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Affiliate Marketing


Affiliate Marketing 

Blog supplied by Empire Flippers

 

Affiliate marketing is one of the best ways to monetize a content site. 

The programs will often pay a high commission, and there is usually room to negotiate for increasing your commission if you can show that you’re sending quality traffic to the offer. This style of affiliate marketing works much in the same way as the Amazon Associate’s program, but since the programs tend to be smaller, you'll be able to communicate better with the affiliate program owner, which can lead to a plethora of benefits. 

In 2020, we sold 17 affiliate sites on the marketplace, representing $1,957,476.55 in transaction volume, or just 2.4% of our total marketplace volume. 

 

Quick Snapshot 

The average list price for affiliate sites in 2020 was $130,932.86, with an average sales price of $119,012.86. As you can see, the value of affiliate sites seems to be larger than the typical Amazon Associate discussed earlier. This is likely due to non-Amazon affiliate programs offering higher payouts and, thus, higher revenues that lead to larger valuations. 

The average list price in 2020 saw an 8% decrease from 2019, when the average list price sat at $142,684.05, but a 44% increase from 2018 numbers, when that same metric sat at $85,317.72. These numbers are also consistent with sales price figures, with 2020 showing a decrease in average sales price of 15% but an increase of 39% when compared to 2018 numbers. 

We sold fewer affiliate sites in 2020 than in 2019, but more than in 2018. 

In general, affiliate sites remain a monetization that just isn’t as common as Amazon Associates, so the quantity of businesses sold doesn’t exactly reflect a trend on the popularity of the business model, but it does suggest that non-Amazon affiliate programs are less user friendly to 

 

set up, which is probably a big part of why there are far fewer of these sites compared to Amazon Associate sites. 

The average list multiple in 2020 was 33.5x, and the average sales multiple was 30.6. When comparing these numbers to 2019 and 2018, we see that multiples have gone up over both years, with increases in list multiples by 5% and 6%, respectively. However, this doesn’t hold 

true with the actual sales multiple: in 2020, compared to 2019, we saw a decrease in the average sales multiple of 2%. This is a fairly low decrease and likely a blip rather than a trend, especially considering the average sales multiple in 2020 increased over 2018 by 4%. 

If more affiliate sites were selling in the same quantity as Amazon Associate sites, we think the trends would be very similar, considering how close the two business models are in practice. 

The average days on market for affiliate sites in 2020 came out to 21 days, making 2020 the fastest year for selling an affiliate site on the market. 

Average number of days on the market decreased in 2020 from 2019 by 49% and decreased by 11% compared to 2018. Considering that in 2018, the average sales price of an affiliate site was much lower, this is a sign that demand for affiliate sites is still growing. 

These are valuable assets that investors and entrepreneurs want to acquire.

Out of the 17 affiliate sites we sold, four were sold using an earnout. This is 2 less than 2019, but double the number of affiliate earnouts in 2018. 

 

There is not much to report on earnouts, other than, on average, 86.29% of the sales price for these businesses was paid upfront, with the remainder paid to the seller over a period of time. 

This number is interesting because it represents the highest upfront amount of the last three years. In 2019, the average amount paid upfront in an earnout deal was 84.48%, and in 2018, that number was 57.61%. 

What we’re seeing here likely has more to do with the marketplace becoming heated than with the affiliate sites themselves. More cash buyers have appeared on the marketplace, making it harder for buyers wanting to do an earnout to get their deal unless they offer higher upfront amounts. 

Of course, this number is over a very small data set, so we can’t be sure this is the reason why higher upfront amounts were being paid in 2020 versus other years, but it does match what we’re seeing in the marketplace as a whole. 

*Our Little Disclaimer 

Because we are the largest curated marketplace and M&A brokerage for online businesses in the world, it’s important to keep in mind that the data above is the aggregate across all deals. 

It would be easy for a competitor to look at the statistics above and tell you we only sell “smaller businesses” or “just look at their average deal size.” The truth is that we sell a lot of businesses, both big and small—we just also happen to sell the most businesses, which can skew the data. 

Here are three businesses that sold on our marketplace far above the average multiple in the affiliate marketing space, listed with their actual sales price: 

  • An affiliate marketing business sold for $175,644.00 at 42x 
  • An affiliate marketing business sold for $142,179.00 at 42x 

  • An affiliate marketing business for sold for $320,000.00 at 32x 

Keep in mind that there are plenty of businesses that sold above the average sales and list price reported here. This little disclaimer is just a reminder that a high-quality business can garner a premium sales price when owners decide to sell the business. 

Opportunities 

Affiliate marketing offers several opportunities for both buyers and sellers. Those opportunities are largely the same as the ones for Amazon Associate and display advertising businesses. Mixing monetization methods together, such as implementing display ads, can be a huge win for affiliate sites looking to grow revenue. 

Adding Amazon Associates might also make sense. Most affiliate sites tend to focus on a handful of offers, often making the site smaller in scope. By adding Amazon Associates, you can expand into other review- and buying-guide content that your current affiliate programs might not offer. 

Finally, email marketing can be a huge engine of growth for the entrepreneur looking to expand to the next level in their business. Email marketing provides both a way to diversify traffic sources and expand revenue opportunities. 

Because the affiliate commissions here are often much higher, it pays to have professional conversion rate optimization tests done on your highest earning pages. While this is also useful for Amazon Associates, it can be a huge winner for affiliate marketing, where an increase in conversions can lead to thousands, or tens of thousands, of dollars in new revenue for the site owner. 

One big advantage affiliate marketing has over Amazon Associates is that it allows you to communicate with the people that own or are managing the offer. Once you’ve proven you’re sending quality traffic to an offer, you can reach out to the managers and ask for a commission bump. This can be as simple as a single email and can lead to a nice revenue spike. 

Also, be willing to test the same affiliate offer but hosted by different affiliate networks, even one that offers to pay lower commissions. We have several clients who have done this and found a network that pays lower commissions but with much higher conversion rates, leading to much more money being created. 

 

Risks 

Affiliate sites have the same main risk as display advertising and Amazon Associates, which is that presented by a Google update. The vast majority of affiliate sites get their traffic from Google, and an algorithm update can be catastrophic for a website’s traffic. 

You can mitigate this traffic risk by building up an email list. Since affiliate commissions tend to be higher than Amazon Associates, you might be able to lessen this risk further by using paid media, such as Facebook ads. This can be a difficult strategy to pull off with the tight margins of an affiliate site, but a successful campaign can be a gigantic boost to revenue. If you use a paid media campaign in conjunction with a solid email-marketing funnel, you may have a campaign that can run for a long time to come. 

Of course, this brings us to another risk with affiliate marketing: Offers don’t always last a long time. Some offers might only be open to affiliates for a few months or even a few weeks. This means you need to make sure you’re not sending traffic to any dead offers. If an offer goes away, there might not be a suitable offer to replace it, which can make a once-very-profitable page become a non-revenue generating piece of content. 

Most of this can be avoided if the site is grown into a larger site that features multiple monetizations and traffic sources. 

 

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