliate marketing, such as:

  • What is Affiliate Marketing?
  • How Does Affiliate Marketing Work?
  • How Do I Get Started With Affiliate Marketing?
  • & many more

Without further ado, let’s get started!

Table of Contents

What Is Affiliate Marketing?

Affiliate marketing is an online monetization model that involves promoting already existing products or services on one or more online marketing channels in exchange for receiving a portion of the profit, or else a commission, for each sale generated via your own unique affiliate links.

In layman’s terms, affiliate marketing can be leveraged towards making money online by selling products and/or services created and distributed by another company or individual.

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The History of Affiliate Marketing

Affiliate marketing was pioneered in 1989 by American entrepreneur and inventor William J. Tobin as a means of leveraging independent digital marketers towards promoting his small flower shop, “PC Flowers & Gifts”, on the internet in exchange for commissions on a per-sale basis.

By 1995, PC Flowers & Gifts was generating over $6 million in online sales per year via 2500+ affiliates it had partnered with. In 2000, Tobin was rightfully granted a U.S. patent for affiliate marketing.

In the meantime, affiliate marketing had started being utilized by dozens of other companies, such as Amazon, which was actually one of the first brands to launch an affiliate program as early as 1996.

A few years down the road, Amazon Associates became, and still is, the most popular and sought-after affiliate program in the world. According to research, by 2013, affiliate marketing was responsible for over 40% of Amazon’s total global revenue. As such, it’s perfectly safe to assume that if it had never launched its affiliate program, Amazon wouldn’t be the colossus it is today.

Over the next few years, affiliate marketing’s popularity skyrocketed.

As we speak, affiliate marketing is being leveraged by over 80% of all US-based merchants towards raising brand awareness as well as boosting conversions, purchases, and customer engagement.

Some of the largest companies that are currently capitalizing on affiliate marketing include, but are not limited to:

  • Apple
  • Google
  • Microsoft
  • Gearbest
  • eBay
  • Etsy
  • Walmart
  • Samsung
  • & more

During the last decade, the affiliate marketing industry is expanding at an average rate of 10% per year and it’s expected to have surpassed the $30 billion mark by 2025.

How Does Affiliate Marketing Work?

Affiliate marketing’s workings consist of 3 core parties…

  1. Merchant
  2. Consumer
  3. and Marketer

1. Merchant:

The merchant (aka “advertiser”, “retailer”, or “vendor”) is any entity running an affiliate program that rewards individuals for promoting their products/services to potential paying customers.

An affiliate merchant could be as big as an electronics company like Samsung or as small as a solopreneur like Matt Diggity who sells a single affiliate marketing course called The Affiliate Lab.

Upon joining a merchant’s affiliate program, you’ll get your hands on a unique affiliate link which purpose is to redirect whoever clicks on it to the merchant’s online store as well as enable the merchant to track and credit each sale you generate accordingly.

2. Consumer:

Consumers are individuals that might be interested in purchasing a merchant’s products/services.

No consumers = no sales = no commissions.

This is exactly where you, the affiliate marketer, come in…

3. Marketer:

Your job as an affiliate marketer is as straightforward as bringing merchants and consumers together…

This can be achieved through a variety of online marketing channels, such as:

  • Social Media
  • Forums
  • Paid Advertising
  • Email
  • YouTube
  • Blogging
  • Search Engine Optimization (SEO)
  • & more

When a consumer you referred to a merchant you’re affiliated with makes a purchase, the merchant will pay you a commission which is usually calculated as a percentage of the total amount of money paid by the consumer.

Commission rates can range anywhere between 1% and 75% depending on the merchant and the type of product/service promoted.

Here’s an in-depth overview of how merchants, consumers, and affiliate marketers come together to shape the affiliate marketing process…

  1. You sign up to a merchant’s affiliate program
  2. The merchant gives you a unique affiliate link
  3. You start sharing your affiliate link on the digital marketing channels of your choice (blog, Youtube channel, social media, etc)
  4. When someone (let’s call him “John”) clicks your affiliate link he’ll be redirected to the merchant’s online store
  5. The merchant recognizes that John landed on their online store after clicking on your affiliate link
  6. If John makes a purchase while on the merchant’s website, the merchant will credit you with the sale and pay you a commission

How Affiliate Marketing Works Infographic

How to Get Started With Affiliate Marketing?

