5 Truths about Referral Income that You'll Want to Know

A decent portion of my income from my online adventures over the past nearly 20 years has been from referral income.

Referral income, as the name implies, happens from people you refer to a service. There could be a one-time bounty, a recurring commission based on their activity with they service, or both.

A referral income structure is a legitimate and often sustainable strategy for growing a business. It encourages existing members to find, and sign up, new members. The referral rewards are built into the system, and should involve no additional cost to the people signing up.

Table of Contents

Work now, earn later

The process for gaining referral income works like this:

Sign up for a service that has a referral program.
Sign up for the referral program itself (may be a separate thing).
Talk up the service, buy paid ads, write content, whatever, to get your referral link in front of people.
Some will click on the referral link.
Some of those will sign up.
Some of those will use the service enough to trigger your commission and you get paid.

Steps 1 and 2 are usually straightforward and quick.

Step 3 is where the work is, and if done effectively, Steps 4 through 6 happen as fruit of that labor.

Truth #1: Getting signups is a numbers game

Getting eyeballs on your referral link (Step 3) is necessary, but that's just the start.

Each of the following steps is a fraction of the step before it.

It's not unusual to to have only a few percent of visitors click on the link. That's maybe 30 out of a thousand.

Then of those they have to sign up for the service.

So maybe two or three get that far.

You need a lot of visitors for a decent amount of signups.

Truth #2: A lot of referrals don't trigger any rewards

Even if someone makes it through all of those filters and signs up, they may never use the service enough to trigger a reward for you.

Let's take my referrals for Swagbucks as an example. (That's a referral link, by the way, as are the rest of the links in this article. 🙂 )

Over the years, I've had 282 referrals sign up. Of those, 135 of them, or nearly half, haven't earned me any referral income. Nothing.

All of those referrals got all the way through to signing up, and never used the service to make any money (which means I didn't make any money).

That happens.

Truth #3: Referrals that do trigger rewards might stop

Referrals might use a service for a while and trigger a lot of referral rewards, but then the shininess goes away and they stop.

I was fairly excited after getting a signup for EarnApp. The person installed the app for a while, and after getting a couple of payouts, stopped.

And on Swagbucks there was a guy that was earning like gangbusters, but then he slowed down a lot. I do see he's still active once in a while, but not nearly like he was.

So once you get a referral, it's certainly not forever. That happens too.

Truth #4: The entire program can shut down

Websites run their course. “It was a good run,” they'll say, “but it's time to say goodbye.”

Or if the website isn't done, then the referral program is done.

Business strategies change, and the people referring the new members were caught in the crossfire.

Truth #5: A small number of referrals trigger most of the rewards

I'll end with a good truth though. It's the Pareto Principle at work.

A small number of your referrals will earn an outsized portion of your income.

For Swagbucks, that one referral triggered 30% of my referral income all by himself.

On a related site, InboxDollars, one referral out of 5 triggered a whopping 90% of my referral income!

These are the referrals that make it all worth the effort. They're the active users that make money for everybody: the site, themselves, and the person who referred them.

The strategy for continuous referral income

Following these truths, here's a strategy for continuous and even growing referral income:

Keep getting new referrals

The numbers game is real. The more people that see your referral links, the more people that will potentially become lucrative referrals for you. Only a small portion of the people who see your link will earn you commissions, and only for so long.

Have several referral programs going

Because referral programs can stop, having several going on at the same time distributes the risk and keeps you from having all of your eggs in one basket.

Encourage your referrals as much as you're able

Not every program gives the ability for referrers to contact their referrals, but making yourself available to them to help might bring more income in the long run.