Affiliate Marketing is a performance-based marketing strategy where a business awards individuals or groups (affiliates) for bringing visitors through their own marketing efforts. Affiliate Marketing is commonly confused with Referral Marketing as they both use third parties to drive more clients to a business. Affiliate marketing, in contrast to referral marketing, purely relies on financial motivation whereas referral marketing relies more on trust and personal relationships.
How Affiliate Marketing Works
The affiliate marketing strategy consists of four core players:
The Merchant (retailer or brand)
The Publisher (affiliate)
Over the years, this marketing strategy has grown more complex leading to the introduction of more players, including affiliate management agencies, super-affiliates, and specialized third-party vendors. Affiliate marketers many at times use regular advertising methods among other internet marketing methods.
Affiliates look for prospective clients via internet marketing methods. Mostly, they are paid in a “pay per performance”, in which they get paid commissions after a sale has been made by a client referred by them. However, there are other methods affiliates can be compensated. 80% of affiliate programs today use revenue sharing or pay per sale (PPS) as a compensation method, 19% use cost per action (CPA), and the remaining programs use other methods such as cost per click (CPC) or cost per mille (CPM).
Here is a practical example of this:
The first affiliate signs up to the program with an advertiser and gets rewarded for the agreed activity conducted by a referred visitor. If this affiliate attracts two other affiliates to sign up for the same program using his sign-up code, all future activities performed by his/her referrals will result in additional commission for him/her.
Two-tier programs exist in minor affiliate programs; most are simply one-tier.
Affiliate Marketing Origin
The translation of the revenue share principles to mainstream e-commerce happened in November 1994, almost four years after the origination of the World Wide Web. The concept of affiliate marketing on the Internet was conceived of, put into practice and patented by William J. Tobin, the founder of PC Flowers & Gifts. Launched on the Prodigy Network in 1989, PC Flowers & Gifts remained on the service until 1996. By 1993, PC Flowers & Gifts generated sales in excess of $6 million per year on the Prodigy service.
Affiliate Marketing Network
In 1994, a beta version of PC Flowers & Gifts was released on the Internet in cooperation with IBM. By 1995 PC Flowers & Gifts had launched a commercial version of the website and had 2,600 affiliate marketing partners on the Web. Cybererotica was among the early innovators in affiliate marketing with a cost per click program. Affiliate marketing programs kept on growing since then and have been incorporated in CDNow(1994), Amazon.com (1996), and many other companies.
Affiliate Marketing Programs
There are three primary ways to locate affiliate programs for a target website:
Affiliate program directories,
Large affiliate networks that provide the platform for dozens or even hundreds of advertisers,
The target website itself.
If these three methods don’t work, there may exist the possibility that whatever being searched for is a non-public affiliate program. If so, the best way to continue is to contact the website or business owner directly.
Issues With Affiliate Marketing
Since the emergence of affiliate marketing, there has been little control over affiliate activity. Some of them have used spam, false advertising, forced clicks, adware, and other methods to drive traffic to their sponsors. Although most affiliate programs set terms that contain rules against spam, some affiliates are known to abuse these rules. Some of these issues are: