I made $622,322.96 in 2009 from affiliate marketing.
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So many websites do affiliate marketing in some form that you can't just throw them all in a bucket of 'shady'.
If you do a blog post comparing slicehost to linode, and have your signup links in it, that's affiliate marketing. Nothing particularly shady about that.
At each instance, of course, their personal information passed through companies who had no moral qualms about holding onto those leads and passing them off to a future client as new.
That's what's shady about it.
It's possible to do it ethically, which is what I tried very hard to do (at the end of the day it's just advertising and a lot of it depends on the product). But it becomes incredibly difficult to pick products that aren't essentially rip offs. The affiliate networks are as much trying to scam the marketers (which is why his advice of picking only the bigger networks is good).
I used to market stuff similar to what JML sell (i.e. fairly niche "time save" appliances). Most of the products were good - but ultimately the kind of thing you buy on a whim and then use once or twice a year.
The margins aren't great for the time input [nearly failed my first year outright] so I moved on to other pastures (where ethics were more prevalent too)
(Just adding data points to your anecdote.)
Sure there are legitimate affiliate marketers making decent money (like someone established with a good forum on webhosting), but another problem is that for an upstart to do that they have to apply less honest methods.
Affiliates create value and jobs for their customers and contribute in a positive way to the economy.
How much value has your zero-revenue startup created for anyone?
For one thing, nobody has promised a huge payout. Investors have evaluated the risk of your company before making their investment, and unless you do something stupid with the money (e.g., send everyone on vacation) there's really no ethical issue with it. If you gave it your all and fail, there's no way you can twist this into some sort of ethical issue. Doing so IMHO is dishonest and self-deluding.
The "jobs and economy" defense is also pretty flimsy. Spam also creates jobs, value for their clients, and contributes to the economy, are we going to start defending that now?
There's no question that a large portion of affiliate marketing falls on the wrong side of morals/ethics, if not the law. The bulk of what I've seen out of that corner of the intertubes is scams that prey on unsuspecting consumers... to compare this with legitimate web startups is really puzzling.
This isn't just holier-than-thou posturing, honestly. I've done shady things in the past for a quick buck, but at least I've never deluded myself into thinking what I was doing was good.
[edit] Poster below has a point, saying "bulk of" to describe the entire affiliate industry is unfair.
I'll question it. Do you have any sources or statistics to back that up?
Amazon claims they run "the most popular and successful" affiliate program on the web, for example, and they're about as clean as you can get.
But, as I see it, many customers sign up for rebill trial offers because they think they can a) game the system and get something for free or b) are truy gaming the system, signing up for offers to get cash as part of so-called "incentivized traffic"
I'm sure there are some unsuspecting consumers who just want to try something and shouldn't have a hard time cancelling.
The problem here isn't the affiliate networks, or the affiliates. It's the advertisers. They are the companies responsible for customer service and providing an ethical experience.
The reality is that it's plainly obvious to the marketer if their offers are legitimate or scams, and when this awareness is so clear it's hard to ride the moral high ground and claim innocence.
It's like giving someone a bag of candy where you know a large portion is poisonous - sure, you didn't poison the candies yourself, but to say that you're faultless IMHO is disingenuous.
Then on the other side of the spectrum, you have the people making shell sites with sales pitches and shady offers crowding up the Google results, and forums of people trying to figure out how to make a quick buck without adding anything of value. But you get that with adsense and other types of advertising as well.
But a continuity offer that clearly discloses its terms (think Netflix) is really not unethical in any way, and your blanket dismissal of affiliate marketing is ridiculous.
I've seen people say on here that ALL advertising is shady and unethical because it makes people spend money on things they don't need. Statements like this are the reason you aren't making any money online.
The industry has a bad name, I agree. On the other hand, it's just selling something for a provision. It does not have to involve sneaky get-rich-quick schemes. Most of the world sells something for someone and does (financially) better than many startups.
It's relatively easy to start selling for someone and when it turns out to be profitable, creating your own product.
For instance, it's hard to get into booking industry, w/o some partnership initially. Once you're big, though, you can drop the middle party and speak with GDS or hotels directly.
EDIT: I know that many startups are about changing the world. I'd say, however, that many are just about making money. And affiliate is a good path.
In some cases, the answer is that the affiliate's aggregation capabilities provides value -- hotels would be a good example of this. In many cases, the answer is NOT pleasant. Sometimes the right hand doesn't really want to know what the left hand is doing.
The other alternative is somehow making a scalable business out of bundling lots and lots of little merchants together and providing scalable affiliate services to all of them. By that metric, Google is almost the biggest affiliate in history. (You can even do CPA bidding!)
