Lead Generation vs. Affiliate Marketing: Which is Better

If you are looking for ways to generate revenue for your website, you are probably aware of lead generation and affiliate marketing. If you are not familiar with those terms, here is what we mean:

• Lead generation – capture information from a potential customer and then sell that information to a company who will try to convert them to a customer
• Affiliate marketing – refer your visitors to a product or service and get paid a commission if the customer purchases or takes a certain action (i.e. provide their information to a company, sign up for a free trial, etc.)

Both of these methods of generating revenue and monetizing your website can be incredibly profitable. Which is better? The answer is that it really depends on what kind of business you are in. They are simply two different tools in your tool belt that each have their strengths and weaknesses.

Helpful Resource – Learn Lead Generation: Actual Tactics Used By Experts to Capture Leads

Lead Generation: Pros and Cons

Lead generation is a tool that may or may not be effective in your particular industry. Be aware of the following strengths and weaknesses of lead generation as you consider it for monetizing your web traffic.

Pros:

#1 – Lead generation may be much more profitable than affiliate marketing in some industries

There are some industries where the going rate for a lead is far higher than what you would earn from getting a commission on a sale. The following industries are known to be quite lucrative for generating leads:

• Insurance – whether it is auto, home, life, health, or small business, the insurance market thrives on generating qualified leads. Since insurance is an incredibly profitable financial niche, many companies are willing to pay top dollar for quality leads.
• Home repair and remodeling – if you have ever tried to find home repair or remodeling contractors at sites like Home Advisor or Houzz, you’ve probably been pressured into entering your name and address and what type of service you are looking for. Your information is being monetized by referring you to contractors who are willing to pay to contact you for hire.
• Legal services – everyone knows lawyers charge ludicrous rates for their services. Competition is stiff for clients. Law firms of all types are often willing to pay lucrative fees for potential clients.
• Higher education – colleges and universities don’t pay commissions if you refer a student but they will pay for qualified leads. With the prices colleges and universities charge for tuition and all the other extras (housing, food plans, books, etc.), students are highly profitable and leads in this industry have typically paid very well.
• Credit cards – credit card customers are worth a lot since most people aren’t very good at paying off balances and thus rack up lots of interest fees.
• Mortgages – here is another niche in the financial industry where lots of interest is paid on home loans which drives up the value of qualified leads.
• Dating – with marriage on the decline, the desire for dating services got popular on the Internet very early. Dating services can charge lucrative monthly fees and their potential customers are worth quite a bit.
• Senior Care and Assisted Living – with an aging population comes greater and greater need for expensive daily care. Obviously, this niche is geographic focused so take that into consideration.
• Local Medical Services – dentists, chiropractors, massage therapists and other local medical service providers will often pay well for qualified leads.

#2 – Lead generation can be used in some industries where paying a commission might violate laws

Paying commissions is not legal in the United States when government money is involved and possibly in other industries that are highly regulated by either the federal or state governments. Instead, lead generation may be a legal method of a company paying for potential customers.

#3 – Customers do not have to spend money in order for you to get paid

The act of actually buying something is often the final hurdle to overcome in the transaction process and often the most difficult. With lead generation, you don’t have to overcome this hurdle in order to get paid. Instead, typically you only need a potential qualified customer to provide information which is obviously less of a perceived risk than handing over money.

#4 – Lots of software tools are available to help you capture information easily

Internet technology has evolved to the point where you can use simple lead gen software like OptinMonster or a more fully featured customer relationship management (CRM) platform like Pipedrive to capture leads.

OptinMonster lets you design a number of forms and offer templates to use all over your website including embedding in pages or delivering all kinds of pop ups based on website user behavior to convert more of your traffic into leads.

You can see what OptinMonster can do in the video below:

Many of these software programs allow you to target pop ups and lead gen forms to different visitors based on their known demographics. For instance, if you are trying to generate leads for a particular local market (say people looking for lawyers in Seattle) you can use the geo-location targeting feature of OptinMonster to only present legal offers to web visitors from Seattle. This valuable feature lets you do a much better job of qualifying leads before you even capture them.

#5 – If you sell leads directly to the end-buyer, you can negotiate rates

Typically in lead generation, you either sell leads directly to the company who is seeking the customer, or you sell it to a lead aggregator who then sells them to the end-buyer or buyers. Selling to a lead aggregator can be an easier relationship to manage but you typically earn less per lead.

