The right way to build an online affiliate based business model

Apr 03, 2013

Table of contents:

1. Why would I want to use an affiliate based business model?
2. What types of website are good for affiliate based models
3. Where do people go wrong?
4. How to build a successful affiliate based website
5. Conclusion

Affiliate marketing is a popular online business model that has the potential to scale quite considerably. The model revolves around third party websites referring traffic to a product or service website. When a customer makes a purchase after using a referral link, the affiliate receives a percentage of the cost of the transaction.

There are many different types of affiliate websites, some much more successful than others. It is probably safe to say that the majority of all money that is made from affiliate marketing is earned by a tiny sliver of the actual affiliate marketers online.

In this post I hope to shed some light on the business model, cover what people usually do wrong and show you how (with a lot of effort) you can build a successful affiliate based website too.

Why would I want to use an affiliate based business model?

There are a number of ways you can monetise a website these days. Traditional CPM or CPC advertising can be difficult to generate significant returns unless you have a large amount of traffic and page views. These forms of revenue rely on huge numbers because rates are so low and so are best utilised when your traffic is measured in millions and is focused on a lucrative demographic that is valued by advertising companies.

Affiliate marketing is a great way to very easily add a revenue model to a website that has traction. Content based websites remain extremely popular on the Internet, but it can be difficult to also create premium content or a related product that can generate significant revenue. Physical products can also be a difficult model to crack early on, particularly due to lack of cash-flow or investment. Affiliate marketing makes perfect sense for companies that are looking to get into an industry such as fashion, but do not have the resources to handle their own stock or distribution just yet.

What types of website are good for affiliate based models

There are many different types of content based website that fit well within an affiliate based business model. I think really the most important characteristic of successful affiliate websites is they naturally make you want to become a repeat visitor.

Blogs

Blogging is the most obvious type of website that fits into the affiliate based business model because it lends itself so naturally to the process. When you consistently write articles on a blog, your opinion becomes respected over time as your audience sees you making good recommendations. If someone recommends something to you, and it turns out to be a really good thing, your respect for that person’s opinion is naturally going to be elevated. Blogging about a new product, book or service is a perfect because it allows you to explain in depth about the product, the benefits and how it helped you or improved your life.

This form of product recommendation is perfect as long as it is kept within the bounds of natural interaction. Everyime you see your friends you don’t harass them in to buying something knowing that you will get a kick back.

But if you take the time to really review a product, you give an honest opinion of it and you maintain the respect of your readers, then earning a small commission by recommending products is a completely legitimate form of earning money to continue writing your content and grow your business.

For example, someone like Tim Ferriss can recommend products to his audience because he has earned an authoritative voice on fitness, productivity, learning and lifestyle design through his blog and his books. Tim’s blog is a perfect example of how to build a successful affiliate model. Tim rarely actually recommends products, but when he does you can tell he is being genuine and not just trying to earn money from his audience.

Community and curated content

The other big opportunity for affiliate based model are community and curated content based websites. These are much better at scaling than blogs because it does not rely on a small number of people to create all of the content. However, this does mean that control of the content is largely up to the community, rather than the host.

The community curated content website has really sprung up in the last couple of years. Websites like Tumblr and Pinterest have created hyper focused niches on highly valuable industries like fashion and retail. I think Tumblr has the opportunity to do something with affiliates, but it is Pinterest that is really looking to go after the opportunity.

These types of websites work best when you create tools to easily create content. For example, both Pinterest and Tumblr make it incredibly easy to post content to their sites. Both websites also allow you to “repost” content from other members and so content can quite easily go viral across the network.

Curation plays a big part in both of these websites. Power users can create large followings by curating content rather than generating it all themselves.

Community based affiliate websites have the potential to scale to a much bigger business than a traditional blog, but they are much harder to get off the ground and become popular.

Where do people go wrong?

Affiliate based business models are not hard to understand. If someone buys something after using your affiliate link, you earn a commission. It’s not rocket science.

So how come so many people never make money from it?

Well, I think there are many reasons why the majority of websites never reach scale:

Shit content

The biggest mistake people make is commoditising their content. When you put little effort into producing content, then you don’t deserve the opportunity to earn commission from making recommendations. If your strategy is to just churn out as much content as you possibly can, you will never build an audience who respects your work.

It’s even worse when every bit of content you write is an affiliate link or is trying to sell a product. How can you expect to build an engaged audience if all you are doing is trying to sell to them? People don’t go to blogs to buy stuff, it’s that simple.

No expertise in the area

Another big mistake is when you see affiliate based content websites that are recommending products where the writer has no place making the recommendation.

If you are going to write a piece of content that has an affiliate link to a high-end DSLR camera, you need to be an expert in order to make it credible. Your whole website needs to revolve around the product and how to use it, rather than eyeing up the fat commission you can make if you dupe someone into using your link from that one piece of content.

