Webopedia on Google+Webopedia on TwitterWebopedia on FacebookTech Bytes Blog
Main » Did You Know » Internet »

How Affiliate Marketing Works

If you have a Web site or blog and are looking for a way to earn income from your online property, consider affiliate marketing programs.

Affiliate marketing is the term used to describe a revenue-sharing plan where an online automated marketing program lets Webmasters place an advertiser's banner ads or buttons on their own Web site. Webmasters will receive a referral fee or commission from conversions when a customer has clicked the affiliate link and performs the desired action, such as make a purchase or opt-in for downloads or newsletters on the advertiser's site. Advertisers invest in affiliate programs for lead generation, and, of course, sales.

Not all affiliate plans work in the same way or pay the same rates. Some enable you to place text or image hyperlinks to products or a Web site, others allow you to set up a shopping or store page that offers products related to the content of your Web site, and others require you to simply place general advertising banners or buttons.

The payouts for Webmasters also varies, but in the most common forms the affiliate is paid per click, each time a person clicks the ad (pay-per-click) or you may be paid a commission when a sale is made (pay-per-sale) or you might be paid by lead (pay-per-lead).

Affiliate Marketing Glossary

If you're in affiliate marketing, here's a quick reference of some of the more common terms used in conjunction with affiliate marketing. By familiarizing yourself with the terminology you'll be better able to understand the affiliate agreement, how different programs work, and how you can earn money. Below you'll find direct links to common affiliate marketing terms from Webopedia.com.

above the fold
ad targeting
advertiser
affiliate
affiliate agreement
affiliate link
affiliate program
banner
click fraud
click-through
conversion rate
cookie
CPC
eBay Partner Network
page impression
pay-per-sale
unique visitor
pay-per-sale
page view
pay-per-lead
raw hits
referrer
traffic sources metrics

TIP: For more affiliate marketing terms,
see Webopedia's Online Marketing category.

Types of Affiliate Programs

Different advertisers offer different types of affiliate programs. If you join a search engine affiliate program you most likely will be placing text links or banners to their advertisers and you'll work on a pay-per-click fee. E-mail list affiliates promote e-mail newsletters and are usually paid when a person joins the advertised opt-in e-mail list. Being an affiliate of any merchant usually means you are paid a commission per sale on the advertiser's Web site. Generally speaking, pay-per-click affiliate programs pay the least amount, as affiliates are often paid per thousands clicks (CPC).

Pay-per-lead programs are when you you provide the links to downloads, trial offers, e-mail opt-in lists and so on. Depending on the advertiser you may be paid per lead generation or you may not be paid unless the user subscribes and pays for a full service from the advertiser. Again, you may also receive fees for both instances. Pay-per-sale affiliate programs (also called revenue sharing) usually offer the highest commissions, and you'll typically receive a set dollar amount per sale or a straight percentage of the total sale. Because a user has to purchase something, you may find this program best-suited to high-traffic affiliate sites.

How Does Affiliate Marketing Work?

Knowing what ads to place and what revenue your Web site generates isn't magic. Once you join an affiliate program you then are able to choose the products or banners you want to include on your Web site, and then receive the code you will need to insert on specific Web page or throughout your Web site. This changes, however, when you select an ad revenue partnership, such as Google AdSense, for example where you have little or no control over the advertisement displayed. In joining the affiliate program, you will agree to their terms of service, called an affiliate agreement, which will tell you what requirements you must meet and how the click-through, lead generation or sales are tracked.

Here is an example of one affiliate program, how it works and the requirements of the affiliate:

WorldWinner is a "Pay to Play" online game Web site that offers a revenue-sharing affiliate program. From the WorldWinner Web site (the advertiser in this case), you would first fill out an application to become an affiliate by providing basic information about yourself and your Web site through a Web-based sign up form.  If you're accepted as an affiliate, WorldWinner will provide you with an affiliate ID as well as the address to a Web page where you can generate the code to place different links advertising WorldWinner on your own site. They offer rotating or static text links, banners or buttons, and co-brand Web sites are also allowed. When you generate the code to place on your own Web site, it will contain your unique affiliate ID. Any user who clicks a link to WorldWinner that contains your ID is tracked by WorldWinner via cookies. If they become a paying player and deposit money to their account and play games for cash, you then earn money yourself; it will be a percentage of that user's deposits for as long as you remain an affiliate (this particular affiliate program offers a 25 percent share in Net Applicable Revenue). WorldWinner also hosts and provides you with all the statistics and information you need to determine how many users your are sending to their Web site, if they are depositing funds, and also provide you with your revenue and payout information.

For the most part, affiliate programs work by using a combination of a unique user ID and cookies to track your leads and subsequent revenues. Most will offer a private affiliate section on their Web site where you can get your HTML code and also check your affiliate account status and information. Through the use of browser cookies, any person who uses your link to make the desired action within a set amount of time contributes to your affiliate revenue.

For example if a user follows your link and looks through an online software store they are tracked as "your referral" by the browser cookie. If the person makes the purchase before the cookie expires, you get the referral commission. So even if a user sits with items in their shopping cart but doesn't go back and make the purchase for two weeks, you can still get the commission, provided the cookie is still active.

