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Affiliate Marketing

  • Affiliate Marketing: Short summary
  • What is Affiliate Marketing: Detailed summary
  • How affiliate marketing works: the basics
  • Benefits for advertisers
  • Benefits for publishers
  • Affiliate marketing compensation models 
  • Conclusion
 

Affiliate Marketing: Short summary

Affiliate Marketing can also be known as Partner Marketing. Here, affiliates or partners advertise products and services of other companies on their websites and receive a commission in return. Affiliate marketing is an instrument of performance marketing which has firmly established itself on the Internet’s advertising landscape. There are different compensation models in affiliate marketing, but the common feature they all share is that payment is only made for a successful performance. This could be, for example, a click on an advert or a purchase.

What is Affiliate Marketing: Detailed summary

The idea of affiliate marketing is said to have originated at a party held in 1997, where the founder of Amazon chatted with a young lady about her website. She offered to sell his books on her website in return for a commission. Gradually more and more partners were added, all prepared to advertise external products and services with payment received on a commission basis. Even today, Amazon is still one of the big players in affiliate marketing.

According to Quora, advertising spending on affiliate marketing in the US stood at $3.7 billion in 2013. Though these are the most-recent figures available, it can be safely assumed that expenditure on affiliate marketing is now much higher.

How affiliate marketing works: the basics

Many companies rely on affiliate marketing for the online promotion of their products and services.

With affiliate marketing web publishers link to content from partner sites and receive a predetermined commission. Advertisers will pay commission only if and when a particular action has been performed – perhaps, for instance, clicking on a banner or ordering a product on their website.

Many website owners offer affiliate schemes. Whenever a new prospect arrives at the advertiser’s site, the actual publisher is determined via an identifying code which the advertiser inserts in all marketing material links. In addition, the action of clicking on an advertisement activates cookies, which are also used to track the process.

Affiliate marketing can also be handled via professional affiliate networks. These are platforms that bring together advertisers and publishers and offer features such as the delivery of advertising media and tracking as well as performance tools and commission payouts. Examples of high-profile affiliate marketing networks include Zanox, Affilinet and Belboon.

Benefits for Advertisers

The goal of advertisers is always to lead potential customers to their site, where they may, for example, make a purchase.

Integrating their own content on the site of an appropriate publisher allows advertisers the opportunity to bring more prospects back to their site, which is likely to increase their sales.

Affiliate Marketing represents a favorable advertising opportunity for the advertiser because payment only becomes due in the event of a successful outcome. This form of performance marketing is therefore a relatively low-risk option.

Along with the possibility of higher sales, integrating their content on other sites also brings advertisers the extra benefit of a further boost to their brand image.

Benefits for Publishers

Publishers can earn money via their own website through the marketing of other products. The process embeds an advertisement on their website, such as a banner advertising a third-party listing.

The publisher acts as a partner (affiliate) and receives commission according to the agreed compensation model – which may be, for example, commission on clicks, leads or sales.

Affiliate marketing compensation models

There are different compensation models in affiliate marketing that specify the basis on which affiliate commissions are calculated. All payments are performance-based, and thus are only triggered when a predefined service is rendered:

  • Pay-per-click (commission per user clicks on the ad)
  • Pay-per-Sale (commission as a percentage of resultant sales)
  • Pay-per-Lead (commission per prospective contact, e.g. a registration or download)

Conclusion

Affiliate marketing is a form of performance marketing whereby affiliates host advertising on their websites on behalf of third-party companies in return for payment. For instance, a blogger could allow a partner company to place an advertisement on his site.

An advertising company will only pay when a predetermined action has been performed. This might, for example, involve a sale or newsletter subscription via the corresponding online shop. The most common commission models in affiliate marketing are pay-per-click, pay-per-sale and pay-per-lead.

Many website owners offer affiliate programs. Besides a direct-deal arrangement with a merchant, affiliate marketing can also be conducted via partner networks, with Zanox, Affilinet and Belboon being amongst the best-known examples.

Any publisher planning to operate successful affiliate marketing must first secure high-quality, well-presented content. Only premium content which adds value for users is likely to bring volume traffic to a publisher’s website, and thus create opportunities to increase commissions via affiliate marketing. It is also important to carefully select the best affiliate programs which offer advertisements that will be relevant to a publisher site’s visitor traffic.


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