It’s so easy to tell that the writer does not understand the product when their content is basically just a padded out version of the product specifications.

To create a successful affiliate website you need to focus on one tiny niche. You need to create a body of content around that niche that shows you are an authoritative voice and you understand the nuances of the product. You need to be the expert friend that you would consult if you were about to make the purchase decision.

Linking to every popular product on an affiliate market place is not the right way to approach this opportunity.

Products that aren’t targeted

Creating a website or writing a piece of content and then sprinkling affiliate links on each of the pages is not going generate significant revenues. When you link to an affiliate product, you need to make sure that your page is hyper focused on why your reader will get value from the product.

This means writing an in-depth coverage of a product and then linking directly to that product or landing page. You need to ensure that your page is so well written that it becomes an invaluable resource for people who are already interested in the product.

When you don’t have this hyper focus on the content and the product, you end up with a website that is just flailing about and clutching at straws to earn money. I also don’t think that you should affiliate link to more than one product on any given page or post on your website. Each piece of content has to be targeted to a specific product.

No value to the reader

And finally, probably the biggest overarching reason why the majority of affiliate websites fail is because they provide no value to the reader. Creating value for your audience should be your number one objective. If you create value and a loyal and engaged audience, revenue will naturally follow.

If you create a website purely as a way of generating affiliate revenue I don’t think you will ever create the kind of audience that you need to earn significant revenue from the opportunity.

Creating value should be your number one priority, not earning money.

How to build a successful affiliate based website

There are many things that go into building a successful affiliate based website, so I’ve tried to distil it down to three simple objectives.

Build a tribe

The very most important objective for creating this type of website is you need to create an engaged audience around your niche. Without an engaged audience, you will never be able to continue to grow.

A really good example of building an engaged audience is Thrillist. Thrillist started out as an email newsletter that curated products and experiences aimed at young american urban males. Thrillist was able to grow it’s subscriber base to millions of readers and has been able to generate significant revenue. In 2010, Thrillist acquired Jack Threads, a members only online fashion retailer.

None of this would of been possible if Thrillist had not grown an engaged audience from the start.

I have previously written more about Thrillist and their business model in the post, The intersection of Content and Commerce.

Create amazing content

The next important objective is, you need to create amazing content. This means from the outset, you need to invest heavily into creating the best possible content that you can.

The Internet has created a strange paradigm around content that breaks the traditional offline model. In the offline world, you would happily pay for premium content in the form of a magazine or newspaper. However, content on the internet is much more valuable, in my opinion, when it is completely free.

By making premium quality content free, you enable it to spread across the Internet. One of the truly enabling factors of the Internet is it allows a message to travel to millions of people with very little friction. When you make your content free, it enables search, social and sharing to grow your audience without the traditional requirement of marketing.

In my opinion, creating premium content should be a loss leader. You should invest heavily in premium quality content in order to build an audience, and then you can find a much better way to generate revenue by offering more exclusive content or products to your most loyal readers.

The real take away here is, just because you a producing free content, does not mean it shouldn’t be extremely high quality and engaging. You want your content to spread and for it to be share worthy, and not something that will dupe a search engine or an unsuspecting visitor into landing on your website.

Be open with your model

And finally, I think you should always be open with your model. When you are recommending products to an audience and receiving a financial kick back, you need to maintain a position of trust by being transparent about how you earn revenue. Some members of your audience won’t want to click an affiliate link, even when you are completely open like this, but I believe having this level of integrity will serve you better over the long run.

When you build a business around an engaged audience and your first priority is to create value, I think your best consumers will actively want to help your continue and grow your business. It seems like the Internet has supercharged the opportunity for a business to grow a loyal audience, where members actively look to support the company because they feel part of the tribe.

At the end of the day, if you can’t maintain your dignity and integrity through your daily activities, what is the point in starting this kind of company in the first place?

Conclusion

Building an affiliate based website is an exciting opportunity for anyone starting out with the vision of creating an amazing online brand. Getting off the ground with an affiliate website is incredibly easy because all it takes is a simple blog or email newsletter and the passion to build a tribe around a certain niche.

I also think that affiliate based business models provide an amazing opportunity to build up momentum and eventually create a product or ecommerce based company. Selling your own products will always be more lucrative than being an affiliate business, but there is an inherent risk associated with this model. If you can grow an engaged audience over a long period of time, it will be much easier to transition to your own products and the investment in manufacturing and distribution will not be as big of a risk because you will already have an audience.

If you dream about creating your own online company around the thing that you are passionate about, but you are unsure about how to get there, take the small step of creating a content based, affiliate business model website, on the path to your future success.

What have you got to lose?