According to a 2009 Sports Illustrated article, 60% of former NBA players go broke within five years of retirement. In the NFL, 78% of former players are bankrupt or in financial trouble after being retired for just two years.
Professional sports and affiliate marketing have a lot in common. In each field it is possible for someone who is young and hungry to make a lot of money very quickly. And like pro athletes, many super affiliates crack under the pressure, finding themselves flat broke just a few years after making life-changing amounts money. How do they lose it all?
By making bad decisions.
Talked into awful investments, sucked dry by freeloading friends and family and just being young and dumb, many affiliate marketers are zeroed out just a few years after hitting it big.
Don’t let it happen to you.
Here are five examples of how a successful affiliate marketer can lose it all. These are based on true stories. Some have happened several times. Read these carefully and don’t make the same mistakes.
1. Spending Money Too Fast
A big campaign can make a lot of money very quickly. But it can die just as fast.
An overzealous affiliate marketer who creates a lifestyle (House, Bentley, Jewelry, Rolls Royce) based on potential future earnings can quickly find themselves upside-down in a debt trap they can’t get out of.
How to avoid it: Be frugal and stay humble.
Your lifestyle does not have to immediately match your income. If you have debts, pay them off to avoid interest payments, but otherwise hold on to your money. Use it to launch bigger campaigns.
If after a year (or two) you see a steady income pattern… then have some fun. Just keep in mind that one hot campaign is not a long-term business plan.
Affiliates are creative people. And sometimes they come up with an idea that is so creative that the advertiser doesn’t approve it. Some affiliates choose to do it anyway because they know the idea will work very well. And if the launch looks good – the affiliate will spend as much money on traffic as fast as they can.
Then the advertiser sees the campaign.
If an advertiser sees a campaign that is running against their guidelines, they won’t pay the affiliate network. The affiliate network in turn can’t pay the affiliate. So the affiliate, who has paid for all the traffic costs upfront out of their own pocket loses everything -and there’s nothing they can do about it.
How to Avoid it: Treat the affiliate network like your business partner
If you have a crazy idea for a campaign, don’t be afraid to pitch it to the advertiser and affiliate network. At the very least run it by the affiliate network. A lot of times a network will OK your crazy idea and roll the dice with you by guaranteeing you payment. Always have your affiliate network in the loop, so that if the advertiser goes nuts, you know you’re still getting paid.
*Tip: This is especially important if the advertiser/product owner lives in the same country that the campaign is running in. If however, the advertiser/product owner lives in the US and your campaign is running in China, you have a much better chance of staying off of their radar.
3. Creating Your Own Product
It is very common for a successful affiliate marketer to consider creating their own version of a product they’re promoting. They think that by cutting out the affiliate network (10-??%) and the advertiser ($$$$$$??) they stand to make an even bigger pile of cash.
The problem is that building an offer, especially a physical product that must be shipped is time consuming, expensive and much more complex than you think. It can take weeks or months to setup a product correctly. And that time could just as easily be spent running a profitable affiliate campaign.
It’s not uncommon to see big affiliates disappear from the business for a year or more, only to return licking their wounds from a product attempt gone wrong.
How to avoid it: Don’t be greedy.
There are a few cases where affiliates have successfully transitioned into being advertisers and they’ve done very well. But for every (1) one affiliate that did it successfully (100) one hundred others failed.
Stick with what you’re good at, because the grass isn’t always greener on the other side.
4. Bankrupt Affiliate Networks
Affiliate marketing is unique in that it is the only businesses where very large financial deals are made without contracts, between parties that have never met. Because of this, affiliate marketers have to accept a certain amount of risk.
One of the biggest risks you take as an affiliate is that the affiliate network you send traffic to won’t be able to pay you if something goes wrong.
In the past 5 years (and as recently as late last year) some of the largest affiliate networks in the industry have gone belly-up due to bad risk-management. Their bad business decisions caused catastrophic losses that left thousands of affiliates without payments on millions of dollars in commissions.
We’re not just talking about smaller networks. These were some of the biggest names in the business that just – disappeared.
How to avoid it: Only work with major networks that have a track record of paying their debts.
There are a handful of affiliate networks out there that have earned respect. They’ve paid every affiliate even when advertisers screw them for millions. In one case an affiliate network president mortgaged his own home to make sure his affiliates got paid after a big deal went wrong.
That’s the kind of business partner you’re looking for.
Don’t risk using an untrusted network that promises an extra $5 per lead for your traffic – because they may not be in business next month. Look for a network with smart leadership who has a backup plan and a big bank account ready in case something goes wrong.
As a baseline – avoid any affiliate network who’s owner posts photos of themselves living an extravagant lifestyle (Bentleys, expensive jewelry, fur coats). That lifestyle has repeatedly proven to be a warning sign for bankruptcy.
*Tip: If you hear rumors that an affiliate network is having issues paying affiliates, leave immediately. There are hundreds of stories of affiliates who chose to stick with the failing affiliate network because it paid an extra $5 on their offer.
In the end the payments never came, the extra $5 was vapor and their greed cost them everything.
5. Bad Investments
Let’s say you make $250,000 this year in affiliate marketing. It would be very hard to imagine spending it right away on shoes and cars right?
But what if your best friend said to you “A smart businessman uses his money to make more money… and if you invest your $250,000 into my idea you’ll get back $2 Million in 60 days plus $10,000 a month for 10 years – Guaranteed“.
Sounds tempting, doesn’t it?
How to avoid it: Don’t invest in anything without professional advice.
Your friends and family are going to pitch you on every bad idea they have. Before you agree to any deal speak to an investment professional and an attorney about it. The money you spend on their advice could save you from making a mistake that costs you everything.
Remember: If you’re doing well in affiliate marketing you’ve already won the lottery. Don’t lose it by trying to flip the money one more time.
Being an affiliate marketer is the greatest job in the world. Writing headlines and split testing landing pages is so much fun. And if done right it’s the most simple to set up and profitable business there is.
But a few years of experience in the industry will show you, it’s not always pretty and not everyone you meet is going to have your best interests in mind.
These are just five examples of ways that things can go wrong. There are many more. Don’t become a casualty. Have fun, keep your eyes open, choose your business partners carefully and make incredibly smart business decisions as often as you can.
If you can do that, you’re in for one hell of a ride.
Thank you for reading – I’ll see you out there,