Does Adding Multiple Monetizations Make Your Affiliate Business More Profitable?
Diversifying risk is always something we’re told to do when it comes to business, but what about diversifying reward?
To find out if this is a profitable strategy, we are going to compare the affiliate businesses sold on our marketplace and see how they performed as more monetizations were added.
Establishing the Data
Before we get into the data, we should establish exactly how businesses are categorized on our marketplace.
When viewing listings on the marketplace you’ll be able to see all the monetizations from which a business earns income. However, thanks to our vetting process, we also have details on how much each monetization contributes to the overall earnings.
This allows us to categorize each business by the monetization it makes the largest percentage of its earnings from, which is referred to as the primary monetization. Organizing the data in this way allows us to label each business, which helps us create our state of the industry reports and data reports like this.
Generally, keeping a clean version of the data is helpful considering some businesses might only make a small percentage of income from additional monetizations. For the purpose of this data study, we focussed on businesses that have affiliates as their primary monetization.
It’s common for affiliate businesses to combine with other monetizations. It should be noted that although Amazon Associates is an affiliate program, we class it as its own monetization due to the volume of businesses we see using it.
The monetizations we’ve seen combined with affiliates include
- Amazon Associates
- Display advertising
- Lead gen
- Info product
Analyzing the Data
In the past two years, we have sold 48 businesses with affiliates as their primary monetization.
We have organized these businesses by how many monetizations they used, as can be seen in the table above. While there isn’t as much data as we would like, we believe the results are worth sharing.
Affiliate businesses with two monetizations earned 64% more average net profit than businesses with one monetization. A large jump in profitability is also seen when it comes to the average sale price, which went up 95% with two more businesses sold.
This trend continued as a third monetization was added, with the average monthly net profit increasing 37% from two monetizations and the average sale price increasing 31%.
While it’s interesting, and maybe a little surprising, to see the numbers increase this much, I don’t think anyone doubts that diversifying income streams is a good idea, especially when it comes to affiliate sites.
We could end the report here and conclude that the data backs up what everyone was thinking. However, this wouldn’t be the entire story; we found a lot more information—especially when diving into individual listings.
First, we’ll go into more detail about the most popular monetization combinations with affiliate businesses.
Amazon Associates accounted for 11 of the 18 secondary monetizations. This is unsurprising considering the ease at which Amazon’s affiliate program can be implemented.
The average sale price for these 11 businesses was $165,666.66, with an average monthly net profit of $4,848.27, both higher than the average for two monetizations. The wide range of products available perhaps offers affiliate business owners more choice when it comes to finding products to promote. Not every manufacturer has an affiliate program, so making use of Amazon’s extensive product collection gives you more options, which means more potential to make money.
Display advertising was the next most popular secondary monetization, with five businesses using it in addition to affiliate. These affiliate and display advertising businesses had an average sale price of $98,539.80, but with the data set being so small, it’s unfair to make comparisons with Amazon Associates.
For the remaining two businesses, there was one that used lead gen and another that used the info product model.
To further analyze what role additional monetization had on the profit and valuation of the businesses sold, we took a look at the businesses with the highest and lowest sales price with two monetizations.
Largest Business with Two Monetizations
The business with the highest sale price was a six-site package in the sports and outdoor niche that sold for $456,000.
What was it about this listing that made it so profitable?
Taking a look at how it made money showed it started with one affiliate program, which helped it work its way up to making a low four figures a month. From here the business slowly continued adding affiliate programs up until the point of sale. Amazon Associates was introduced as the second monetization almost two years into the business when it already had two other affiliate programs earning it money.
The owner continued this formula, slowly adding more affiliate programs. By the point of sale, around four years after it started, the business was earning from 20 affiliate programs plus Amazon Associates. This took the earnings to an average of $12,680 a month at the time it was sold on our marketplace.
One of our vetting advisors, who valued the business, said “the 36x valuation multiple was chosen at the typical high based on steady growth, strong branding, and diversified revenue streams.”
There is a strong link between the success of this business and the way in which it added monetization methods. Applying them slowly allowed the business to create good content to promote the affiliate offers and kept the trajectory going upwards while diversifying risk. Both of these things are not only good business practice but what buyers and investors look for when purchasing successful businesses.
This also raises another positive point about the affiliate business model. Using many different affiliate programs was another good way to diversify the income.
It could be argued that there were other contributing factors to the success and valuation of this business, but to what extent?
Profit is one of the largest factors in how much a business is valued at, but there are also other factors involved. This particular business had a small email list and a good following on YouTube, but most of their traffic was from organic search. While these points were considered as positives, they weren’t significant in terms of revenue or traffic, which means they weren’t a great factor in the success or high sale price of the business.
Smallest Business with Two Monetizations
The business that sold for the smallest amount was an affiliate and display advertising business in the electronics niche that sold for $32,491.
Initially, the business began earning primarily from AdSense display advertising and two affiliate programs. As it went through its first year, it was earning in the low four figures from Adsense and one of the affiliate programs. It was also trying to diversify further by adding additional affiliate programs, although these didn’t have the same success as the other affiliate offers.
Just over a year into the business, the AdSense account was limited by Google and the site lost one of its main income streams. The seller explained that he was busy with offline work when this happened. In addition to this, he wasn’t overly familiar with promoting affiliate offers which meant that there was a significant drop in income.
