Most people who get into business online start off either building web sites for AdSense revenue or being an affiliate of other people’s products. That’s a reasonable way to begin, since there’s less work, less responsibility, and probably most important for people starting out, less risk involved.
But the truth is that there’s simply less earning potential in AdSense sites or being an affiliate when compared to creating and selling your own product online.
There are three major benefits of being a product owner over being the a site publisher or affiliate.
1. More earning ability than affiliate commissions, both initially and after the sale.
As an AdSense publisher, you get paid once when a visitor clicks an ad. As an affiliate, you get paid once when the visitor buys the product you link to. That’s usually where it ends.
As a product owner, you have a lot more opportunities to profit. When a visitor becomes a customer, then you have the most valuable asset any business can have: a customer! It’s ten times easier to sell to a happy customer a second, third and fourth time than to convert a visitor into a customer.
I’ve got customers who’ve told me that they buy my products without even reading the sales page! They buy first and then read over the benefits. “My credit card loves you” was the exact words of a loyal long-time customer of mine.
The obvious financial rewards aside, as a product owner you also have the ability to tweak things about your site to make it convert better – modify headlines, wording in the sales page, incentives, price. As an affiliate you can’t change any of those things about the product you’re trying to sell, even if you have a good idea of what would make the product sell better.
2. Greater growth potential as you recruit affiliates.
As an affiliate or AdSense publisher, you’re limited to your own ability to create growth in your business. It’s usually not cost-effective to have other people do the work for you. For example, you can setup a Pay-Per-Click campaign to sell the products, but you have to pay for every click, which cuts into your profit margin. You can't go out and recruit others to sell the product for you, either.
As an affiliate or publisher you’re usually just a one-man show. As fast as your fingers can type is as fast as you can put up articles or web sites that drive traffic to your affiliate links. There's no way to leverage other people's work.
As a product owner, however, you don’t have these limitations. Beyond sending an email to my list, I do no outside advertising of my products. I know that if I have a good product that it will be found in the PayDotCom or ClickBank marketplace by affiliates eager to sell the product. I know a portion of my my initial customer base will also look into becoming affiliates for the product.
After I create a product I just sit back and let the affiliates do all the work! They run all of the Pay-Per-Click campaigns, they write blog posts and do search engine optimization for their web sites and Squidoo pages, they write articles and reviews and submit them to directories. I don’t have to do any real promotional work at all. In my mind that makes it a lot easier to be a product owner than an affiliate.
Let me give you an example of how much traffic affiliates can drive to your site. For just one of my products, Instant Article Wizard, I had more than 42,000 unique visitors in June of 2008. Of that 42,000, only about 2,500 came from search engines. The rest came from the work done by my affiliates. Searching for the phrase “instant article wizard” in Google returns about 118,000 results – of which only half a dozen or so belong to me.
Do you have any idea what it would cost to drive that kind of traffic with AdWords? Even at only 50 cents a click that’s $21,000 for one month’s worth of traffic! The reality is that you probably couldn't find enough keywords to get that kind of traffic out of PPC, not without paying huge per-click prices.
Even at 50% commission, affiliates are by far the cheapest form of advertising for the volume of traffic you can get from them.
3. The money is in the list.
The third major benefit of being a product owner is that even if the visitor does not buy immediately, you have the chance to get them onto you mailing list with the offer of a free gift or some specialized information. Afterward you can follow up with more teaching and coaching until they reach the point of trust where they’re ready to buy.
As an affiliate, it’s usually a now-or-never deal. Either they convert and make you a few dollars right now, or they’re lost forever. You don’t suffer from this shortcoming as a product owner. You can grow your list and teach them and win their trust over weeks or months, and in time they will help build your bottom line by becoming a customer.
As an example: I have a core set of about 5,000 people on my 50,000+ email list that are my real buyers. They’re the folks who read every email I send, leave comments on my blog posts, and have bought at least some of my products. Every so often a “lurker” on my list – a person who, up until now, has only been feeding off of the information I give out – has enough trust in me to become a member of my core list.
It takes time to build someone up to that point of trust, and affiliates don’t have the luxury of that time. Only product owners do.
So why isn't every one a vendor?
If being a product owner is so great, why isn't everybody a product owner? Because there's more risk in putting time, money and effort into creating a product. If it doesn't take off, you're left holding the bill. As an affiliate, if your efforts don't pay off, you're still holding the bill, it's just usually a lot smaller bill.
Being an affiliate also means less responsibility: no customer support, no follow-ups. You make a few dollars and you go on your merry way.
I think it's a good idea to start off as an affiliate, but you'll hit a ceiling where you won't be able to go any further. When you hit that ceiling, it's time to move on to becoming a product owner.
Please leave your thoughts and questions in a comment below.