What exactly is affiliate marketing?

18 December 2008

Do you need affiliate marketing to make money on the web? By now, you’re probably well aware of the multitude of ways in which a person can earn a substantial amount of money online.

Obviously, any method needs to be employed correctly, and affiliate marketing is no different. To understand if you need affiliate marketing, you must first fully understand what it is and how it can work for you.

In affiliate marketing, a business; typically a website; will reward affiliates for each customer referred to them if they sign up and conduct a purchase transaction. Simply put, if an affiliate can get people to a businesses site, that business will pay said affiliate a commission, sometimes called a referral fee.

Affiliate marketing is the name of an entire industry that houses a number of different companies and individuals who all perform affiliated-based tasks to earn revenue. These models include affiliate management companies, in-house affiliate managers, and affiliate networks.

Needless to say, affiliate marketing can be a very rewarding prospect, whether you take part in the marketing for a business, or employ the marketing technique for your own business.

The three-step process takes a customer to a website with an affiliate marketing option, the customer is then directed to a partner which is a seller or brand, and from there, the affiliate is rewarded compensation. It’s a simple science, and one that countless individuals are using to help line their pockets.

This technique shares somewhat common characteristics with other Internet marketing methods, in part due to advertising to a profitable end; but in terms of difficulty and capital investment, affiliate marketing remains wholly separate due to the ease of use and low overhead cost of operating as an affiliate.

However, affiliate marketing’s profile isn’t quite as large as its counterparts. Syndicated websites and email and search engines such as Google are the biggest players.

The vast majority, around 80%, of all affiliate programs use a brand of revenue sharing referred to as “cost per sale” (CPS) as a means of compensation. Others use “cost per action” (CPA), and “cost per click” (CPC).

There are also “tiered” methods of compensation when dealing with affiliate marketing. Instead of compensating only the affiliate’s referral, a tiered method would compensate referrals from the referral of the affiliate to a percentage - usually lower. This is referred to as multi-level marketing (MLM).

Businesses/webmasters witness a few key benefits when employing affiliate marketing. The “pay for performance” model means that you can attract business without incurring a heavy marketing expense unless results are met. Businesses running in-house affiliate programs and those who employ the use of third-party services run basically neck-and-neck where productivity is concerned.

There are currently no set-in-stone industry standards for which types of businesses can implement affiliate marketing; the model is open to all comers. Some types of websites currently using affiliate marketing include: Those utilizing Pay-Per-Click for promotion; Comparison shopping; Loyalty sites; Sales promotions such as coupons and rebates; Niche market sites; Personal site; Weblogs. The list is virtually endless. If you’re planning on running a business, setting up an affiliate marketing option is a smart move for all parties involved.

Readers Comments

AdShoker - 24 January 2009

By earning some few dollars per click from displaying AdShoker ads on it. Many are now realizing that good money is made from this source of revenue. Try the simple mathematical computation of multiplying those clicks for every page on your website and you get a summation of earnings equivalent to a monthly residual income.

Leave a Comment

Name:
Comment:
CAPTCHA: