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Affiliate Marketing

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Are you taking your first steps into the realm of affiliate marketing? It must be so confusing to wade through tons of information for some modicum of understanding. Don’t worry; you are not alone. There are many newbies, who are working their way up the ladder of affiliate marketing with a little bit of advice, some mentorship and thorough understanding of what is affiliate marketing.

Why Delve into the World of Affiliate Marketing?

With deep smartphone penetration and fast Internet connectivity, more people are using e-commerce sites on the go. This offers you a unique opportunity to turn into a top-level affiliate marketer. You can earn passive income tomorrow with a little bit of effort today. That is why knowing what is affiliate marketing can prove to be a boon to your bank account. Isn’t it wonderful to hear the ka-ching of the cash machine each time an online retailer decides to compensate you for your efforts? Well, here is the skinny on affiliate marketing and how it can turn into a lucrative online enterprise.

Basics of Affiliate Marketing

As you may have realized, affiliate marketing has something to do with marketing online. In simplistic terms, you get rewarded by a business for promoting their physical or virtual products, services or even website online. Usually, you write something positive about a product or service along with a link to the business’ online store or the item you are promoting. When a visitor from your site clicks that link and makes a purchase, the business rewards you. This monetary reward can be a certain percentage of the total sale amount or it can be a fixed amount for each sale. The reward will depend on the business’ affiliate marketing policy.

Then, there are some online businesses that reward affiliate marketers for referring visitors. However, there is a caveat to this reward. Visitors have to necessarily take an action – sign up for a newsletter or complete a survey, for instance – before they leave the website. After the visitor completes the necessary action and fulfills the terms that the business imposes, you get paid a certain percentage that you and the business agree upon at the outset.

Since affiliate marketing involves promoting a product or service online, you may think it is necessary to be tech-savvy. However, a simple WordPress blog will suffice where you write posts about a program or business you are associated with. This is blatant affiliate marketing, and there are affiliate marketers who have adopted this method of marketing successfully. Another way to market a product or service would be to deftly weave the product into your blog post that is about a related topic. In both scenarios, you can include a button, banner ad or even a link that will take your readers directly to the product page where they can place their order based on your recommendation (your blog post).

What Not to Do in Affiliate Marketing

Think back at a time when you were out shopping and the pushy salesperson tried forcing you to purchase something. If you are non-confrontational in nature, you will purchase the item just to get the salesperson off your back. On the other hand, if you don’t like their attitude and style of selling, you will just walk out of the store, never to return. Well, that is exactly what happens even in the World Wide Web, as well. Prospective buyers do not like to be pushed into purchasing something.

Yes, you are selling a product or service, but your blog does not have to turn into a commercial, impersonal blog. The idea is to create a rapport with your readers so that they can identify with you and realize that the product that has fulfilled a need in your life, and could do the same in theirs. So, be sure to recommend products that you have used and can vouch for. Tell the readers how the product or service has helped you. By showing them in an honest and sincere manner that the product is useful, you will create a need that many potential buyers maybe unaware of.

Secondly, be very careful about a product or service you promote or recommend. You want to set a benchmark for your visitors and if you market any and everything, you lose credibility. You come across as a greedy affiliate marketer, who is more interested in making money than caring about the wellbeing and welfare of their visitors. Don’t cultivate such an image, or you could end up failing as an affiliate marketer.

Instead, be selective about the affiliate programs you promote. It is advisable to get familiar with the product or service first. If necessary, purchase and use them. Figure out their pros and cons. Once you know a product is good, your writing will reflect it. Your sincerity will shine through and make you appear as a person who genuine wants to help people.

Use these two approaches and you could turn into a successful affiliate marketer. Honest and genuine affiliate marketing can reap wonderful results and will set you onto the path of success.

The Who’s Who of Affiliate Marketing

Now that you know the basics of affiliate marketing, it is time you also understand the stakeholders in affiliate marketing lifecycle.

  • The Merchant: This is the creator or seller of a product or service. The merchant can be an individual, a business or a corporate enterprise. There is no restriction on who can turn into a merchant. The only criterion is to have a product to sell.
  • The Affiliate: This you or any other publisher. An affiliate can be an individual or even a company. This is the stakeholder, who is responsible for marketing the product by convincing prospective customers that the product is perfect for them.
  • The Customer: These are one of the most important stakeholders of the affiliate marketing system. Without customers, you will not have anyone to sell the product to and you will not earn commissions. You, the affiliate marketer, have to decide whether you want to inform a customer that they are part of the affiliate system. Today, more affiliates are adopting a transparent method of marketing and letting their prospective visitors know that they will benefit financially when customers make a purchase. However, there is no hard and fast rule.

The Choices in Front of You

You can choose to become a merchant or an affiliate. For a merchant, it is necessary to have a product, a physical or virtual one, that you can get affiliates to sell for you, and in lieu, you give them a commission.

