What Is Affiliate Marketing? [& How to Make Money With It]

What Is Affiliate Marketing And How Does It Work Featured Image

Let me guess…

You’ve been searching for a legit way to build a revenue stream online for a while now.

However, you still have nothing to show for all your efforts.

Recently, you stumbled upon an online business model called “affiliate marketing.”

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

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

In this article, I’ll be addressing every single question you might have about affiliate marketing, such as:

  • What is affiliate marketing?
  • How does affiliate marketing work?
  • How much money can I make with affiliate marketing?
  • & more

Without further ado, let’s get started!

What is affiliate marketing?

Affiliate marketing is a performance-based digital marketing model in which you receive commissions for referring paying customers to third-party online merchants.

In simpler words, affiliate marketing is the process of earning money by helping businesses make more sales.

Affiliate marketing is a win-win for all the parties involved.

On one hand, online retailers can use affiliate marketing to raise brand awareness, expand their customer base, and increase conversions, sales, and customer engagement for a fraction of what they’d normally spend on traditional marketing channels.

At the same time, affiliate marketing enables ordinary folks, like you and me, to build a source of income online without having to spend tens of thousands of dollars and several years of our time on developing, distributing, and supporting a product or service of our own.

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The history of affiliate marketing

The concepts of revenue-sharing and receiving commissions for referring customers predate both affiliate marketing and even the internet itself.

Modern affiliate marketing was pioneered by American entrepreneur and inventor William J. Tobin in 1994, almost four years after the World Wide Web was publicly launched.

It all started in 1989 when Tobin founded a flower shop called “PC Flowers & Gifts” on Trintex (aka Prodigy), an online service that offered access to a range of digital services, including news, shopping, games, stocks, and more. By 1993, PC Flowers & Gifts was bringing in over $6 million per year in sales.

A year later, Tobin launched an official website for PC Flowers & Gifts along with an affiliate program that paid commissions on a per-sale basis which quickly gathered over 2600 affiliate partners.

And this is how online affiliate marketing was born.

In 2000, Tobin was rightfully granted a U.S. patent for affiliate marketing.

By that time, affiliate marketing had already been implemented by dozens of other large corporations, like Amazon, which was actually one of the first ones to launch an affiliate program as early as 1996.

Amazon’s affiliate program (aka Amazon Associates), swiftly grew to become the most popular affiliate program in the world and according to statistics, by 2013, it was responsible for over 40% of Amazon’s total global revenue.

Therefore, it’s perfectly safe to assume that if Amazon hadn’t launched Amazon Associates, it might have never become the colossus it is today.

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

Affiliate marketing is currently being used by more than 80% of brands around the world, including some of the most well-established ones, such as:

  • Apple
  • Nike
  • Google
  • eBay
  • AliExpress
  • Samsung
  • & more

Based on statistics, the value of the affiliate marketing industry is growing at an average rate of 10% per year and is expected to surpass $30 billion by 2025.

This places affiliate marketing among the fastest-growing online business models out there.

How does affiliate marketing work?

Affiliate marketing comes into being through the collaborative efforts of three primary players – the merchant, the customer, and the affiliate.

1. Merchant

The merchant (aka advertiser, retailer, or vendor) is any company or individual running an affiliate program that pays commissions for referring business to them.

Merchants can be as big as corporations like Samsung and Amazon or as small as solopreneurs who sell affiliate marketing courses like Matt Diggity and Doug Cunnington.

2. Customer

A customer is any entity facing a problem that can be solved by purchasing a merchant’s products or services.

Customers are the bread and butter of any business regardless of what industry it’s in or what kinds of products it sells. Any business that doesn’t draw a healthy amount of customers is doomed to eventually fail.

This is exactly where you, the affiliate, come into play.

3. Affiliate

Your primary job as an affiliate marketer is as straightforward as helping merchants acquire more customers by promoting their products or services on various digital marketing channels, such as:

  • social media
  • paid advertising
  • email campaigns
  • YouTube
  • blogging
  • search engine optimization (SEO)
  • podcasts
  • etc.

Every time you refer a customer to a merchant you’re affiliated with, you’ll receive a commission.

Most of the time, commissions are calculated as a percentage of the total amount of money the customer paid to the merchant. Commission rates can range anywhere between 1 and 75% depending on the merchant and the type of product or service promoted.

For example, physical products typically yield lower commissions than digital products or services. That’s mainly because the profit margins of physical products are a lot smaller due to their significantly increased development, manufacturing, distribution, and support overhead.

While most merchants pay their affiliates on a per-sale basis (PPS), some might leverage the cost-per-action (CPA) pricing model in which an affiliate gets compensated every time a potential lead completes a specific action, such as:

  • submitting a form
  • signing up for a trial
  • installing an application
  • etc.

