The two mainstream ways to monetize a content site are via affiliate marketing and display advertising. When you are looking to buy a site, which strategy is best?
I cover the following in this write-up:
- Benefits and disbenefits of each
- Examples of networks
- Can you use both strategies on a site?
- Website valuations for each strategy
Let’s get into it!
What’s Affiliate Marketing?
Affiliate marketing is a program where a company or program pays a set fee or percentage of a sale that someone (an affiliate) makes on their behalf. This can be done with the selling of products where a website owner gets 4% or 8% of a sale that comes from a link on their site, or it could be $20 per person who signs up for a free consultation.
Affiliate marketing is one of the most common ways to monetize a website online. This extremely popular style of program has both its pros and its cons.
The 6 Benefits
1. Higher Revenue Per Visitor
Generally affiliate websites will consistently make more per 1,000 visitors than display ads. And often it isn’t even remotely close. This is actually pretty easy to figure out why. While common CPMs range from $10 to $24, if an affiliate makes a $1,000 sale, even at a pitiful 3% that is a $30 commission.
From one single visitor, not 1,000. That is the serious potential that affiliate marketing offers. Many affiliate programs have cookies that track any sales for 30 days, meaning even after a visitor leaves they can still make you money that month. If you’re using Amazon, any sales made on Amazon within 24 hours of clicking an affiliate link are also credited to an Associate account.
2. Use in Emails and Social Channels
Many affiliate programs allow the use of links in social media or to email lists. This can be a very effective way to get more affiliate sales without even needing traffic to find your website. You can’t do this with display ads.
Pinterest and Quora are places where some affiliates have become very good at getting affiliate clicks. Email lists give you a list of people who trust your recommendations and might be willing to buy if your recommendations are good.
However, it’s also very important to note that some affiliate programs (and some social media platforms) forbid this. Before using these strategies make sure it’s allowed by all parties.
3. Potential Recurring Revenue
With display ads the only time to make money is when a person is actually visiting your site. That’s not true with affiliate programs. There are many affiliate programs for subscription models. This can bring you recurring monthly affiliate commissions.
That means a person who visits once and then signs up for a subscription you promote earns you money every month even if they never visit your site again.
4. Negotiate Higher Payouts
If a company is taking part with an affiliate program, they’ve already proven they’re willing to split profits for more sales. If you sell a large number of a company’s products, you can often contact them directly and negotiate a better payout.
5. Incentives Aligned with Brand
With affiliate programs you can make sure the affiliate programs and incentives are aligned with your brand. This isn’t just good because it gives you plenty of control over what you offer, but it allows you to increase your own earnings by making sure your affiliate offers make sense for the interests and values of your group.
6. Various Payout Models
With affiliate marketing, you can choose the payout models that make the most sense for your site. Sometimes you can even use multiple affiliate programs on the same website.
Percentage of Sale
This is the most common payout model. The percentage of sales is just like it sounds. You get a set percentage of every sale based on item, category, or in some cases how many total items you sell. Averages can be as low as 1% or as high as 75%. These are extremes with most falling in the 3-10% range.
Cost per action or CPA is the other most common setup. This is a set payment for every action taken. This can be $10 for someone subscribing via email, $20 for every phone call to a business (qualified lead), or $100 for a sale.
When someone takes a specific action via your link, you get paid in the CPA affiliate model.
The 6 Disbenefits
1. May Require Reviewing Service/Product
Many times the blog posts and websites that Google pushes to the top of the SERPs are the ones that have original pictures and an in-depth first-person review. This means you may need to put money upfront for a service or product before you can give a review that will get any attention and thus any income. This is even more evident in 2021 with Google’s new Product Reviews Algorithm.
Even then it’s not a guarantee, so there is some up front investment and risk.
2. Commission Decrease Regularly
Take a look at any affiliate program that was around in 2010 or 2015 and compare it to now. Chances are about as close to 100% as you can get that they pay less now than back then.
Amazon has made a lot of news with their heavily decreasing commissions over the last several years, but they’re not the only ones. Many large affiliate programs are also following suit and lowering the common rates offered.
This will be something every affiliate based website owner will need to keep an eye on.
