You’re reading this post, so you probably know that affiliate marketing is one of the best ways to make money online. But can you get rich with it?
The answer, as with any good question, is not that simple. Building a steady stream of affiliate income requires a lot of work, and it’s definitely not something you can do overnight.
In case you don’t know, here’s how affiliate marketing works.
You help sell the products or services of other companies by sending visitors to their website or online store. When one of those visitors makes a purchase, you get a cut of the profit.
If you own a blog that gets a lot of traffic, have a YouTube channel with a big following, or run an email list with plenty of subscribers, affiliate marketing can turn into an additional income stream for you.
Affiliate commissions tend to vary significantly with the niche and program. The typical affiliate payout, however, usually is somewhere between 5% and 30% per sale.
Generally speaking, there are a few reasons for this. Above all, some industries have higher profit margins than others. The thinner the margin, the lower the commission a merchant can afford to give to their affiliates. There’s also the fact that some merchants are greedy—and do all they can to retain as much of the profit as possible.
For example, the lowest-paying product category in Amazon Associates, the e-commerce giant’s affiliate program, pays out 1% (for Amazon Fresh, physical video games & video game consoles, grocery, as well as health & personal care). The highest product category, on the other hand, pays out 10% (for luxury beauty, luxury stores beauty, and Amazon Coins).
Amazon Associates’ flat fees (also called “bounty”) range from $3 for Amazon Prime to $15 for Amazon Business.
Some of the highest-paying affiliate programs are in the web hosting and Software-as-a-Service (SaaS) niches. Examples include GetResponse’s 33% commission or $100/sale bounty (your choice) and a 40$ recurring commission from SEMrush. This is also why these two niches are the most competitive.
How Much Money Can You Make With Affiliate Marketing?
As Neil Patel writes on his blog, “a decent affiliate can make anywhere from $10,000 a year to $400,000.” Why the difference?
Because there are so many ways to do affiliate marketing, it’s hard to come to a reliable average. A YouTube channel reviewing books will make significantly less money than one on lawnmowers, for example.
The latter will also be harder to compete with as there’s a barrier to entry—to keep shooting review videos, your competitors need to buy the products or have some kind of partnership with a retailer.
Similarly, a food blog with affiliate links to groceries will significantly lower earnings than those that link to luxury goods, even if they have the same amount of traffic.
Last but not least, the earnings depend on the cookie lifetime. When a visitor clicks on one of your affiliate links, that link contains your affiliate ID, a unique number that allows the merchant to identify that this visitor came from you in the first place.
That ID is saved in a cookie, a tiny text file in the visitor’s browser. Like actual cookies, Internet cookies have an expiration date. After that date, any purchase that visitor makes on the merchant’s website will not get credited to your affiliate account.
Some merchants have cookies that expire as quickly as 24 hours, which means you probably won’t get paid for 99% of the visitors you send to their websites. Some have cookies that last for as long as ten years!
What It Means to Be Rich
First and foremost, let’s talk a little bit about what it means to be rich. It’s just one of those things that everyone sees differently.
How rich you are will generally depend on two things:
- Your disposable income;
- Your living expenses.
Your disposable income is the amount of money you have after you’ve paid income tax. Your living expenses, along with your disposable income, depend on the country (and, as is the case with the United States, the state) that you live in.
Suppose you make $100,000 a year and live in a country that taxes personal income at 30%. This essentially means that you have $70,000 disposable income, even if, in reality, you make much more. This is why, to become richer without earning more, some affiliate marketers will relocate to countries with little to no income taxes and lower living expenses.
Sticking to the same example, imagine how much more money you would have left if you moved to a tropical country with 0% income taxes and living costs 1/3rd of wherever it is that you live now.
Second, even if you are rich today, it’s not a guarantee that you’ll stay rich tomorrow. In fact, building wealth and preserving wealth are two completely different things.
I know affiliate marketers who make hundreds of thousands of dollars per year. Trust me when I tell you that they’re living the dream with mansions, sports cars, and all of it. The problem is that they’ve set up their life in a way where they spend 99% of what they make.
If one of their websites gets hit by a Google algorithm update tomorrow and organic traffic grinds to a halt, or Amazon decides to slash their commissions again, they’ll end up in debt in a matter of days!
So, before we start talking about what you can achieve with affiliate marketing, remember that how rich you are will depend on your disposable income and your ability to conserve wealth.
Both of these factors are entirely under your control. Think of them like levers that you can learn how to pull depending on where you are in life (and, ultimately, how far you want to get).
How Passive Is Affiliate Marketing Income?
Passive income comes from an asset you buy and forget about as it compounds with time, like purchasing a piece of the S&P 500 market index, effectively owning shares of the 500 largest companies listed on U.S. stock exchanges.
By that definition, affiliate marketing isn’t passive income (unless, of course, you’re outsourcing 100% of the work to a company like Niche Site Builders or Alpha Investors, and your only involvement is checking your income and paying the bills).
You have to build a site or create a YouTube channel and keep writing posts or shooting videos to grow your audience and make a living.
If you’re just getting started, it takes time, isn’t guaranteed to work, and has a steep learning curve. The only exception to the rule that I can think of is if you’re coming from an agency or the marketing team of a company, and you already know how to set up WordPress websites and create content for the web.
Even if you go the less-common path by building non-indexed landing pages on ClickFunnels and buying ads to get traffic to them, you will still have to keep track of your affiliate links—and ensure you’re not wasting money by sending visitors to Amazon with the products out of stock.
So, no, affiliate marketing isn’t passive income. But it isn’t the type of income where you’re trading your time for money, either. As a general rule of thumb, you’re putting in work today to make money after 6-9 months (depending on your site’s maturity and the competitiveness of your niche).
I call this type of income “compounding income” because, in a way, it’s like a bank deposit. The more capital (time and/or money) you put in today, the more money you’ll be making some time in the future.
I know this is a controversial topic in the affiliate marketing community—and I’m curious to see where you stand on the matter. So I let’s make it a discussion; I encourage you to share your thoughts in the comments form below this post.
In Conclusion
There’s no guarantee that affiliate marketing will make you rich. But if you pick a good niche with high payouts and are smart about the way you invest your money, you can use affiliate marketing to get rich slowly.
