(NewsNation) — Social media has made it easier than ever for content creators to show off their favorite products, and some claim they’re making thousands in “passive” income doing so.
It’s called “affiliate marketing,” — an arrangement that allows creators, or “affiliates,” to earn a commission for generating sales, often by convincing viewers to click the “link in the bio.”
“Back in the day, TV shows could run ads, but now even a small influencer — or just anybody — can basically participate in the ad economy,” said Dina Mayzlin, a marketing professor at USC’s Marshall School of Business.
U.S. affiliate marketing ad spending is expected to grow from $9.5 billion in 2023 to nearly $16 billion in 2028, according to EMARKETER, a market research company.
Some creators are capitalizing on the rising interest by posting “how-to videos” that explain how others can become affiliates and make money with minimal effort.
But is it that easy?
Here’s what to know about affiliate marketing.
Claim: Affiliate marketing is an easy way to generate passive income
Some TikTok videos might sound too good to be true, framing affiliate marketing as a “passive,” even “lazy” way to make extra money:
- Affiliate marketing = the best side hustle (TikTok)
- How I made $100k last month without a job (TikTok)
- Laziest way to make money online for beginners (TikTok)
In a TikTok video with over 1.8 million views, a 24-year-old influencer claims she made $114,000 working just two to three hours per day doing affiliate marketing.
In another, a 14-year-old creator says he bought a Rolex with the money he made, calling it the “laziest way” to generate income.
How affiliate marketing works:
Affiliate marketing lets content creators earn a commission by promoting products or services. It’s perfectly legit, but that doesn’t mean it’s easy.
Here’s how it works: Affiliates partner with a company and share custom links that track where a user came from, encouraging their audience to visit an online store. When a referral leads to a sale, the affiliate earns a commission. The more sales they generate, the more money they make.
Commission rates vary based on the industry. Low-price, high-volume products in niches like pet food or skin care might earn an affiliate 5% of each sale, according to Shopify. High-ticket affiliate programs in sectors like software can offer affiliates more than 20%.
Many affiliate programs, like the popular Amazon Associates Program, are free to join but require you to apply and be approved.
What they’re not telling you about affiliate marketing:
Building an audience isn’t easy
Affiliate marketing can be a great way to monetize your social media audience if you have one, but gaining a following isn’t that simple.
It’s a point side hustlers tend to gloss over in their “how-to” videos.
“What they’re failing to mention is how much work you’re going to have to do,” said Aaron Dinin, who teaches entrepreneurship and social marketing at Duke University.
Dinin said most “overnight” success stories aren’t overnight at all. Creators often spend several years crafting and publishing content before making a regular income. For every creator that makes it big, many more give up, deciding it’s not worth the effort.
If you do start to gain traction, it can be risky to monetize too early. Most people aren’t on social media for a sales pitch — they’re looking for value, either through information or entertainment.
“Your audience is there for the content, it’s not there for the ads,” Mayzlin said. “You can’t overdo it.”
It can take A LOT of clicks to make serious money
Growing an audience is one challenge, but converting views to clicks and clicks to sales is another.
“Getting people to click on your link turns out to be really, really, really, ridiculously hard,” Dinin said.
In some cases, affiliates get paid per click, while others only earn a commission for each sale. Regardless, don’t expect to pull in millions of dollars simply by telling people to click the “link in bio.”
Click-through rates vary from influencer to influencer and across industries, but think about the math like this:
- You have a YouTube channel and make a flat $1 commission for every sale made through your affiliate link
- If your video gets 1,000 views and 1% of viewers make a purchase, then you’ll make $10
- At 10,000 views, that jumps to $100
- For perspective: Almost 90% of YouTube videos have less than 1,000 views
In other words: if you think “passive” is going to cut it, think again.
“To make enough videos, to get enough content out, to get people to it, is going to be a full-time — and then some — job,” Dinin said.
According to a survey from Influencer Marketing Hub, most affiliates (nearly 60%) make less than $10,000 a year.
It’s not a free-for-all, and you can lose your audience’s trust
Affiliate programs generally have rules that restrict how products can be promoted.
Amazon, for example, has guidelines around advertising prices, using the company’s logo and disclosing your affiliation. Run afoul and you could get banned from the program.
Transparency, or lack thereof, also presents a risk. Social media audiences are built on trust, and if followers feel misled or deceived, the consequences could tank your engagement.
Something else to consider: Not all products are worth promoting, even if they come with a hefty paycheck. Affiliates become extensions of the brands they represent, and that risk goes both ways.
“You don’t want to send anyone to something that’s going to give them a bad experience because that’s your community that you’ve worked very hard to cultivate,” Denin said.
Big Picture: How many people are doing it?
Affiliate marketing is low-risk and easy to start compared to other side hustles, making it extremely competitive.
Amazon’s program has over 900,000 affiliate partners — and that’s just one company. According to Forbes, 83% of marketers use affiliate marketing programs to drive brand awareness, and the market is expected to grow.
In 2023, TikTok Shop launched in the U.S., enabling creators to sell directly through their videos.
If you enjoy making content, have built a loyal audience and identified a niche, then affiliate marketing could be a great way to generate extra cash. But don’t believe everything you hear on TikTok: It’s not easy or passive.
“Don’t start with the premise of, ‘I want to do affiliate marketing.’ Start with the premise of: ‘I want to see about building a meaningful audience on one of these social media platforms,’” Denin said.