Relatedly, Google takes huge, huge amounts of money from advertisers whose hands are less than clean. (Ringtones, for example: essentially 100% of these are rebill scams. Ditto diet, weight loss, acai berry, teeth whitening products, whatever the flavor of the month is.)
Think ScamVille times two or three orders of magnitude and perpetuated under the curiously unseeing eye of the most beloved tech company in history.
What I'm speaking, though, is about relatively small companies. I don't mean VC backed companies with well researched markets. There's a lot of kids dreaming about big buck doing #31337 clone of Flickr. It's basically a waste of time, in most cases.
You have to be careful with the real products. They have their drawbacks, too. You have to do the support, reply e-mails from the actual customers, sometimes forecast the demand etc.
Another thing I literally love in the affiliate industry is their experiments driven approach. The best test (it even rhymes!). That's what Google do obsessively, too. (see Marissa Mayer vs Doug Brown thread)
I think there's a lot to learn from the affiliate industry. It's silly to get into usual moralistic standpoint: usually they have less skills than a regular wizz kid, and, somehow, manage to make better money.
EDIT: It's also good to have a broader perspective. When you're speaking with a client directly and agreeing on the fee, you're doing affiliate, too.
I agree. There's a level of plausible deniability with using affiliates. They can resort to some black-hat tactics and when they are caught, you can claim you didn't know, and ban them.
"Google takes huge, huge amounts of money from advertisers whose hands are less than clean."
I agree with this, while noting that almost all ad networks do. No one wants to admit it, but a lot of the internet was built on rebills and affiliate ads. Now Google is bigger and has some large clients to keep happy, so they push back harder on scams as they crop up. But as long as rebills exist, Google and others are stuck playing "whack-a-mole" with the latest flavor of rebill.
The latest FTC moves have put some pressure on affiliates, but it's just a matter of time before they come up with something else.
It's fairly easy to find a niche and iterate until profitable. However, it can all go horribly wrong as well.
Interesting.
eg
Find a good niche - say "order flowers online"
Find all the best keywords on Google
Setup landing pages if needed, or just send direct to affiliates.
Profit from the commissions
If the latter, how so?
Also it's not unknown of for leads/sales to be disputed later on, or be reversed, or advertisers to go under, or affiliate networks to go under.
Also if you're paying for traffic in the hope of directing it to affiliate links, those affiliate links may be down/broken/messed up in other ways. So you have to be pretty sure everything is working exactly as it should be, especially if you're spending a lot on traffic.
I think many in this community are hoping that there's a middle ground, with both value creation ("building something people want") and extracting that value via monetization.
The goal of business is to make money. The people you should be most concerned about building value for are your shareholders.
These recent posts, this one included, are about making money through shady tactics (there is a reason they have to create adsense accounts every two weeks).
It's more an attack on the general sense here on HN that people are spending lots of time and money building things they have no idea how to monetize.
Absolutely, the best way to create value for investors is to create value for customers by selling them something they want.
In the affiliate's case, the customers are the merchants that pay for leads or sales, NOT the end users of the product, and there is nothing shady about that relationship.
As an affiliate, I always create compliant and legitimate landing pages and ads. Ultimately, it is the merchant's responsibility to adequately disclose billing and allow for easy and timely cancellation. I try to work with compliant merchants, but their billing practices are beyond my control.
I agree that lots of affiliate stuff is valuable, I wrote a site a couple years ago that makes it money through affiliate ads and provides value to both the vendor and customers. But reading what he was doing, stuff like re-bill, seems really shady and while it might technically provide value to the vendors it is at the huge cost to the customers who are being tricked.
I'm an affiliate marketer also but I prefer to refer to myself as a product reviwer. My mission statement is "To help buyers understand exactly what they are buying". It brings job to me when my readers comment on how my reviews helped them save money -- they avoided a bad product after reading my review.
To me, affiliate marketing is just another revenue model, part of the business model but not the business itself.
Whether your business is shady depends on how you're abusing the model. That said, all other revenue models can be abused.
Currently, I'm earning US$1500 per month, after a years of work. I work 2 hours per day and have a full time job besides that. My web marketing sucks but hopefully next year I can quit my job and explore other ways of building businesses around affiliate marketing.
But let's look from the good side. You design a new website (with flash for example), fancy and nice, good customer supports, easy transactions, product delivery management... and you take a % in sale.
You can end up earning something like $100K a month. Nothing weired with that, it's innovative and amazing and you are improving the user experience.
The real problem is that the current marketer are too busy earning money from ebay/email/twitter SPAM to build something innovative that solves buyers problems.
Every sale that's make through that little search box nets the company a little commission. Imagine how many people are using web browsers, and which web browsers.
If this is an evolution of a porn technologies it works for sure. It is just a ponzi scheme where newcomers loses some money and established players gets them.