3. Less Content Opportunities
A purely affiliate site won’t be able to monetize nearly as many article topics. Because of this the number of things to write about in any niche will be lower, and that also means everyone in that space is more likely to be focused on those topics. More competition makes it harder to get results.
4. Affiliate Programs Get Terminated
Sometimes an affiliate program just shuts down completely. Airbnb is a recent example as they shut down their affiliate program in 2021, as per this CNBC article. Before online sales tax became common Amazon shut their affiliate program down in Connecticut from 2011 until eventually re-opening in 2014.
There are many hugely successful companies that started out with strong affiliate programs 10 years ago, then shut them down once hitting a certain company size. This is a genuine concern, especially for “growth oriented” companies when they reach actual cash flow.
5. Seasonality of Brands
Skiing affiliate sites are great in December, not so much in July. Surfing affiliate sites are the exact opposite. Some brands are only good for 1 or 2 seasons before sales disappear for half a year.
6. Site Looks “Spammy”
The reason Google updates affect affiliate sites so much isn’t because of an unreasonable hatred of all things affiliate. It’s because so many affiliate websites look spammy. Sometimes the damage of a “spammy look” can be mitigated.
But sometimes that’s much harder to do. Getting a good look that converts affiliate sales without irritating Google can be a challenge for even moderately experienced affiliates.
Examples of Affiliate Networks
This is not a comprehensive list. There are literally many thousands of affiliate networks and options out there, but this is a good set of some of the biggest networks you can get into as a beginner.
1. Amazon Associates
The Amazon Associates program is the largest and most well known affiliate program in the world. You are paid a percentage of what a person buys from Amazon after getting to the site through your affiliate link. The percentage varies based on the product between 1-10% on payable items with most at 3-4%.
This is a great starting affiliate program because it is extremely easy to get into, use, and Amazon is a trusted name people buy from. In addition, Amazon sites are also the most commonly flipped sites.
2. Commission Junction
One of the largest affiliate networks out there, CJ is like a marketplace of small, medium, and even big brand names. You get approved for CJ then will need to apply to individual affiliate programs that are part of this network.
Commissions can vary greatly from one company to another but often range from 3% to 15% in many cases.
ShareASale is one of the names that will pop up a lot when you research affiliate programs to join. Since they work with companies to create affiliate programs as well as connecting affiliates to big brands, they have a lot of clout in the affiliate world.
Clickbank is unique because they are an affiliate program that is only about digital products. No physical products at all. These are ebooks and online courses. These are often harder to sell, but it’s not unusual to see commissions in the 75% range.
What’s Display Advertising?
Display advertising is a method of website monetization where a display advertising network puts ads on a website and the website owner is paid on a per click or per view rate (sometimes both).
The effectiveness of display advertising is usually measured as Ad revenue per thousand impressions (RPM), meaning the rough estimate of what a website owner can expect for every 1,000 visitors.
The 4 Benefits
1. Write Content on Any Topic
There are many topics that can bring traffic (think informational content), but don’t lend themselves to affiliate sales. But with display ads, any traffic equals income. The much wider selection of topics means it is easier to get high traffic and still make money off of it even when you don’t have anything to sell.
2. Every Visitor Is Monetized
One of the reasons that many sites use both display ads and affiliate links is because it monetizes everyone. Display ads mean that every single visitor to your site is still worth something.
Since every visitor is monetized the conversion rates for affiliates matters much less. On a pure affiliate site you need to get that conversion rate as high as possible. With display ads you can focus on just getting more traffic. No visitor is wasted!
3. Consistent Payouts on a Daily Basis
With display ads you are earning on a daily basis. Over time, it becomes fairly predictable based on traffic what you can expect to earn each and every day.
On the other hand, while affiliate payments can lead to spurts of purchases (and thus affiliate income), it’s also sporadic. You don’t know what you’re going to make day to day and you might not always hit the payout levels needed for an affiliate payout.
Display ads are just more consistent.
4. Less Vulnerable to Seasonality
Many affiliate programs are extremely seasonal. Everyone knows of the “Christmas boost,” and many good affiliate niches are seasonal. This is an explosion of income at one point but then thin during others.
