Understanding Affiliate Marketing

One of the buzzwords for internet marketers is affiliate marketing. The promises of untold and uncountable wealth echo around the internet and many new marketers are dazzled by these words.

It’s never that easy of course. Most people know this. But it is still really hard to ignore the call that some fairly unscrupulous people put out. As a new or even seasoned internet marketer the big point is to be cautious. Buyer beware!

Let’s have a look at what the term actually means.

By definition joining an affiliate program means that you as the affiliate undertake to send new visitors and buyers to a business for a reward.  When you achieve a result, which is pre-determined in the affiliate program you sign up to, then you get paid.

There are several players involved in the affiliate marketing industry. There is the merchant who offers the product or service for sale, the network, the publisher which is another term for the seller and the consumer.

This business model has grown very quickly and has led to establishment of a secondary tier of service providers including Affiliate Management Agencies, Super-Affiliates and Specialized Third Parties vendors.

For internet marketers it seldom matters whether they sign up as an affiliate direct with the company such as with Amazon or via an affiliate management agency such as Commission Junction.

Affiliate marketing has certain elements in common with ordinary online sales practices. Marketers might use traditional advertising methods. They might also use organic search engine optimisation, paid search engine marketing, e-mail marketing and display advertising such as banner ads.

On the other hand affiliates might use methods which are more internet specific. This could be in the form of writing revues on the products and services offered by a partner on their own blog or on social media platforms. What it boils down to though is using one website to drive traffic to another.

The most active sectors for affiliate marketing are the adult, gaming and retail industries. The sectors which are expected to experience the greatest growth are mobile phone, finance and travel sectors. Several of the affiliate solution providers anticipate growth in the business-to-business sector as well as advertisers who might add affiliate marketing to their mix.

Amongst the most commonly used compensation methods eighty percent of affiliate programs offered today use revenue sharing as their method of reward. It’s also called cost per sale (CPS).  Some nineteen percent use cost per action and the very small remaining percentage uses cost per click (CPC).

As examples Amazon would be considered a cost per sale merchant. The affiliate gets paid a commission if a sale has been completed whether this is a book or a DVD. The customer will have reached Amazon via the link on the affiliate’s website.

A cost per action payment would be made if a visitor introduced by the affiliate signs up to an e-mail subscription service or an online dating site. A cost per click example is something like Google’s Adsense program. The affiliate shows text ads on his site and if anybody clicks on the ad the affiliate receives a very small commission.