My Affiliate Marketing Experiment – Part 1

Spending a lot of time online I run across the term “Affiliate Marketing” all the time. I even go to an “internet marketing” event once a month here in Austin to meet other entrepreneurs, but always found some of the people doing affiliate marketing a little perplexing (and sort of shady).

When prying into what they do, they never gave me CLEAR answers. They would always say things like, “I do lead generation” or “performance marketing” or “sell an online product” and other buzzwords I didn’t fully understand. I’d ask, “Ok, give me an example of a product you generate leads for” and they’d state a general industry at most (such as insurance, health or real estate). Some of the people said they do “PPC arbitrage” and that they “promote products” but wouldn’t go much further into detail about their business.

I was never satisfied with these responses and just presumed these people were really shady (which some of them are).

So here I am trying to find out what these people do and they keep skirting around the actual details…WHAT THE HELL?

I can tell them I own a rave store and sell light up stuff online. It’s a pretty straightforward, and they can even see the website for themselves. Why were these people acting so shady? They were obviously hiding something or lying about something.

Many of the people I met in the affiliate marketing world seemed to sell herbal pills online or get rich quick schemes for the masses. Most of the products they were promoting seemed relatively useless once purchased, and most had “interesting” billing plans.

In my mind, I saw “affiliate marketing” as referring to a website that promises to get you rich quick…something like this kind of crap:

get-rich-quick-website
(You should be PUNCHED if you even TRY to click that image).

I’ve read many bloggers like John Chow and other guys who make their living from blogging and they frequently talk about affiliate marketing. I kept wondering what exactly it was, especially since they correlate so much of their income to it…..so I decided to do some research and find out.

The first thing I did was research the term “Affiliate Marketing” and printed out all the articles I could find. I read them all and took notes on a plane ride somewhere. I read the Wikipedia article and a bunch of other search results, and the most basic idea behind Affiliate Marketing is:

  1. Someone is selling a product.
  2. You help promote that product.
  3. When someone buys a product through your recommendation, you get paid a percentage of the sale.

SIMPLE.

I thought about this for a second and realized there are many successful companies that heavily use affiliate marketing in a non-shady way. These include Amazon, eBay and so many others. Amway and other companies also use an affiliate structure. Even car dealerships to a small extent seemed like “affiliates” of their larger companies.

The easiest example I can give of a super-simple affiliate marketing experiment is my books reviews page. If you click one of those book links and buy from Amazon, I get a small portion of the sale. Amazon is willing to do this because I helped drive a sale to their site through my review. If it weren’t for me, they probably wouldn’t have made that sale.

So THAT was affiliate marketing??

Not completely.

A lot of people I met talked about buying ads to promote their affiliate products….this was part of the term “Pay-Per-Click Arbitrage” I heard so much about. Some of the more intelligent people in the internet marketing group I attend made a lot of their money this way. I found out what some of these people do is:

  • Signup for an affiliate program for a product.
  • Buy ads on Google, Yahoo, banner ads etc promoting these products.
  • Clicks get sent directly to the product page or their own webpage promoting the product.
  • Whenever a sale is made from that action, they get a percentage of the sale.

This is a frequently touted method of getting rich quick by many crappy eBooks out there. In essence it makes sense. For Example:

  • If you buy paid clicks from Google costing $0.10/click…..
  • You send all that traffic to a webpage that offers an affiliate product/service/signup…whatever.
  • That service pays you $2 per transaction that succeeds.
  • If 1 out of every ten people completes that offer, that costs you $1.00 at Google.
  • So for every dollar you spend, you make two dollars.
  • So long as your spending is less than your earnings, you’re making money.

The math behind this actually works, and some people legitimately make a lot of money doing this….and that’s why people buying get-rich-quick schemes believe in these methods.

I thought this affiliate marketing world was a good model at its essence, so why was everyone I met in this world always so shady? If these people were making money doing arbitrage, why didn’t they share details?

Just like the bottled water idea or homeless experiment, I decided to find out by simply trying it out…. To be continued.

Neville Medhora blogs at NevBlog.com and is the founder of House Of Rave.