Affiliate marketing has a massive growth on the internet. According to Marketing Sherpa’s “Ecommerce Benchmark Guide 2006”, affiliate marketing is a $6.5 Billion Business worldwide. Cases of affiliates with home business, earning thousands of dollars per month, increase dramatically. Research estimates that affiliate marketing will explode even more in 2010, since the model of finding thousands affiliates for promoting products is becoming more appealing to the merchants.
The affiliate business model has indeed some unique advantages that they couldn’t take place in other business models all together at the same time either in offline commerce or even in the e-commerce. One of the most advanced features affiliate business model has is the lack of inventory. This is very profitable for the affiliate since there is no need for investing in inventory and more important, the danger of stock remains eliminates completely.
Another advantage is the “no support” feature. The merchant deals with it, either it refers to a tangible product or not, like software for example. The affiliate has nothing to do with it. That means gain of money which can be invested in the promotion of the affiliate business.
Less cost of the business. That is the main advantage of e-commerce in general but it refers equally in affiliate marketing. No physical shop address, no warehouse and cost of the rent, actually the whole affiliate business can be applied in affiliate’s residence. Plus, the need of payroll will vanish, since there will be no need for employees. In some cases all is needed is a computer and internet connection and nothing more. Case studies of affiliates doing that and succeed have been verified.
The above features lead ultimately to another advantage. It is the gain of time. The affiliate will not have to run to his or her office. All this time which can be saved for more productive labor can lead to a more lucrative business in less time scale.
The lifestyle of the business. It is the ideal way of life most people dream of. The ability to create a portable business model and control the online business, even with a laptop, worldwide is the work model most home business entrepreneurs aim to. Before few decades that was almost impossible, but today with the internet technology has become daily routine.
The disadvantage is that the affiliate marketer has to compromise with the fact that there will be always commissions instead of the full profit the product or service provides. There are merchants that offer generous commissions to their affiliates but they are still commissions.
Loneliness. There is no face to face human interaction. It’s the affiliate with the computer and the phone line. It’s a lonely business model with mental consequences sometimes. There is no dialogue with other individuals, except email communications and sometimes phone communication. It should be noted though that for some people that is considered as an advantage and not a negative feature.
Finally it is not as easy as it seems. Many myths has been spread around about “working 15 minutes per day-make 15000$ per month”. Reality is far from it. It is a business which means proper planning, developing, constant advertisement and promotion, daily searching for new tools and resources to improve the business and so on. All these activities require serious amount of time, effort and some initial capital to invest. Many affiliate marketers do not follow these principals and that’s why 95% of affiliate marketing businesses fail.
The online affiliate marketing industry is divided into two groups: The first is composed of super affiliates who have serious affiliate marketing business with professional website, email lists, recent website updates and extremely advanced information for their clients. These people make the 85% of the affiliate industry turnover worldwide.
The second group contains newbie affiliates, amateurs are the majority, who consider affiliate marketing as a hobby instead of business. These “businessmen” will deal with online affiliate marketing business for some time, they will start enthusiastically, but quit when they confront the first obstacle. These people, which are the majority, are in the percentage of 15% of the turnover.