This is why we talk about diversifying income by adding monetizations as an important part of building a successful business. When something happens that is out of your control, having the income spread as evenly as possible will help negate the risk. As we saw with the largest business, there’s also a good claim that it can increase income.
Even though this business had the smallest sales price, it was by no means an unsuccessful business. Throughout 2019, it earned $32,508.23 in net profit for the seller, who decided to list the business shortly after the AdSense account was limited. While everyone would like to build a six- or seven-figure business, affiliate businesses are often side projects for many people, which earn them additional income. This business certainly pulled it off.
We’ll again look at the largest and smallest businesses to analyze how multiple monetizations affected their success. But first, we’ll give a run-down of how these businesses earned their income.
Of the 14 businesses with three monetizations, 12 were affiliate, display ads, and Amazon Associates businesses. One was an affiliate, display ads, and lead gen business, while the other was an affiliate, display ad, and info product business. Overall, the breakdown of monetizations was similar to businesses with two monetizations and follows the commonality in monetization seen for affiliate websites as a whole.
Businesses with three monetizations had the highest average sale price at $181,569.64. It would be easy to draw conclusions that having more monetizations is better, but what seems to be more important is the way in which monetizations are added. Looking at individual cases will help us evaluate how to best utilize additional monetizations for profit.
Largest Business with Three Monetizations
The largest listing with three monetizations was an affiliate, Amazon Associates, and display ad business that sold for $600,000 in the pet care niche.
This was a well-aged business that had previously been bought in a private sale and worked on by the current owner before bringing it to our marketplace to sell. It was already earning four figures a month from Amazon Associates, and shortly after acquiring the site, display advertising was introduced. Display advertising was helping the business make an additional $1,000 to $2,000 dollars a month in revenue.
The first affiliate program was introduced around the same time and quickly worked its way up to earning five figures a month for the business. Affiliate offers have great earning potential, especially when compared to Amazon Associates affiliate program, as the commission rates are usually higher. The business also added a second affiliate offer that earned it a few hundred dollars a month.
Even though the primary earner for this business at the point of sale was a single affiliate offer, some months it would earn almost $10K from the additional monetizations. Applying additional monetizations in this way gave the business more opportunities from which to earn money. The business had built up enough of a following that display advertising would earn the business a thousand dollars a month without requiring much upkeep, if any at all.
As we mentioned before, this was a successful business in more ways than one. It had a total of 61,000 social media followers across six accounts and required only two hours of work a week from the owners. But in purchasing an asset that was already successful and growing it even more, additional monetizations was a big factor in its profitability.
Smallest Business with Three Monetizations
The smallest listing with three monetizations was an affiliate, Amazon Associates, display advertising business in the finance niche, which sold for $39,433.
The business earned primarily through a single affiliate program at the point of sale (60%) but started as an Amazon Associates site. It was making a couple of hundred dollars a month from the various Amazon Associates marketplaces before adding any additional monetizations.
The affiliate program was added in May 2018, almost a year into the business, and display advertising was added in February 2019. In the seven months of 2019 leading up to the point of sale, the business’s net profit was already on par with the whole of 2018’s earnings.
While it can’t be said for sure, there are clear signs that adding display advertising and promoting an affiliate offer put this business on an upward trajectory.
Diversify with Caution
While the positives of adding additional monetizations far outweigh any negatives, there is a right way to go about things.
Trying to do too much early on may spread your efforts too thin. The majority of successful businesses in this study built solid foundations on one or two monetizations before diversifying. Display advertising is a monetization that is somewhat exempt from this due to how easy it is to use. You’ll have to decide whether it’s the right fit for your particular business.
Continuing this theme, diversifying should be done with monetizations that complement each other. Affiliate, display advertising, and Amazon Associates have been combined so often it’s safe to say they work well together.
The Benefits of Adding Additional Monetizations
If your business earns through a single revenue stream, then it has one critical point of failure. If something happens to that revenue stream, then your business might go from being successful to earning nothing, or even worse making a loss.
This sounds like a scare tactic, but it almost happened to one of the businesses we talked about in this article. It’s also something affiliate businesses are susceptible to in particular. Affiliate programs aren’t immune to changes in commission structure.
As a result of the global pandemic, Amazon Associates cut their commissions, meaning many businesses not only took a hit to their earnings but their valuations also decreased. Having multiple monetizations successfully earning is the best way to negate this risk.
As we’ve seen with the initial data and in most of the businesses we have analyzed, it’s also a way to increase your revenue. Amazon Associates and display advertising are the two main methods that affiliate business owners have used successfully. Display advertising is something that should at least be considered thanks to its ease of implementation and upkeep.
With the recent Amazon Associates commission cuts, this model may not be as effective as it once was. However, the vast range of products available to promote on Amazon still make it a good additional monetization.
Diversification is also possible through different affiliate offers, not just monetizations. Businesses should look to promote more than one affiliate offer where possible.
The bottom line is diversification, when done right, will not only minimize risk but also make your business more profitable.
If you own an affiliate business, there’s been plenty of food for thought. Maybe this confirms what you’ve already seen in your business? If so, it’s likely that you’ve built up a significantly sized online business.
To see how much that business is worth, use our free valuation tool, which uses real sales data to give you an accurate valuation in five minutes.
You can also schedule a call with our sales team if you want some advice on how you can maximize your exit.
Adding multiple monetizations might be something that you haven’t even considered yet. It could be the catalyst that takes your business to the next level.