In the last two years, a lot has changed in the affiliate marketing industry. Google AdWords has implemented Quality Score, which has completely changed the PPC game. Much of the internet’s focus has moved away from search and into social media. The FTC (Federal Trade Commission) has implemented new rules and restrictions on affiliate marketing. That’s just the tip of the iceberg.

There have been many, many significant changes to the affiliate marketing world in the last couple years with surely even more to come. That said, affiliate marketing is still as strong as ever. In fact, some would even say that the long-term health of the industry is much better off with all these changes.

How can you adapt to the new world of affiliate marketing? How can you use the “new world” techniques and tactics, along with time tested and proven methods to build a profitable affiliate marketing business?

That’s what we’ll be covering here.

=> Why Affiliate Marketing Is Still a Stellar Business

Affiliates can account for as much as 50% of a small, lead-based business’ traffic, or as much as 10% of a large retail-based business’ traffic. The affiliate marketing industry is huge, with millions of dollars flowing from merchants to affiliates every single month.

Unlike just about any other business, practically anyone can get started in affiliate marketing and start making an income in just a matter of weeks. Start-up costs are often in the low hundreds of dollars, sometimes not even requiring any start-up capital at all.

Affiliate marketing makes it easy for people to specialize. If you love the art of marketing and generating traffic, you get to spend your whole day doing just what you love, instead of getting bogged down with other business concerns.

Unlike running an ecommerce company where you’re responsible for sales, customer support, product fulfillment, recruitment, legal structures and more, with affiliate marketing you can make a very strong income from being good at just one thing: generating sales and traffic.

As easy as it is to get started, the potential upsides are huge. Super affiliates can make as much as $10,000 per day, a select few make even more.

In short, affiliate marketing is relatively simple to get started in and the potential upsides are tremendous. Though the industry is more complex today than it was five years ago, it’s still a stellar way to make a good living online.

=> Why the Old Model of “Hit and Run” Affiliate Marketing Is Over

Affiliate marketing has gotten a bad rap for a long time for being spammy and for creating low-quality sites and products. For the last few years, this has been true more often than not.

Fortunately, this culture is changing. Affiliate marketing is moving more towards trust building and high-quality products with strong back ends, with businesses less concerned about the hit-and-run sale and more towards building sustainable businesses.

Hit-and-run sites are being squeezed on all ends. Traffic sources like Google AdWords are shutting down such sites with new rules and policies like Quality Score. Shady offers are being squeezed by the FTC with new regulations around testimonials usage and billing disclosures.

Most importantly, consumers are becoming smarter and smarter every day. Shady rebill offers have seen a massive drop in conversion over the last eighteen months, mostly due to consumers who are just much more conscious about whether or not a business has their best interest at heart.

The bottom line is this: if you want to succeed as an affiliate marketer in today’s market, start looking more towards creating sites, lists and other web properties that really create long-term value for customers, rather than just making the quick sale.

=> Social Media, Branding and Its Impact on Affiliate Marketing

How do social networks like Facebook, YouTube and Twitter affect affiliate marketing?

Unlike direct response traffic sources like AdWords, where you can immediately measure your ROI and sales, the effect of social media is more subtle and takes longer to take effect. That said, the potential impact of social media and personal branding can be much more powerful than direct response traffic.

Trust is often the number one most important factor when it comes to online marketing. A website owner who has his or her reader’s trust can command incredible conversion rates simply by making a recommendation.

On the other hand, a website owner with a poor relationship to his or her list often has to work extremely hard just to make dismal conversion rates.

In the past, the only way to build trust was to consistently put out quality content on a website or on an email list. That method worked, but building trust took a long time and often a lot of consumers just got left behind. They didn’t bother to come back to the site or just didn’t have the time to read emails.

Social media has changed all that.

Social networks like Twitter and Facebook make it easy for people to stay in touch with people and businesses in their spare time, in a leisurely way.

For example, if someone follows you on Twitter, they’ll keep hearing from you without having to go through the effort of checking your website every five days. If you continue to put out quality content on Twitter, they’ll gradually start to trust you more and more.

=> Social Media as a Traffic Source

In addition to being a great way to build relationships with fans, social media can also bring in huge amounts of traffic.

This is especially true for topics that people feel passionate about. Some successful Facebook pages have literally grown from zero to hundreds of thousands of people in under a week.

That’s because the viral power of social media lets people pass things on at a speed that’s never been seen before. Each time a piece of content is passed along, it also bears the weight of a friend’s recommendation, which takes the content even further.

Most social media sites also carry some sort of advertising program, and very often the most effective way to advertise on the platform is to combine its advertising platform with viral aspects.