Here’s an overview of how merchants, customers, and you as an affiliate synergize to form the affiliate marketing process:

  1. You join a merchant’s affiliate program
  2. The merchant gives you a unique affiliate link that points to their e-shop
  3. You start promoting your unique affiliate link online (blog, social media, paid ads, etc.)
  4. Every time a customer clicks on your unique affiliate link and makes a purchase on the merchant’s e-shop, the merchant pays you a commission

The Affiliate Marketing Process Overview


How much money can you make with affiliate marketing?

The yearly earnings of beginners to affiliate marketing can range from $20,000 at the low end to $50,000 at the high end. Seasoned affiliate marketers can generate anywhere between $100,000 and $500,000+ per year.

According to PayScale, the average annual income for affiliate marketers in the US is approximately $54,000 per year.

Statistics reveal that 13% of affiliates earn more than $75,000 per year. That may seem like a very small percentage but it’s actually rather higher than most money-making models out there.

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 for 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 has 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 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 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 can experiment with multiple merchants and affiliate programs until they find those that fully cover their and their audience’s needs, with no strings attached.

Affiliate marketing FAQs

(Click each question to expand)

Affiliate marketing is an online business model that involves promoting products or services created and distributed by third-party online merchants in exchange for getting paid a commission for each sale you refer.

In layman’s terms, affiliate marketing is the process of being compensated for helping businesses sell to more customers.

Read more…

Here’s a bird’s eye view of how affiliate marketing works.

  1. You join a merchant’s affiliate program
  2. The merchant gives you a unique affiliate link that points to their e-shop
  3. You promote your unique affiliate link online (blog, forums, social media, paid ads, etc.)
  4. Every time someone clicks on your unique affiliate link and makes a purchase on the merchant’s e-shop, the merchant pays you a commission

The Affiliate Marketing Process Overview

Read more…

There are thousands of successful affiliate marketers all around the world. Some of the most well-known ones are:

  • Pat Flynn
  • Matt Diggity
  • Matthew Woodward
  • Doug Cunnington
  • & more

You can check out a roundup of my 17 favorite examples of affiliate success and their backstories right here.

  1. Billion-dollar industry
  2. Very low startup & operational expenses
  3. Huge income potential
  4. Flexible & versatile
  5. Passive income
  6. Simple to implement
  7. No technical background
  8. No customer support
  9. No physical setup

Read more…

Affiliate marketers can be divided into five main income groups:

  1. Total beginners: $0 – $20,000 per year
  2. Low-level affiliates: $20,000 – $50,000 per year
  3. Intermediate affiliates: $50,000 – $100,000 per year
  4. High-level affiliates: $100,000 – $500,000 per year
  5. Super affiliates: $500,000+ per year

According to PayScale, the average annual income for affiliate marketers in the US is over $54,000 per year. Statistics reveal that 13% of affiliates earn more than $75,000 per year.

Some of the factors that influence how much you earn as an affiliate marketer include:

  • seniority
  • target niche
  • available resources
  • previous experience
  • marketing efforts
  • & overall mindset

Read more…

Here’s a rough income growth timeline of a typical affiliate marketing business:

  • months (0-3): no earnings
  • months (3-6): first affiliate sale
  • months (6-12): $100-$500 monthly
  • months (12-18): $1000 monthly
  • months (18-24): $3000+ monthly

This timeline isn’t a guarantee of future performance but rather a mere approximation of the income growth of an average affiliate business. Your own timeline could be shorter or longer than projected.

Over the years, I’ve seen aspiring affiliates striking a gold vein just a few months into the industry. On the other hand, I personally know people who’ve been struggling to grow their affiliate revenue to $1000 per month for several years.

Read more…

Affiliate marketing is one of the most affordable money-making models out there.

Here’s a breakdown of everything you need to get started as an affiliate marketer along with their associated costs:

  • web hosting & domain name: $2.95/month (Bluehost)
  • keyword research tool: $49/month (Jaaxy)
  • expert guidance: $49/month (Wealthy Affiliate)
  • email autoresponder: Free for up to 1000 subs (MailerLite)

Please note that on top of expert guidance, Wealthy Affiliate also provides free access to hosting and a keyword research tool so you don’t have to purchase them separately.

Yes, you can do affiliate marketing without a website by promoting your affiliate links on other marketing channels, such as:

  • Social Media
  • Paid Ads
  • YouTube
  • Podcast
  • etc.

Read more…

The process of getting started with affiliate marketing can be broken down into the following four simple steps:

  1. Pick a niche
  2. Launch a blog
  3. Build an audience
  4. Promote affiliate products

Read more…

No, you don’t.

Affiliate marketing is very simple to get started with by virtually anyone regardless of age, education, background, available capital, tech-savviness, professional network, etc.

In fact, most 6-figure affiliate marketers were no more experienced than you currently are when they first ventured into the affiliate marketing industry.

Nonetheless, being knowledgeable in fields like marketing, sales, content production, business management, etc., could help you reach your financial goals somewhat faster.


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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