Affiliate Marketing the Basics

This is an overview of Affiliate Marketing so don’t be too disillusioned by some of the terminology further along. Once you get going with any form of Affiliate Marketing it will all become a little clearer. First off let’s just start with Affiliate Marketing the Basics.

The internet arrived in our world in the 90’s and not long after that websites were popping up left right and centre with content about anything and everything. With the arrival of search engines companies were able to trade online and website owners were finally able to earn revenue by cashing in on site visitors. It wasn’t much longer before online advertising became sophisticated and saw the arrival of affiliate marketing.

Here’s How It Can Work For You

So you have an interest in Stick Insects and decide to share your enthusiasm with the whole world by setting up a little website about them. You provide all sorts of useful information and every week you post an article (a Blog) relating to these wonderful little creatures.

After a few months you begin to notice that you are getting more and more visitors to your site and have a bit of a fan club forming. So what can you do with these new found friends?

A quick search on Amazon shows a few related products that these readers would just love so you recommend them by adding a direct link to them on your site and they are chuffed to bits. So everyone’s happy but financially you are no better off.

You then come across the Amazon Affiliate Programme. All this involves is you registering with Amazon for the programme, you then put the same direct link on your site but this time you receive 6-8% of whatever that reader buys. Even if they buy totally unrelated items as long as they come via your link you will be rewarded.

Welcome to Affiliate Marketing The Basics!

Affiliate marketing is a business model where employees are rewarded for new customers or website visitors enticed to the business. There are four key components: The retailer, the network, the publisher or affiliate and the customer. It has further expanded into the subcomponents of super-affiliates and third party vendors. Affiliate marketing is a triangular relationship between the consumer, advertiser and publisher.

So How does it work?

First let me introduce you to my little sugary friend Mr Cookie. I am not talking about that delicious treat lying on the counter in your local bakery but a piece of software that remembers your moves online.

If you happen to search nice hotels in Budapest on google and five minutes later, when you are on a totally different page, an ad pops up with offers for hotels in Budapest, you’ve just been introduced to the cookie monster.

Cookies have a great memory. They remember what date and time you searched for hotels, what words you used to search and what kind of content you prefer. This information is of course gold for publishers. Affiliates use first-party cookies. This cookie will remember the link the consumer clicked on the publisher’s website to access the advertiser’s page and the commission earned.

How Revenue is Earned

Pay Per Sale (PPS)

This is the method used in 80% of affiliate marketing. This is a compensation system where the publisher is rewarded for direct sales generated by the publisher’s website. Cookies are the key component here where they will track the movement of the consumer from the point they access the publishers website to when they make an online purchase. The cookie is the key to accurate commissions being rewarded for actions prompted by them. Unique Identifiers are inserted in cookies in order to track these transactions. Pay Per Sale can be completed via telephone, search engine or by impression.

Via Telephone

Sales driven online but that are concluded in a telephone call are tracked by cookies from the keyword search that drove the call. This can sometimes be an easier way of tracking the transaction.

Search Engine Marketing

The traffic here is mostly search engine related such as from Google’s Adwords “pay-per-click”. This means the advertiser no longer bears the cost but the provider takes the risk of conversion.

Cost Per Impression

The publisher gets paid for every time the ad is displayed regardless of actions taken by the consumer.

Affiliate marketers use an upfront set-up fee coupled with monthly charges. There are also stringent entry requirements for the advertiser.

Cost Per Action

19% of affiliate marketing uses the cost per action model. Under this model the advertiser pays for each action. This can clicking a link, a banner, submitting a form (newsletter, contact request) or sale. Sometimes referred to as cost per acquisition as the core is trying to obtain new customers through sales. Calculated as the cost divided by the number of acquisitions.

Pay Per Lead

A form of cost per action whereby the action is a generated lead. Used both online and offline with the lead being the transaction completed. The advertiser in this case only pays per lead generated. Criteria specifying what constitutes a lead is agreed in a contract between the publisher and the advertiser.

What is defined as a lead can be anything from a click, phone call or acquisition of contact information. It can be open to fraud though perpetrated by the affiliate marketeer by using false or misleading leads. The onus is on the advertiser to perform regular audits of the leads to ensure they are satisfactory and genuine.

The remaining 1% of revenue is earned by more traditional methods such as cost per click or per mile. The ad is only available on the publishers’ website under cost per mile and this is how a commission is earned. With cost per click one addition step is required to earn a commission and that is the consumer must click on the ad and migrate to the advertisers’ website. Cost per click was very popular in the earlier days of ecommerce. It since died out as the threat of click fraud increased as threat to the utility of the marketing model.

The Parties Involved

Advertiser

A company selling a product like airline tickets, package holidays, electronics or clothing. It could also be an insurance company selling policies. Basically if you are willing to pay other people to help sell your products or services you are an advertiser.

Publisher

A company that accepts money from an advertiser to help promote its wears in exchange for a fee. The publisher will promote the advertiser using links, banners or text ads. They could also use unique phone numbers for the primary use of selling the specific product.

Consumer

The consumer completes the triangle and is the last link in the chain. The consumer enters the publishers website and via a banner link or ad migrates to the advertisers page at which point we call this a conversion and the publisher has earned his commission.

Affiliates often use standard internet marketing methods such as search engine optimisation (SEO) and search engine marketing (PPC-Pay Per Click), email marketing as well as content marketing. It is commonly confused with referral market but are very different. Referral marketing relies on relationship to drive sales while affiliate marketing is driven by financial incentives.

In Conclusion

Affiliate marketing provides many benefits to the online advertiser and is certainly a useful driver of sales and leads. There are of course some caveats to take heed of. In certain cases affiliate marketers may use less than ethical methods to create an illusion of more traffic to your site. It’s certainly not without its glitches but by all accounts is a key string to the online trader’s bow.