If you develop relationships with the end-buyer, you can typically negotiate higher rates per lead, especially if you do a good job of qualifying your leads according to your buyer’s needs.

In some industries, it is common to sell one lead to multiple end-buyers which can further maximize your earnings per lead.

Cons:

#1 – Some industries don’t have companies willing to buy leads

Leads aren’t always worth the time or money to purchase in some industries and therefore may not even be an option. For instance, Amazon won’t pay you a lead for someone who might buy a set of computer speakers on their website. However, they may pay you for someone who signs up for their Audible monthly subscription program free trial.

#2 – Many times leads must be qualified in order for you to get paid

Just because someone fills out a form does not mean a company will pay you for that information. The lead must be qualified meaning it must meet certain standards in order to be viewed as a potential customer and worth being purchased.

For instance, why would a dentist in Denver, Colorado pay for a lead from a person living in England who has no interest in dental services in Denver? They wouldn’t – such a lead is not qualified for them.

In order to get paid for leads, you must think in terms of what prospective client the end-buyer really wants to pay for.

#3 – Beware of companies that don’t pay for the leads

In the past, there have been problems with companies not paying for the leads given to them. There are ways to ensure you get paid but just be aware that it has been a problem in the lead generation industry. It is important to have mechanisms in place to protect yourself and make sure you are paid fairly for what you deliver.

Affiliate Marketing: Pros and Cons

Affiliate marketing is probably more well-known to solo entrepreneurs than lead generation. We’ll go into some of the pros and cons so you can get an idea of where this monetization option might fit within your overall strategy.

Pros:

#1 – Affiliate marketing is available in a wide range of industries

Affiliate marketing got its start early in the popularization of the Internet around the mid to late 1990s with the advent of link and cookie tracking in connection with the rise of ecommerce. As an accepted form of marketing, it has been widely adopted and is available in a very wide range of industries. Most likely, options for you to affiliate with companies that offer products or services of interest to your web visitors is very high.

#2 – Affiliate marketing is easy to set up and get started

Typically, all you have to do to get started with affiliate marketing is fill out a form, get accepted, and then start adding links to your website. When visitors click a link and purchase a product or service, you get a commission.

Of course there is more to successful affiliate marketing than that but the steps to get started are that simple. It is really quite easy which is why it has become such a popular method of monetizing web traffic.

#3 – Lots of software and services exist to accurately track referrals and credit them to you

Affiliate marketing lives and dies by the effectiveness of the tracking technology that credits paying customers to those who refer them. Fortunately, the technology is fairly widespread which has given affiliate programs the opportunity to proliferate.

With off the shelf third party tracking technology, just about any company can offer an affiliate program and some of the best programs are offered directly from the companies selling the products and services and not through the larger affiliate networks like Commission Junction, Rakuten Marketing (formerly Linkshare), Clickbank, or ShareaSale.

#4 – There are often multiple affiliate options for competing products and services

The more affiliate programs that are offered in your industry, the better it is for you to negotiate better terms or have backups in case one affiliate program performs poorly or is eliminated completely. Additionally, you can test various affiliate programs against one another and aggressively promote those that perform better for you.

Affiliate programs don’t always last forever. Sometimes companies decide to shut them down completely. If a particular program becomes a large source of income for you, you always want to have a backup plan.

#5 – Affiliate programs can be promoted wherever the terms of service allow

Affiliate programs rely on links that set a cookie and/or coupon codes to track a sale to you. If the terms of the program allow, you can promote these links and coupon codes just about everywhere including your own website or sites, other people’s websites, social media, email, or in third-party community apps. This can give you quite a bit of flexibility in how you choose to market these products and services and may open doors your competitors haven’t yet taken advantage of.

Cons:

#1 – Affiliate programs can be susceptible to losing commissions through cookie blocking or erasing technology

Typically, affiliate programs rely on cookies that are placed on your web visitors computers once they click on your affiliate link. If these cookies are blocked or erased, you could lose out on earning a commission if the referrer ends up purchasing.

Some affiliate programs have other methods of tracking like coupon codes or software that contains a tracking identifier. In short, be aware of how the affiliate program is being tracked and ask if there are any backup methods of tracking in case of cookies being blocked or erased.