Alternatively, you can become an affiliate. Most people prefer becoming affiliates as it is easier than becoming a merchant. The effort, time and money that go into creating a product can be prohibitive. This said, expecting to make a full-time living from just affiliate marketing for a newbie is a far-fetched dream. It requires building massive amount of traffic to your blog or pay-per-click ads to crank up vast volumes of sales that will keep the cash register ringing each month. Of course, there are affiliate marketers, who are earning five- and six-figure incomes monthly, but that is not the rule of thumb.

At the same time, if you play your cards right and manage to create meaningful posts for social media and your blog, you will be able to get visitors who will click on the links to make purchases. Alternatively, you can create an e-mail opt-in list and market the products via newsletters.

The potential of affiliate marketing is tremendous. The results are proportionate to the effort, time and money you are willing to spend on it.

Finding the Right Product

All companies selling online do not necessarily offer affiliate programs. Hence, you may want to conduct a Google search to find companies that do. This can be time consuming, as you will have to browse through websites companies before you can figure out whether they have an affiliate program.

One of the best ways to check out affiliate programs and products is by scouting affiliate marketplaces, such as Clickbank, Commission Junction and ShareASale. These marketplaces allow you to create a free account and once you have done that, you can start researching the products that fall into your niche.

You can also check out other blogs that are popular in your niche to see the products they are promoting. This will give you an idea of the products that are in demand and also help you figure out the methods that competitor blogs are adopting.

To Blog or Not to Blog?

While a blog is not necessary for affiliate marketing, it is undoubtedly one of the best methods to promote and advertise a product. For newbie affiliate marketers, pay-per-click ads are unchartered territory and if they do not know what they are doing, they could end up losing significant amounts of money.

With a blog, you can use subtle and hard marketing tactics to market a product. More importantly, it allows you establish a relationship with your visitors so that they can connect and interact with you. This boosts your credibility, especially if your posts add value and offer solutions to everyday problems and issues that your readers may experience.

Get, Set, Go…

Now that you know what is affiliate marketing and have a basic understanding of how to go about marketing and promoting a product online, it is time to take your first steps into the exciting world of affiliate marketing. While you are taking baby steps, educate yourself further and learn the ropes thoroughly so that you can succeed and earn an enviable online income through affiliate marketing. Until that happens, do not think of leaving your full-time job!

Affiliate Marketing is a great way to make money online from websites. If you don’t have any idea about affiliate marketing, first get an idea of the concept by reading this guide – What is Affiliate marketing.

The very first thing you need to make money via affiliate marketing is a website. The whole concept of making money via affiliate marketing revolves around having a website with lots of traffic/visitors and referring those visitors to mainstream e-commerce websites like Amazon, HomeDepot, WalMart etc. When visitors from your website reaches Amazon (or Walmart or other websites you refer) and makes a purchase, you get commission as a percentage of the sale value.

Amazon_affiliate_marketing_program

Lets first see a classic example of website making money with Affiliate Program. There are lots of different websites making money with different types of affiliate programs. In this article, we are exploring websites that make money with Amazon Affiliate Program. Out of many websites I have analyzed, InductionTop is a classic example of website making money with Amazon Affiliate Program. The website basically provides unbiased reviews of Induction Cooktops of various types. People visit the website to read reviews of induction cooktops to inform themselves before making the purchase. If you observe an individual review page of the website – say Duxtop 1800Watt Portable Induction CookTop – you can see hyperlinks referring to the Amazon product page of Duxtop Induction Cooktop from the review page. Each of these links to Amazon product page has a referral ID/tag (tag=inductiontop-20) – which is used to identify the referring website. People visiting the Amazon product pages with this referral link from InductionTop will get a cookie set in their browsers for a definite period (say 24 hours). If the visitor makes the purchase within 24 hours of referral link click, you will get the commission for the sale credited in your Amazon account.

I hope you have got a good basic idea of how making money with amazon affiliate program works. For each referral sale you make, you will get commission which may range from 4% to 10% or higher as defined by the Amazon for specific product categories and number of referral sales you make. There are plenty of people who make thousands of dollars per month from Amazon Affiliate Program.

I am noting down the essentials you need to get started!

  • Domain Name
  • Website Hosting
  • Selecting the Product Niche
  • Good Articles and Contents
  • Adding Referral Links to Amazon
  • Building Traffic
  • Developing the Website as a Useful Resource

Selecting the “right” Product Niche

Selecting the right product niche is very very important in getting successful with Amazon Affiliate Program. A niche or a product category can be selected based on various criteria. Most important criteria is based on Product Value and Expected Sales Volume.

