Affiliate Marketing: Why a Small Budget Will Hold You Back
Someone sent me an email about their frustrations in starting affiliate marketing.
What’s going on?
He’s a college student on a tight budget.
Sure he’s motivated to start, but his total budget’s only $250.
He wants to know what the “hack” or the “secret” was to making affiliate marketing work with $250.
I understand how much it sucks if you’re trying to start on a small budget. Maybe you’re from a country where it’s hard to earn money, or perhaps you’ve had some financial setbacks.
I hated to be the bearer of bad news, but that’s nowhere near enough regarding budget.
It’s kinda like trying to figure out how to win a car race, but your car only has 5% gas left.
Half of that money is already gone because of hosting and tracking software. And now you’re left with maybe a hundred bucks to test traffic.
Anyways, I get these budget questions A LOT.
I want to explain a few concepts on how affiliate marketing works, and it’ll give you guys a better insight.
Profitable Campaigns Are Created Through a Series of Experiments
I don’t know about you, but I LOVED science classes.
I hated the boring lectures, but I looked forward to the classes that involved experiments.
I brought this “experiment” mentality into the affiliate marketing space. I view every campaign as a series of experiments.
With any experiment, you start with a hypothesis.
A simple hypothesis is, “Drinking sugary drinks daily leads to obesity.”
The validity of your prediction hinges on two variables (drinking daily and weight gain). So, you run a series of experiments to see if that statement is true or not (HINT: It is).
When you’re launching a new campaign, you also have a hypothesis, except that there are a lot more variables.
You hypothesize that running this combination of offer, landing pages, angles, traffic source, and more will result in profit.
A lot of variables means a lot of testing, and you need money to run these tests.
Here’s another way of thinking about it.
Let’s assume there are two people about to launch the same campaign that they found through a spy tool.
And to keep it simple, let’s assume everything’s the same except for budgets.
The newbie has a small testing budget and can only afford to test three offers.
All three offers fail, leaving him with zero money left.
The super affiliate has a much larger budget and ends up testing six offers.
Well, guess what? The first three offers the super affiliate tested out failed too.
But because he has the budget to test more offers, he discovers that offer #5 works. Now he has a profitable campaign.
The newbie walks away with his campaign a failure. The super affiliate walks away with a winning campaign simply because he could afford to test more offers.
Starting to make sense?
One analogy I like to use is going fishing and trying to catch a rare fish.
If you’re on a low budget, all you can afford is a fishing pole or a net. The guy with the bigger budget can afford a fishing boat that has a vast net.
You can imagine that the odds of him catching the rare fish are much higher.
That’s kinda how I feel about affiliate marketing sometimes. Yes, there’s a lot of skill involved, but some of my victories came just because tested longer.
Bottom line: whoever experiments more wins, but experiments require money.
Lowering the Impact of Variance
There’s a fascinating concept I learned from the poker world called “variance.”
Simply put, it means things don’t always go according to plan.
In Texas Hold Em’ poker, the best pre-flop hand is two Aces (AA), and the worst is 7 2 offsuit. In theory, AA should win around 88% of the time in a heads up match.
But even though the odds are excellent, there’s a chance that the AA can lose to the 7 2 offsuit five times in a row.
Just like how it’s possible to flip a coin and have it land on heads five times in a row.
I’ve realized that no matter how well things are planned or should go, there’s ALWAYS an element of luck involved.
The ONLY way to lower the impact of variance is to increase the sample size.
You may be able to flip the coin and land heads five times in a row, but if you flip it 100 times, it will most likely end up being right around 50%.
How does variance affect affiliate marketing campaigns? One of the easiest examples is launching a Facebook campaign.
A big part of how well your ads do is how they perform initially.
Facebook will show your ads to a small sample of your selected audience. If they perform well, you’ll be rewarded. If they don’t perform well, you won’t be rewarded.
So what happens if you launch a campaign and you get “unlucky” with a bad initial audience? You might think the campaign is a dud, but it could’ve had potential.
How can you combat that? You can launch with multiple ad sets.
But once again, more experiments require money.
It’s so easy to assume that if a split test fails, it must mean X sucks. But there are unknown hidden variables that could be affecting things. I’m talking things like…
- The offer is fantastic, but you launched it on the one day the advertiser decided to scrub.
- The offer is impressive, but you launched it when there’s a holiday in the country and conversion rates are low.
You could go crazy thinking about everything.
My big point is that it’s hard to do paid traffic on a low budget.
What to Do if You’re on a Smaller Budget?
If you have a small budget, you need to get a bigger budget. There’s no secret.
I’ve mainly seen two paths.
The first one is to focus on a less capital intensive business, build a bankroll, and then come back to affiliate marketing in the future.
The second one? Go straight into affiliate marketing, but hustle for more disposable income.
That’s what I did when I first started. Sold everything I didn’t need. Didn’t go out. Picked up freelancing gigs online for extra income.
As far as launching campaigns, there are a few things you can try to maximize your dollars.
1. Reverse engineer campaigns.
Remember when I mentioned that launching campaigns is all about testing variables? If you’re starting from scratch, that’s a lot of testing you need to do.
One shortcut could be to model what other affiliates are doing. If an ad is appearing everywhere, then they’re probably making money.
You could model the winning landing page and offer, and focus your budget on just the ads.
2. Get an Affiliate Wingman
This is a technique I’ve used successfully in the past. Instead of launching by yourself, start a campaign with someone else. This doesn’t mean you’re forming a new corporation and all that nonsense.
If you have $500 to test a campaign, and they have $500, why not run the same campaign, run different split tests, and share the data?
- I’ll test the landing page and the offers
- You test the angles and the ads
- We’ll share the data and cover more ground that way
One time I shared this idea with someone and their reaction was, “What if we’re profitable and they steal the campaign?”
Even if that were to happen, you would still be walking away with the experience of getting a campaign profitable.
And you know how to “fish” now and have the ability to catch your own fish anytime. Who cares if they stole the bucket of fish?
I’ve been getting the same question over and over again for years, so I’m hoping that sharing these concepts helps you understand why a budget is needed.
And if you have a small budget, you have to get creative. Look at what others are doing. Team up with a wingman.
I lost thousands of dollars testing out campaigns before I found my first profitable one.
Did it suck to lose money? Yes. Especially when I had no idea if it was going to pay off.
But money is replenishable. You get a paycheck every two weeks.
We all take risks. Me getting into university debt was a risk.
I guess for me, affiliate marketing was me finally taking a bet on myself.