If you are involved in affiliate marketing you see this statistic all the time, 99% fail, 98% fail, 95% fail, 90% fail, whatever it is, depends on the site, the statistic is pretty obviously made up, but fairly accurate none the less. A site owner will tell you that it is the fault of the members and people who join, who are unwilling to put in the effort, time, and work needed to succeeded (read: lazy members). Naturally they want to thwart the blame away from themselves, but in reality, this high failure rate is in the design.
The ‘Make Money Online’ niche is loaded with thousands of multilevel marketing scams, frauds, and nonsense – they are literally designed to fail by using these “matrix” structures (read: pyramid). For example you will pay $20 to join, and all you have to do is refer 3 people, who each also refer 3 people, who each also refer 3 people. The main sales pitch is – you just have to refer 3 people and you will make $800,000 a year. Really? Let me break it down for you, many of these pay lowest amounts on first levels, and larger amounts on later levels, knowing that most people won’t get beyond the first couple of levels, so it this rate you have your first level of 3 people, and they are paying probably 25 or 50 cents per person, but we will be generous and say $1. So you have 3 people, that’s $3. You’re a pro-marketer so you even manage to fill up the second level of 9 people – and now you are at $12. You are a master of your craft, so you even fill the 3rd level of 27 people, Cha-Ching! Now you’re in profit! That’s 39 people and now you’re making $39 – woohoo a profit of $19 a month.. you’ve referred 39 people to this site who are now all paying members, and what did you get for it? A profit of $19. Wow this site is AWESOME! (pardon my sarcasm). Here’s the thing – how much money are those people on your first level making? they have 2 levels filled, and are at $12 – so not even your first level is in profit – so out of 40 people, 1 is making a profit – and viola – there is your number – 2.5%. That means 97.5% of the people (round up to 98%) are not making any profit at all. We can take this a step further and miraculously fill up your 4th level – that’s 81 MORE people – giving you a total of 120 affiliates, well now your first level is at that $19 profit, and you are finally starting to make some money – $100 a month. This brings you to 4 people that are profiting, out of 121. That is 3.3%.
So why do 95% of Internet Marketers Fail? Because a huge majority of sites are built that way. This is why pyramid schemes are looked down upon, and why marketers started calling it a ‘Matrix’ instead. Even if you are in the top position and making money, it’s still just barely – You had to recruit 120 referrals, just to make $100, that’s pretty sad.
So lets say you are a smart one who doesn’t do matrices or pyramids or any of that other over-hyped garbage, lets say you are promoting a “real product” and getting a full single level commission of 30%. That’s great, but still, how many people do you need to make a profit? 3 people x $3 commission a person is $9 so even then your not still at your full return, you would need another 1/3rd of a person, so 4 people will put you in profit, if it is a $10 product and you get 30% then 4 members is netting you $12 – $10 for the product, $2 profit. So now you are making $2, while the other 4 are still making nothing – 5 people, 1 in profit – that’s 80% failure, still better than 97%, but still leaving a lot of people in the cold.
How about 50%? Now you just have to refer 2 people to break even, which means 3 people total, 1 in profit – now we’re down to 66% failure. For me, this is the magic number. You have to understand also all the time, energy, and resources put in to developing and running a site, splitting sales 50/50 with the site owner, to me, is fair, without the site I would have nothing to use, but without the affiliate there would be no one to use it. There are a lot of expenses to running a successful site (though very few expenses to run a failing one), also keeping in mind payment processing fees, 50% comes to well over half of the real profit. For me personally, 50% of the profit goes back in the site in advertising and hosting and other services, so when I pay you 50% commission, I am getting 25% of it as profit, and 25% goes back in, so realistically even at 50% you are getting twice as much from each sale than I am as the owner, and this is because I have enough respect for my affiliates that they are worth it. If you are going to put in the time to create an advertising campaign, and use your resources and relationships to build my sites membership, then you deserve the larger chunk.
Take a site with a good worthwhile commission rate, and pair it with an exceptional product, and you’ve got a gold mine.
Another huge flaw in most get rich quick schemes is that they are marketing an income opportunity instead of a product, so while you are recruiting this endless chain of affiliates, they are joining under the premise that they will make $800,000 a month – when they don’t make $800,000 a month, guess what, they quit, they feel ripped off scammed, and don’t trust you or the site anymore, now not only have a lost a current and future customer, you have to recruit another to replace them, if you do manage to fill that 4th level and get 120 people in your structure, by then you’ve actually recruited twice that, if not more, who have come and gone and had to be replaced. If you were promoting something as an excellent source of advertising, tracking, email marketing, etc, and they join – and it turns out that it IS an excellent advertising, tracking, email, source – then guess what, you have a satisfied customer who will remain your referral and continue to earn you commission. You didn’t sell it to them as an income opportunity, so if they do not earn an income, they do not feel betrayed or ripped off.
If you want to be in that top successful group of affiliate marketers, it’s very simple – don’t let site owners bully you into paying you pennies on the dollar in commissions, and don’t let them sucker you into their hypes and pitches that you can make money overnight with their program. Instead find an exceptional product that people in your industry actually have a demand for, and couple it with a commission rate that makes creating a successful marketing campaign actually worth your time – and you have a formula for success.