For example, Facebook advertising allows you to advertise a Facebook page. Users directed to this page can click “Like” and have that like posted to their wall.

Likewise, Twitter’s “Promoted Tweets” feature allows you to bring your tweets to the front page. This allows Twitter’s users to retweet your tweet, sending it virally spreading through the Twittersphere.

Again, often the most effective way to advertise in this kind of media is to combine its paid advertising with content that users genuinely want to pass along.

=> Changes in Pay Per Click Advertising

In the past, Google AdWords consisted primarily of direct linking affiliates or affiliates who just created one-page websites designed to funnel traffic to affiliate offers.

Today, if you want to succeed in AdWords, you’ll have to do a lot more than that. You need to genuinely create high-quality content websites.

Even if you manage to get around the Quality Score filters the first time around, Google manually checks every single AdWords advertiser at least once every eight weeks.

Since Yahoo has recently switched its search feed to Bing, Bing and Yahoo are effectively going to be the same moving forward. Bing is also moving heavily in the direction of quality sites.

The trend is clear: to succeed in AdWords today, you can’t just do “arbitrary traffic.” You might get away with it for a short period of time, but to succeed in the long run you need to build websites that create genuine value for the user.

Do this and your PPC platforms will work for you rather than against you.

=> Facebook Advertising – How Does It Affect Affiliate Marketers?

When Facebook PPC first came out, they were very clumsy. Ads were often disapproved for no reason, but an ad could simply be resubmitted twenty times until it was reapproved. International ads wouldn’t be approved at all because Facebook staff couldn’t see the offer in the US.

In short, Facebook ads had at first developed a poor reputation in the affiliate marketing industry due to the many bugs in their system.

Fortunately, they’ve fixed many of the bugs and Facebook PPC is today becoming one of the most powerful platforms on the market.

They’re the second most visited website on the internet, second only to Google. They’ve surpassed any other website on the internet for user engagement, meaning people spend more time on Facebook than any other website on the planet.

But their real power comes in their targeting ability. While on Google you might be able to “infer” data, meaning guess at demographics or income based on keywords people type in, you could never really be sure.

With Facebook, you can specifically target people by age, income, location, marital status, gender or interests.

If you’re promoting a video game offer, for example, you could target only 18 to 28 year old males in the United States making $30,000 or more who’ve expressed an interest in video games.

Never before has such data been available on an advertising platform. Just about every source of user targeting in the past has been “inferred” data; users have traditionally been very hesitant to hand over their personal information for marketing purposes.

But with Facebook, you can target your exact demographic to speak to with data that you know is accurate.

Facebook is also able to provide advertisers with an increasingly powerful set of tools. You can split test many different pictures, ads and targeting options, for example.

Most affiliate marketers find that they need to go through a good handful of failed ads before they finally find one that really works on Facebook.

The good news, however, is that once you find a campaign that works, Facebook has so much traffic that you’ll often be able to make a lot of money once you hit on that one working formula.

=> Other Noteworthy New Traffic Sources: PPV & CPV, MySpace / Plenty of Fish PPC, Media Networks

Facebook PPC is by far the most significant new traffic source to come along in the last few years. That said, a few smaller players have come onto the market as well.

These may not work for everyone, but there are hundreds of affiliates making a full-time living just by learning the ins and outs of smaller traffic networks.

One significant new source of traffic is Pay Per View traffic, also known as CPV (cost per thousand views.)

The traffic is pop-up traffic, triggered by consensual ad-ware on a user’s computer. They install a piece of free software in exchange for viewing 2-3 ads per day. The free software could include games, wallpapers or utility applications.

Each installation clearly states that they will be seeing ads, and the user has to click “agree” before they’re shown any advertisements. The ad units can easily be uninstalled at any time.

As an advertiser, the primary way you bid on traffic is by domains. For example, if you’re running a dating offer, you might bid on the domain match.com. Any time someone goes to match.com, your ad will pop up in a separate window.

The top CPV networks are Trafficvance, Media Traffic and Zango. In general, you’ll need $500 to $1,000 to get started.

Other sources of traffic to look into include MySpace and Plenty of Fish in-house advertising. Much like Facebook, you’re able to target users based on demographic data provided by them. Though the user base is much smaller than Facebook’s, you also pay a lot less.

MySpace’s user base and Plenty of Fish’s user base both differ significantly than Facebook’s. To work on MySpace, chances are you’ll need to target either a much younger audience or a very music-centered audience. To work on Plenty of Fish, you’ll usually have to be presenting very dating-centered products.

Finally, banner ad networks have also been popping up left and right. These networks allow you to place banner ads on people’s websites, often with a very low minimum buy.