The process of getting started with affiliate marketing is comprised of 4 simple steps

Step 1: Pick a Niche

A niche is basically the market in which you’ll be promoting affiliate products and it can be anything from weight loss and electronics to furniture and clothes.

Ultimately, you should pick a niche that:

  • Is profitable and well-established
  • Doesn’t have stifling competition
  • Is relatively evergreen

Furthermore, it’s highly suggested that you go for a niche you’re interested in or, even better, passionate about.

Becoming a successful affiliate marketer involves putting in consistent effort and going through a lot of trial and error over a significant period of time.

That’s exactly where most affiliate marketers fail… Once the honeymoon phase is over, they start gradually losing interest… Their work becomes less and less consistent… Eventually, they stop making an effort and give up altogether.

Having said that, doing work that revolves around a topic you love is going to help you ensure that you’ll stick with your affiliate endeavors for the long term even when the going gets tough (which it will) until you’ve reached your financial goals.

Step 2: Create Digital Marketing Assets

A digital marketing asset is anything that can be leveraged towards communicating and interacting with your target audience over the internet, such as:

  • Website
  • Blog
  • Youtube channel
  • Instagram page
  • Facebook group
  • Email list
  • etc

You can think of your digital marketing assets as the “storefront” of your affiliate business where all your affiliate promotions will be taking place.

Just like people who walk in a brick-and-mortar store might end up buying some of the stuff it’s selling, a percentage of those who’ll be visiting your digital marketing assets will be purchasing some of the products/services you promote.

Typically, the more digital marketing assets you run, the higher the reach, credibility, and authoritativeness of your affiliate business.

However, to avoid becoming overwhelmed as a beginner, you might want to focus the vast majority of your initial efforts on mastering just one.

Step 3: Gather Web Traffic

Web traffic is the bread and butter of your affiliate business and can be described as the total amount of people that interact with your digital marketing assets (e.g. Instagram followers, website visitors, email subscribers, Youtube viewers, etc).

Simply put, no web traffic = no potential consumers = no affiliate commissions.

The 3 web traffic generation methods that are the most utilized among affiliate marketers (probably because they have a track record of being the most effective) are:

  1. Content Marketing
  2. Search Engine Optimization (SEO)
  3. and Paid Advertising

Content marketing is the process of consistently creating and publishing content that’s highly relevant to your target audience, such as:

  • YouTube videos
  • Blog posts
  • Infographics
  • Case studies
  • Social media posts
  • etc

Search Engine Optimization (SEO) is a combination of practices that can be leveraged towards optimizing a website so that search engines (Google, Yahoo, Yandex, etc) start displaying it at higher positions of their search results when specific keywords are queried.

Paid advertising refers to the process of promoting your affiliate offers via renting ad space on digital advertising platforms like Google, Facebook, Instagram, Yahoo, etc.

Ultimately, you could experiment with as many web traffic generation methods as you’d like until you’ve determined for yourself which one generates the best returns on your investments.

Step 4: Promote Affiliate Offers

Once your digital marketing assets are in place and web traffic has started flowing in, it’s time to start monetizing by promoting niche-relevant affiliate offers.

For instance, if your niche revolves around yoga, you could promote yoga workout routines, equipment, retreats, courses, etc.

Begin by locating merchants that sell the products/services you’d like to promote to your audience.

Then, take stock of which ones actually run an affiliate program.

Lastly, sign up to all available affiliate programs, get your hands on your unique affiliate links, and start sharing them with your audience via all your digital marketing assets.

Now, every time someone makes a purchase through an affiliate link of yours, you’ll get paid a commission by the corresponding merchant.

Benefits of Affiliate Marketing

The affiliate marketing business model comes with tons of benefits, such as:

1. No Investment in Product Creation

Since affiliate marketing is geared towards making commissions by promoting already existing products, you won’t have to invest time, energy, and money in developing, testing, optimizing and launching your own product or service.

