There are 3 main types of online Internet Marketing Businesses:
- Create and sell your own products,
- The Affiliate Model and
- The Licensing Model.
In the previous post we explored the positives and negatives of starting your new internet marketing business by creating and using your own product.
We concluded that, for a number of reasons, it was probably not the way to start your new online business unless you have exceptional knowledge and a strong network in your niche and could easily attract subscribers and potential buyers.
But we also recognised that it does have its place once your business has reach an acceptable level of sales and profitability.
In this post we will look in detail at the other two options Affiliate Marketing and the License model.
Over the last 3 years I have tried both myself.
The Affiliate Model
Affiliate marketing is one of the easiest ways to start your internet marketing career and is heavily promoted as such. So it is one of the most popular online business models. But in terms of building a long-term sustainable business it has serious flaws which I will explain in this article.
Affiliate marketing involves you as an affiliate (really an authorised distributor) promoting a product owned by someone else – normally you would do this by advertising online, and when a customer buys through your advertisement (which contains your affiliate link), you become entitled to a commission from the product owner.
The way you (as an affiliate marketer) source products to sell is by joining one of the many affiliate product websites now online and having their product listed and displayed on that site. Two of the biggest and most popular examples are “ClickBank” and “JV Zoo”
The owners of products get them listed on these sites, and in return Clickbank and JV Zoo get a small commission when a copy of the product is sold by an affiliate (like you).
When an online marketer looks on one of these sites for potential products to sell as an affiliate, the products are listed by category e.g. Health, Exercise, Internet Marketing (there are also sub-categories within each category), and within each category the products can be sorted by best-selling, number of affiliates currently promoting, highest commissions, title, etc, This makes product selection easier and enables affiliates (like you) to specialise in one or more categories.
The advantages of affiliate marketing as a business model include:
- You don’t need to create your own products to get started earning money,
- The product owner handles all the administration, like product delivery (usual just a download) invoicing, customer support, and revenue collection from the customer, so you don’t need to set up your own payment gateway on your website.
- The owner will also supply all the promotional material for you to use, including the sales funnel (The page where your ad sends the customer to opt-in (i.e. to enter their email address and then click to be taken to the sales page).
- After you promote products a few times, it becomes relatively easy to set-up and start promoting and selling a product,
- Your ad can be shown 24 hours a day, seven days a week. The internet does the rest for you.
- Once you get some experience and some sales, you can ramp up your sales by either promoting your existing products more heavily or adding new products.
For the few internet marketers that stick with it and persevere, affiliate marketing can be a profitable model, but in reality the great majority of people that start will fail fairly quickly because they take a random/ad-hoc approach to what they promote and lose faith in themselves and the business model fairly quickly.
The disadvantages of affiliate marketing:
- You don’t have ongoing access to the customer who bought the affiliate product from your promotion because the ad they clicked on went straight to the product owner and would have added them to his or her email list.
- So you only get paid for the product you sell up-front. The product you promoted is usually a low value product designed by the owner to get people on his email list so he can promote his higher value products to them and keep the full 100% of the sale value. You get nothing from these ongoing sales.
- The only way you keep getting commissions is by continuing to spend money to get leads (traffic in I.M. Language). You have not got an ongoing business relationship with product owners and you do not have the opportunity to build your own email list using this model.
- As the products you are selling increase in popularity, more and more affiliates will promote them, causing the cost of advertising to increase if you want to stay on the front page of your chosen advertising medium (e.g. Google Adwords, Facebook, Yahoo, Bing etc.).
- You have to constantly hunt for new offers to promote as your current products start to tail-off in sales.
- The bottom line is, with the affiliate model you never get to build a customer base – the foundation of all businesses that achieve long-term success.]
This is the reason why the really successful affiliate marketers eventually end up creating their own products for other affiliates to sell, so they can build their own email lists and sell the higher value products direct to the customers on their list as a result of the up-front affiliate sales someone else brought in, and keep 100% of the sale value for those back-end sales.
The Licensing Model
The licensing model has become more popular in the last 4 years, as the weaknesses and disadvantages of the affiliate model became more apparent to Internet Marketers. This inspired some of the industry thought-leaders, who started to develop alternative, more comprehensive programs using the licensing model.
This model combines the positive elements of the other 2 options whilst also overcoming the major flaws in the affiliate model.
It makes a lot of sense when you are new or relatively inexperienced in Internet Marketing to follow a proven model, which is exactly what the right licensing program will give you.
Most importantly, it also gives you lifetime ownership of the customers you bring into the business. This means that you get the full commissions on any future products they buy for as long as they remain active members.
In addition, instead of creating your own suite of products, you get the license rights to the products from an established, comprehensive and proven source.
Doing this can avoid the need to spend a lot of money and time developing your own products in the early stages of your internet marketing career (although you may want to do this at a later stage as it does add to your appeal to your chosen target audience).
For instance in my case, I joined a program called “My Online Business Education” (MOBE for short) to meet one of the specific needs of my target audience (i.e. men over 50 looking to design their long, healthy and wealthy retirement life) to create their own online business working from home to provide a source of additional retirement income in their spare time.
Now I am also creating a 12 part video course covering the complete 4 part “Design Your New Life” system as a comprehensive guide for my subscribers, to enable them to design their long, healthy and wealthy retirement life.
So, as you can see, as my business is more diverse, and not exclusively devoted to teaching older people how to earn additional retirement income (although that has become a very important element in recent years), I will have my own and possibly other 3rd party programs to fulfill my overall mission and as a result will have several targeted products to up sell to my subscribers, to help them to achieve their goals.
Going back to the licensing model; as comprehensive programs are now becoming available, I believe that they are a really attractive alternative to trying to do it all yourself. Frankly, that is hard, and only the bravest, smartest and most determined “would-be internet marketers” will make a successful=long-term business doing.
But you do need to get the right program i.e. one that is not only tried and tested but one offering all the features you might need to make it easy to use and to generate your desired level of additional income with as little time commitment as possible.
In my next article I will share the benefits of the program I invested in, so you can decide whether it might work for you.