For the Webmaster, one of the the hardest things about using an affiliate program to earn money is finding a good one that will actually produce results for you. To better your chances of earning revenue from affiliate marketing here are some tips to get you started;

  • Always read the fine print. Make sure you understand how the payouts are structured, if you need to earn a minimum dollar amount before a payout, and, of course, compare commissions between similar affiliate programs.
  • Once you have narrowed down your options to a handful of possibilities, take a look at the merchant or marketers' Web site rankings and traffic. If, for example, you have your choice narrowed down to three computer software e-tailers, you can use Google and Alexa rankings to help you determine which may have a better volume of traffic. While their Web site traffic won't directly help you promote their products, this may tell you which company has a larger customer-base (more traffic). A well-known name that your Web site visitors may be familiar with might encourage them to click the advertising links on your own site.
  • Choose affiliate programs that complement your Web site content. If your site is all about sports, then chances are you'll want to skip on setting up a co-branded Web store for cartoon themed car accessories, for example. Also, if affiliate programs offer customizable banners, buttons or splash pages that can be edited to reflect elements of your own site design, be sure to take advantage of those options.
  • Don't be afraid to play the field and try a couple affiliate programs, or opt out of one and choose another if you're not seeing any results after time. Results are going to be based on how much traffic your own Web site gets. If your site serves only a couple visitors a day, you can't expect high click-through numbers.

Choosing an Affiliate Program

Because there are such a large number of affiliate programs to choose from and many are structured differently, here are some tips to keep in mind while looking for a good match.

First, you need to be sure you are comfortable with the product you're promoting or selling and you have confidence in the advertiser you are linking to. Check the pages on the advertiser's Web site. If it's something you yourself would never consider purchasing, or it possibly looks a bit unreliable, then chances are your visitors won't be interested in it either. If you're running a content-based site, you don't want to sell anything that might offend visitors or lower their opinion of your site.

The best rule of thumb is to pick affiliate programs that offer something that's relevant to your site. For example, if your Web site is about registering domain names, look for affiliate programs that are related to the topic such as Web site hosting, Webmaster tools and software, Web site templates and so on.  There is nothing worse than advertisements that stand out like a sore thumb on your pages (e.g., online casino ads placed on a Web site about elementary school math tutorials). Even niche sites can find affiliate programs that are a good match.

What is the Advertiser really offering affiliates? Make sure you understand the affiliate agreement and that you can comply with it. Take the time to check out the advertiser before joining to ensure they really do pay out to affiliates and that their program is not a scam.

Have a look at what the advertiser is offering in terms of tracking and reporting tools for affiliates. Good programs will provide you with a way to access real-time automated statistics to view conversions, sales and commissions. Be sure you have ad and product display options to integrate the advertising into your Web site. Can you change the colors, themes and choose from a selection of different sized banners and buttons?  With this type of service it means a little less work for you, the affiliate, and it also means your affiliate program meshes with your site.  Some higher-pay programs may look attractive, but may offer a higher commission because they might not provide support and tools to their affiliates. If this is the case, make sure you determine if this program will be too high-maintenance for you before joining.

Generally speaking pay-per-click programs offer the lowest dollar value for conversions, and you'll need a higher click through rate to earn money. Pay-per-lead and pay-per-sale programs will usually offer a higher commission, but you'll have less visitors clicking through to complete the transactions, so you need to have a lot of unique visitors. Use your own traffic and reporting tools to determine which type of program will have a better chance of success on your own site.

Affiliate Marketing Resources

To get started with finding a good affiliate program, we suggest you start with the Affiliate Reviews on Ecommerce-Guide (you'll find them listed in the Related Links section below).

Key Terms To Understanding Affiliate Marketing:

advertiser
The advertiser is the Web site owner or merchant who pays affiliates for sending traffic to their site to make purchases or generate leads. Also called merchant.

affiliate
The Webmaster or site owner who earns revenue, usually commission-based, for conversion of leads, clicks or sales on the advertiser's site.

affiliate program
An automated marketing program where a Web advertiser recruits Webmasters to place the merchant's banner ads or buttons on their own Web site. Webmasters will receive a referral fee or commission from sales when the customer has clicked the affiliate link to get to the merchant's Web site to make the purchase.




Based in Nova Scotia, Vangie Beal is has been writing about technology for more than a decade. She is a frequent contributor to EcommerceGuide and managing editor at Webopedia. You can tweet her online @AuroraGG.





TECH RESOURCES FROM OUR PARTNERS
QUICK REFERENCE
How to Create a Desktop Shortcut to a Website

Creating desktop shortcuts to a websites is useful. When you double-click the icon from your desktop it automatically launches the browser and... Read More »

Flash Data Storage Vendor Trends

Although it is almost impossible to keep up with the pace of ongoing product releases, here are three recent highlights in the flash data storage... Read More »

15 Important Big Data Facts for IT Professionals

Keeping track of big data trends, research and statistics gives IT professionals  a solid foundation to plan big data projects. Here are 15... Read More »

DID YOU KNOW?
Hype Versus Action in the Developer's World

Often times technologies start as hype but with time become adopted. As a developer or technologist, it is worth reading the hype and knowing the... Read More »

Microsoft Hyper-V Network Virtualization Q&A

The top 5 Hyper-V questions with answers provided by Nirmal Sharma, a MCSEx3, MCITP and Microsoft MVP in Directory Services. Read More »

Storage Trends: Solid State and Software Defined

Solid state drives and software defined storage are two leading trends in the rapidly growing storage market.  Read More »