2. Zero Product Handling & Customer Support

As an affiliate marketer, you’ll never have to bother with any product handling or customer support procedures such as:

  • managing inventory
  • maintaining stock
  • packaging & shipping orders
  • customer service
  • handling complaints
  • returns & refunds
  • etc

Everything just mentioned is the responsibility of the merchants you’ve partnered with.

Your sole job as an affiliate marketer is just marketing products/services.

3. No Physical Setup

Since product handling procedures aren’t in the domain of affiliate marketers, launching an affiliate business doesn’t require the investment of time, money, and effort in establishing an actual physical store.

As a matter of fact, most affiliate marketers work from the comfort of their own homes.

4. Minimal Start-Up & Operational Costs

Compared to other business models, affiliate marketing is the one with the lowest startup and operational costs…

As a matter of fact, if you utilize the right digital marketing assets and traffic generation methods (e.g. YouTube + Content Marketing), you could be able to launch and run an affiliate business without spending a single dime.

To give you a frame of reference, the first-year costs of other small business ventures could range anywhere between $8000 and $20,000.

5. Passive Income Potential

Affiliate marketing is among the online business models with the highest chances of becoming a source of passive income.

Passive income is basically money generated as a result of work you’ve done in the past that requires no effort to maintain.

For example, the royalties paid to a writer for a book he’s published 5 years ago is passive income.

Just like that, the vast majority of my current affiliate earnings are generated completely passively as a result of blog posts, guest posts, reviews, videos, and social media posts I’ve published months ago.

6. Requires No Technical Background

While tech-savviness could smoothen and simplify the entire process of launching and running an affiliate marketing business, having a rich technical background isn’t really a prerequisite for becoming a successful affiliate marketer…

Truth is that most 6-figure affiliate marketers had practically zero prior experience in running an online business, creating websites, recording videos, promoting products, or performing any other affiliate-related task.

7. Flexibility

The last thing I love about affiliate marketing is its flexible nature…

First of all, as an affiliate marketer, you’ll get to choose your working schedule and environment.

Secondly, affiliate marketing allows you to have absolute control over the products you recommend to your audience…

For example, if one of the products you promote underperforms, you could simply shift to promoting another one without any hassle whatsoever.

On the contrary, if you’d invested time and money in launching a product that ends up underperforming, you’d have to invest even more time and money in either improving upon it or launching a brand new product from scratch.

Lastly, since affiliate marketers are independent contractors they have the option to experiment with multiple merchants and affiliate programs until they find those that fully cover their and their audience’s needs, no strings attached.

Affiliate marketing FAQs

(Click each question to expand)


Affiliate marketing is definitely among the best, simplest, and highest-paying make-money-online opportunities you could currently invest in.

Nevertheless, building and growing an affiliate business to success is no walk in the park…

Truth be told, most people’s affiliate journey involves consistent effort, a long learning curve, tons of trial and error, and enormous amounts of patience.

That’s exactly why a large chunk of aspiring affiliate marketers end up giving up just a handful of months in, some even before making their very first commission…

To ensure that you won’t end up suffering a similar fate, you’re going to need all the expert guidance you can get!

Thankfully, there are literally thousands of seasoned affiliate marketers sharing beginner-friendly proven-to-work affiliate marketing advice, tips, strategies, and techniques on free digital platforms such as YouTube, blogs, forums, social media, etc.

However, if you’d like to boost the chances and speed of your affiliate success as much as possible, it’s highly suggested to consider going for a dedicated, structured affiliate marketing course.

Having said that, here’s a roundup of The Best Affiliate Marketing Courses that have actually helped thousands of people build successful affiliate marketing businesses from scratch.


Have any questions?

Leave a comment right below or contact me right here.

I’ll be more than happy to help you out!

All the best,

Harry, Founder & Editor at dearboss-iquit.com

Written by:

Harry is the founder and creative director of Dear Boss I Quit. His mission is to inspire and help as many people as possible escape the 9-5 grind forever by building a passive income online just like he accomplished a few years back.

You can read more about Harry’s story right here.

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