I am listing two commonly used strategies below:

  1. High Value Products with Low Sales Volume
  2. Low Value Products with High Sales Volume

The idea behind these 2 strategies can be explained. A high value product in the range of 100USD or higher can yield a commission of 5 to 7 USD per sale. A low value product in the range of 20 or 30 USD generates only 1 or 1.5USD per sale as commission. For a high value product 20 sales is enough to generate 100USD in commission revenue whereas 100 sales is necessary in a Low Value Product segment to generate the same 100 USD commission revenue. The difference in sales volume required is 5 times – which is a very very significant figure. Lets check why the difference of 5x sales volume is very significant.

I am going to present a set of assumed data.  Usually to generate 20 sales, you need to send as much as 500 product link clicks or more. The sales conversion rates from total number of product link clicks to Amazon can vary from 1% to 10% or higher. It totally depends on your organic search traffic, your click rate etc. So to generate 100 sales, you need to send 5 times of product link clicks – which is nearly 2500+ product link clicks or higher. Not everyone who visits your website will click on the product links. Only a certain percentage of the total visitors in your website will click on the product links, which may also vary from 5% to 25% (varies from site to site and niche to niche). So your website needs to have nearly 4 to 5 times traffic to achieve 5 times increase in sales volume.

This article is a guide for affiliate marketers outside USA. There are lots of smart affiliate marketers who make money online by referring sales to hosting companies like BlueHost, HostGator, DreamHost and many other popular hosting companies. They earn money by referring sales to these companies and the earned money is kept in the respective affiliate account of each hosting company. Most of these hosting companies are located in USA and they are subject to US Tax laws. An affiliate marketer who earns commission  for a sale is also subject to US tax laws. Since the parent company who provides commission for a sale is incorporated in US, the earned commission is also an income earned in USA. If the affiliate marketer is a US citizen or an immigrant, he/she is subject to US tax laws and should pay income tax for the earnings. Such people (US citizen or permanent resident) should file the tax form W-9 with the respective hosting company.

If an affiliate marketer is not a US citizen, he/she has to file tax form W-8BEN with the respective hosting company.

What is W-8BEN ?

I will summarize the whole thing! Non US persons (individuals or corporations) are liable to pay income tax at 30% (flat rate) on certain types of income earned from US sources. This tax amount is collected at the source by the payer of the income. (In the case of affiliate marketing, this tax amount is collected by hosting companies like Bluehost, Hostgator etc who pay the affiliate commission). The source (payer) which collects the tax amount is also known as “withholding agent”. Withholding agent then pays the collected tax amount to IRS (US Internal Revenue Service).

Withholding agent is responsible to collect tax and pay it to IRS. In case the agent fails to collect tax, IRS will charge the amount from the agent. The 30% withholding tax is applicable to non US  persons only. Payer doesn’t need to withhold any tax from US persons. Each foreign person has to submit a W-8 (one particular version of the W-8 form) tax form with the payer (withholding agent). You may note that W-8 has to be submitted with the payer (or withholding agent) and not with the IRS.  When the payer has the form W-8 on file with the accounts, they will know the payee is a non US person and they have to withhold 30% of the payment. On the other hand, if the payee is a US person, they will have a W-9 form on accounts. The payer don’t need to withhold 30% from accounts with a W-9 on file as they are US citizens.

Note 1:- In some cases, an income tax treaty negotiated with US and another country can be used to reduce this tax rate of 30%. It depends on which country you are residing and the possibility of tax treaty with the country. You can check this in official IRS website.

Note 2:- You may check this blog for further reference on the subject of W-8BEN

How to Fill Out the W-8BEN Form ?

For a case study, I am using the W-8BEN form provided by Bluehost for its affiliate accounts. So here is how to fill the W-8 BEN form on BlueHost. The form is same for other companies like Hostgator, DreamHost or others, there are differences only in the way the form is presented (look and feel of form).

What to Fill ?

As shown in the screenshot, your name, your country name, your permanent address, your state/city, your country name in full are the primary fields to fill. If the present address is different from permanent address, fill those optional fields. Now comes the very important fields – SSN or EIN. SSN is Social Security Number issues for US citizens and residents only. A non US citizen don’t have an SSN or EIN. So you can leave those fields blank.

Note:- At the time I submitted the BlueHost tax form, there was a technical glitch with their system. The form was not getting accepted when I submitted with blank fields for SSN and EIN. I contacted customer support of BlueHost and they responded with a suggestion of submitting the form with any random 9 digit number. This is the reason you see a random 9 digit number on the screenshot. This is needed only for BlueHost. For other companies like Hostgator and DreamHost, you can leave those fields blank. If you face any difficulties, contact their customer support.

Click on Image to Enlarge
Click on Image to Enlarge

Finally there are some check boxes to tick. Read them carefully and select applicable ones. You may refer the screenshot to see what I have selected. In the signature field, just type your full name as signature. You can write “Owner” in the field “Capacity in which acting“.

Now hit “Submit Tax Form” and you are done. You will receive a success message screen as shown below (for BlueHost).

BlueHost_Affiliate_Tax_Form_Success

I hope you have got it done perfectly. If you have any doubts, drop in a comment.