Many people shrug off affiliate marketing (and internet marketing more broadly) when they start to think about the numbers involved. What they don’t understand is the power of how compound interest works with affiliate marketing.
Consider this example:
Someone tells you: “If you write a blog post, you can earn a dollar a month.”
What do you do? Do you say? “Eh, no thanks, it’s just a dollar” (this is what most people say) or do you say: “A dollar a page? I could be rich!”
I always fall into the second category: a dollar a page can be a lot of money. Let me do some math to explain why.
How Compound Interest Works
First, let me give a brief overview of how compound interest works.
Most commonly, people talk about compound interest in terms of investing, which usually means investing in “traditional” things like the stock market, bonds, etc. Either way, the fundamentals are the same.
Basically, compound interest is the ability to earn more money over time because you invest the money you earn (your interest) as well as what you originally started with (your principal). That is compound investing is the process of converting interest earned to your principal, in order to reinvest and earn more interest.
Let’s use an example. Imagine you start with $1,000 and get a 10% return.
- Year 1: you have $1,100. ($1000 + $100)
- Year 2: you have $1,210. ($1100 + $110)
- Year 3: you have $1,331. ($1210 + $121)
You see where this is headed:
- Year 10: $2,593.74
- Year 30: $17,449.40
At the end of 30 years, you’ll be earning $1,745 dollars per year, which is almost twice the amount of money you started with!
Now let’s turn to how this works with affiliate marketing.
Compound Interest and Affiliate Websites
Above I asked if you would earn $1 a post. Most people say no. Now I’ll show you the math behind why I say yes:
Let’s say I write 1 post a day, which is an easy part-time job.
- Day 1: $1
- Month 1: $30
- Month 6: $180
- Month 12: $365
By the end of 1 year, I’ll be earning an extra $365 per month. Not bad for something I can do to earn extra money in my spare time!
But wait, the math gets even better. Let’s say I don’t just write posts myself, but I save and reinvest the money to pay someone else to write additional posts for me. Let’s assume (based on my experience) I can get a good post for $10.
- Month 1: $30 (haven’t had time to buy additional posts yet)
- Month 6: $231($180 of my work + $51 from posts I purchased)
- Month 12: $642 ($365 of my work + $277 from posts I purchased)
By reinvesting the money earned from my work, I’ve nearly doubled my potential return, after only 1 year! Keep in mind that these numbers are monthly earnings, so the results will only continue to improve.
Not only that, but at the 12 month mark, I’m earning enough to be able to purchase 55 new posts per month, which means that I could stop writing new posts and continue to earn money from my previous work. My income would grow substantially over time!
So what do you think? Are you ready to earn $1 a page? Learn how to get started.