The internet offers boundless possibilities for earning a living online. Upwork and Freelancers Union found that 35% of the American workforce was doing some type of freelance work in 2016, and 73% said technology made it easier to find that work. One of the ways to harness the internet as an income source is pursuing affiliate marketing. It’s intended as a way to generate passive income, but does it really work? Let’s consider. (For more, see The Ultimate Working From Home Guide.)

Affiliate Marketing Defined

In simple terms affiliate marketing means selling another person’s or company’s products and services. It’s like a referral service. You set up a website or blog and join affiliate programs that are relevant to your audience. You can connect to these programs through affiliate networks that provide you with a link that you include on your site. When someone clicks the link and purchases the product or service you’re marketing, you receive a percentage of the sale proceeds as a commission.

How Much Can You Earn?

The affiliate-marketing industry is growing steadily. An independent survey commissioned by Rakuten Affiliate Network found that affiliate marketing is set to reach $6.8 billion by 2020. Ninety percent of advertisers included in the survey said that affiliate programs were important or very important to their overall marketing strategy, with the majority of publishers reporting that affiliate partnerships drove more than 20% of annual revenue.

Another survey from VigLink offers a closer look at just how much income affiliate marketers are bringing in. According to the survey, 9% generated more than $50,000 in affiliate income in 2016. The majority, 65%, said they were making between 5% and 20% of their annual revenue from affiliate programs. The survey also showed a link between time frame and revenues. Among the publishers with the largest revenues, 60% had been utilizing affiliate-marketing strategies for five years or more.

The most advantageous aspect of affiliate marketing is that once you get a solid affiliate program in place, you can essentially earn an income on autopilot. All that’s really required is a steady flow of traffic to your blog or website. There are some downsides, however.

If an affiliate changes the terms of its program, your revenues could be directly affected. Choosing the wrong affiliates can also be problematic if your blog or website audience doesn't feel compelled to buy their products or services. With the affiliate-marketing industry experiencing a boom, you’ll also have to contend with competition from other marketers shilling the same affiliate products.

Developing a Successful Affiliate-Marketing Strategy

Its relatively easy to get started in affiliate marketing, but generating sustainable income from affiliate programs is an entirely different ballgame. If you’re thinking of giving it a try, it’s important to lay the groundwork first. (For more, see 10 Ways You Can Make Money as a Blogger.)

Start by thinking about your audience. What kinds of products or services are they most interested in? Which products or services are you currently using that you would feel comfortable recommending to your readers? You can add links to any affiliate program to your site, but if you want to market them with authenticity, it’s best to stick to companies with which you already have some kind of connection.

Next, research individual affiliate programs to compare their structure. You want to consider factors such as how much the commission is and how often the affiliate pays. Also, make sure you understand what rules, if any, a company imposes for being a part of its affiliate program. Additionally, you're likely to make more money with affiliate marketing content that is similar to your own.

Finally, be upfront with your readers. Add a disclosure to your blog posts or somewhere on your website letting them know that they may come across affiliate links. This adds to your credibility, and it’s also required by the Federal Trade Commission’s endorsement guidelines.

The Bottom Line

Affiliate marketing can be lucrative, but it takes a commitment of time and money to make it a serious enterprise. Do thorough research before you jump on the affiliate-marketing bandwagon.

Also, remember to avoid putting all your eggs in one basket. If you’re hoping to build a money-making website, diversifying your income streams with advertisements or selling your own products is a smart move in case your affiliate-marketing revenue dries up.

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