The benefit of these over direct buys is that when buying direct, you usually have very high minimum buys – typically $5,000 to $10,000 dollars. The benefit of using fringe networks over Google Content Network image ads is that the CPMs are generally lower.

Examples include Magnify360 and adBrite.

=> Improvements in Free Affiliate Tools

Over the last few years, the free tools available to affiliates have drastically improved.

For just about any affiliate, accurate tracking and split testing is crucial. Almost every single super affiliate on the planet is also an avid split tester.

In the past, to run any kind of split test you’d need to purchase split testing software which would cost you at least $500. Today, Google Website Optimizer gives webmasters sophisticated split testing tools at no cost whatsoever.

In addition to Google Website Optimizer and Google Analytics, other tracking tools have also gotten a lot more sophisticated.

For example, Tracking202 allows you to track what time of days conversions came from, what precise keywords they came from, as well as watch traffic data stream in in real time.

The new tools don’t just end there. Competitive analysis tools have been cropping up left and right as well.

For example, SpyFu allows you to spy on your competitors keywords with startling accuracy. You can see what keywords they’re bidding on, the ads they’re writing and which keywords are most likely converting well for them.

Compete.com also provides a similar service, with a different data set.

Affiliate offer aggregators like CBEngine and OfferVault make it easy for affiliates to find offers. Gone are the days when you only have a handful of offers to choose from. With these aggregators, you can now see many offers over many different networks, sorted many different ways to find the perfect offer for you to promote.

Affiliates today face fiercer competition, but the tools available to smart affiliates to compete are infinitely more powerful than in the past. If you haven’t updated your toolset yet, get acquainted with some of the tools talked about in this section and give yourself a leg up against other affiliates.

=> The New Holy Grail: The Power of Scaling

One of the most powerful things about being an affiliate marketer in today’s internet environment is the power of scaling.

Because there are so many different sources of traffic, if you find one working campaign you can often scale it to as much as 5-10 times its original income.

Let’s say you find an image ad that works successfully on the Google Content Network. You’re currently making $50 a day from this campaign.

The first step would be to port over the exact campaign to the Yahoo! Content Network, as it’s the most similar to Google’s. You might expect a $10 a day boost from this.

Then, using the demographic data you collect from your first campaigns, you might test out Facebook, MySpace and Plenty of Fish advertising. You might find that only one of the three converts profitably, or you might find that all three do.

From all this testing combined, let’s say this takes your earnings from $60 a day to $120 a day. Now let’s take it even a step further.

First, you take all the sites you’ve been placed on in the content networks and contact them directly and place media buys with them instead of through intermediaries. This cuts your costs by 30%, giving you a $15 a day boost.

Then you start testing larger media buys through Advertising.com, making sure you have stop loss clauses in your insertion order (the banner ad contract) to make sure you don’t lose more than $1,000 on any one buy.

You might fail a couple of buys before you find one that works. When you do find the one that works though, pretty soon you find yourself getting millions of views to your banners and thousands of users to your site.

Let’s say that takes your $120 a day to $300 a day. You’ve just gone from $50 a day to $300 a day, $1,500 a month to $9,000 a month, just by scaling one successful campaign.

This would have never been possible just a few years ago. Yet today, this happens all the time. You’ll find that many super affiliates you meet in conferences are constantly talking about scaling.

When you find that one campaign that works, latch onto it like a dog on a bone and milk that campaign for all it’s got.

=> When to Stop Studying Affiliate Marketing and Start Taking Action

Information and education has gotten a bit trickier over the last few years. On the one hand, industries and marketing techniques are shifting constantly, which makes it crucial to stay on top of the latest trends.

On the other hand, the number one thing keeping most affiliates back isn’t lack of information, but lack of action. Most affiliates actually know enough to make their first few successful campaigns online, but they just don’t put the action necessary into place.

If you’re just getting started, it’s important to know enough about whatever tactic you plan on using to make sure you’re at least following a proven formula. This is especially true if you’re paying for traffic, as the potential to lose a lot of money is there if you don’t know what you’re doing.

In general, keep your basic education to no more than two top-notch books, DVDs or eBooks. After studying your first two systems, take immediate action and put what you learned into practice.

If you’re an intermediate marketer, it’s still important to stay on top of industry trends. In general, you’ll want to put into practice an information consumption ratio of no more than 4 to 1.

In other words, for every hour you spend reading affiliate marketing blogs, studying eBooks or listening to audio books, you need to put four hours into actually building your business. At least.

This way, you’re both taking powerful action towards the future you want to create and sharpening your skills at the same time.