#2 – Little ability to negotiate rates and terms of service unless you are a high volume affiliate

Sometimes commission rates are set fairly low and cookie duration is short and often you as an affiliate can’t do much about this unless you send a lot of customers to a company or there are competing affiliate programs that offer higher rates.

Additionally, sometimes terms of service are changed overnight which can negatively impact your revenue. Cookie duration might decrease, commission rates might be lowered, or a company might decide to only allow certain affiliate with a base sales or traffic volume to be a part of the program. Be aware of this potential volatility and have multiple revenue sources in place to compensate.

#3 – Affiliate links may be viewed negatively in some cases by search engines

If you populate your content too heavily with affiliate links, it may negatively impact your search engine ranking. Search engines like Google consider affiliate links a form of advertising and have policies in place that determine how ad-heavy your content is as a part of their ranking factors. You will want to be wise in how you deploy your affiliate links in order to avoid any search engine penalties.

#4 – A customer has to actually purchase (in most cases) in order for an affiliate to get paid

Getting someone to pay for a product or service is harder than getting them to provide you with their information. Therefore, the barrier to getting paid is higher than lead generation.

Another thing to be aware of is that as the price of a product or service increases, so does the difficulty in getting someone to purchase. You may have to do more work up front to convince someone to purchase if you are promoting high priced products.

#5 – You may be losing sales due to short cookie length

Every affiliate program will tell you how long their tracking is set for which determines how fast your referring visitor must buy if you will get paid.

For instance, if a company only has a 24 hour cookie duration and your referring customer buys 30 hours from the time they clicked your link, you won’t get paid.

Always be aware of cookie duration when you sign up for affiliate programs. Some un-affiliate friendly companies know exactly how long it takes someone to purchase from them and sometimes set cookie length to minimize how much they have to pay affiliates. This doesn’t make for a good long-term business relationship so be aware.

Weaknesses of Both Lead Generation and Affiliate Marketing

At the beginning of this article I mentioned that lead generation and affiliate marketing should be viewed as two different tools in your toolbox and that one wasn’t necessarily better than the other. It is about applying the right tool in the right situation.

But sometimes, lead generation and affiliate marketing aren’t the right tools at all. Consider the following drawbacks of both monetization options:

#1 – You may be sending valuable customers to other companies in exchange for a one-time payment instead of building your own long-term customer base.

Companies are willing to pay you a lead fee or commission because they know they can make more money on that customer in the long run than they paid out to you.

This is OK if you have no intention of building your own customer base. Unfortunately, that isn’t always the most strategic decision.

There is all kinds of value that opens up to you if you build your own long-term customer base. Instead of making money off one purchase, what if you built up a customer base that purchased from you over and over again? (developing and selling online courses is one way to do this).

Sure, if you have no intention of selling insurance or offering home repair services, you might as well make some money off the lead. But if there is an option for you to build your own business, think twice about sending potentially valuable long-term customers off to someone else.

#2 – You don’t control the customer experience

When relying on lead generation and affiliate marketing, you typically don’t control the purchasing process, the product or service quality, or the customer service. Therefore, you are at the mercy of the company you are referring to for how effectively they meet the needs of visitors you are sending them.

This can impact your business not just in terms of lost revenue but also in lost trust depending on how closely your visitors see the alignment between you and the companies you are partnering with.

When you sell your own products and services to your visitors, you are in control of all these aspects. You decide on the level of quality you deliver. You can make the purchasing process as painless and trustworthy as possible. You can control how well your customers are taken care of after the purchase.

#3 – You may be tempted to refer your visitors to companies with poor reputations

Sometimes the temptation to maximize revenue leads us to make poor choices with who we choose to align ourselves with. Unfortunately, our web visitors suffer as a result.

When referring visitors to another company, you’ll feel better if you know you are making quality recommendations that serve your customers’ needs well. These products and services don’t need to have the lowest prices. Seldom do the best quality items occupy the lowest pricing tier. Customers need to understand that there is a cost for high quality. As long as pricing is transparent and honest, don’t feel bad recommending higher cost products and services to your customers.

I hope this article helped you understand a bit better what role affiliate marketing and lead generation might play in your monetization goals. I encourage you to test both if you can to see which perform best and provide high quality products and services to your website visitors.