Display ads, on the other hand, tend to be much more consistent. While RPMs do tend to go up during the November/December holiday season it isn’t as sharp an increase or drop as affiliate marketers see.
For example, check out Ezoic’s Ad Revenue Index for 2019. Ad RPMs do increase from January to December, but it is linear, and not spiky.
The 3 Disbenefits
1. RPM Depends on Niche
The amount you earn off display ads is going to vary radically depending on what your site is about. There are many niches where traffic is much easier to get, but you’re only getting paid $4 RPM. In other niches the competition is insane, but you get $25 RPM or even more.
This is why you can see statements like “Average RPM of $4 to $25.” That is a huge difference. At 100,000 visitors a month that’s the difference between $400 a month and $2,500 a month. The more traffic you get, the larger that gap.
The niche your site is in will be the single biggest factor in your RPM from display ads.
2. No Monetization in Email or Social Channels
Display ads work on your sites and that’s it. You can’t add them to email or social media so you are more limited in how you can earn.
3. Website Gets Riddled with Ads
When you use display ads your website will be absolutely loaded with ads. This can have some detrimental effects on site speed and user experience. And your site is going to look more spammy than those that don’t have ads.
But you can’t make money with ads without there being any on the page. Just keep in mind that this is an unavoidable part of using display ads.
Examples of Display Advertising Networks
Not all display ad networks are created equally. Some have better advertisers who pay out premiums, some have better technology, and some do not accept all niches.
The mainstream display ad providers under 50,000 page sessions include:
- Google Adsense: no traffic limit, site will be reviewed, low RPMs
- Ezoic: usually requires 10,000+ sessions, AI-based technology, medium RPMs
- Newor Media: requires 30,000+ sessions, medium RPMs
- Monumetric: picky on who they accept, medium RPMs
The top-tier display ad networks have strict requirements. They include:
- Mediavine: 50,000 session limit, sites will be reviewed, high RPMs
- AdThrive: 100,0000 session limit, sites will be reviewed, high RPMs
Note that there are many other ad networks out there. This is just a selection of the ones most niche site builders and flippers use on a regular basis.
Most website flippers use Ezoic once they hit 10,000 sessions, and then once 50,000 sessions are hit, the site is upgraded to Mediavine. Mediavine and AdThrive provide roughly the same RPMs thus there usually is no need to upgrade again, unless it’s a niche that AdThrive has premium RPMs in.
Should you add both Affiliate and Display Ads to a Niche site?
Yes! Display ads do not take away from affiliate ad revenue. They work together nicely.
Here is an excellent video outlining why this is the case:
Consumers are used to display ads. Every large media site you visit (e.g., CNN, Forbes) includes display ads. Therefore, consumers actually may see your site as more authority when they see display ads. The visitors that came to your site with the intent on buying (i.e., commercial content), will click through to the affiliated brand anyways.
If skeptical, and you are promoting a high-paying affiliate program (e.g., $50+), then you can stop display ads on those specific pages. That’s a great strategy to have display ads on low earning pages and disable them on high-earning pages.
Website Flip Valuations of Display Ad vs Affiliate Sites
The typical valuation for niche sites is around 30-40x monthly average profits.
Display ad sites and affiliate sites DO NOT differ in multiples; they are both valued in the same manner.
Why is this the case? First, the underlying business model for both of these monetization strategies is content. Content sites however monetized hold the same valuations in the industry.
An argument can be made that display ad sites are more stable, since your affiliate program can cut commissions or shutdown this requiring you to find another brand. However, the website flipping industry is not as matured to differentiate. At the end of the day, investors are buying for cash flow purposes.
Both of these strategies are part of my “arsenal of tools” that I use when and where needed. One is NOT better than another. They both have their purpose on a content site.
I personally use both affiliate marketing and display advertising on my sites, unless I have specific high-paying pages. Both of these strategies allow you to monetize each visitor to the maximum.
If I was to lean to one side though, I personally prefer buying sites that are focused on affiliate marketing, and then making the decision whether to integrate display ads. This is because affiliate marketing provides higher payouts (i.e., $50-$145 on my dating site). This cannot be achieved with sites with purely display ads.