Online Affiliate Marketing is a cooperative income-sharing venture between a website owner and an online merchant. The website owner places advertisements on their website to either assist in selling the merchant’s products or direct potential customers to the merchant’s website, all in exchange for a portion of the profits.
Affiliate Marketing Program
An affiliate marketing program is sometimes referred to as an affiliate program, and it may also be called a pay-for-performance program or an associate program. An affiliate program serves as a marketing tool for the e-business operating it, known as the merchant or advertiser, and it serves as a revenue source for the e-business participating in it, known as an affiliate, associate, or publisher.
There are three ways to earn money through affiliate marketing:
1) Pay per Click or Cost-per-click affiliate programs: Each time a potential customer leaves the affiliate website by clicking on a link leading to the merchant’s website, a certain amount of money is deposited into the affiliate’s account. This amount can vary from pennies to dollars, depending on the product and the commission rate.
2) Pay per Lead or Cost-per-lead affiliate programs: The merchant pays the affiliate a fixed fee for each visitor who clicks through and takes an action at the merchant’s site, such as completing an online survey, registering at the site, or subscribing to receive emails.
3) Pay per Sale or Cost-per-sale affiliate programs: Whenever a sale is made as a result of advertising on the affiliate’s website, a percentage or commission is deposited into the affiliate’s account.
The Amazon Story
The world’s largest online bookstore provides one of the most successful examples of an affiliate program, known as their associate program. Amazon currently boasts over 1 million affiliates, meaning that more than a million websites actively promote their products every second of every day. Amazon generates over 40% of its revenue through its affiliate program, amounting to over $3 billion in annual revenue. As another example (though smaller in comparison), Zeald generates over 50% of its revenue using its unique affiliate program. While not in the billions, this equates to millions of dollars in revenue each year.
Numerous diverse e-businesses operate affiliate programs, including Barnes & Noble, Dell, and Rackspace Managed Hosting, among others.
Affiliate Programs as a Marketing Tool
There are two major advantages for merchants:
1. Directly tying marketing efforts to leads or sales.
2. Paying only for tangible results.
There are also two major advantages for affiliates:
1. An additional source of revenue, particularly for affiliates who also sell products or services.
2. The primary source of revenue for affiliates offering entertainment or information.
Two Approaches to Running a Successful Affiliate Marketing
1. Building a large affiliate membership. For instance, Amazon’s associates program has over 1 million members from various backgrounds:
– RVPart – Sells parts for recreational vehicles and motorhomes.
– Dilbert – A site for viewing cartoons, playing games, and sending electronic greeting cards, among other activities.
– Books for Managers – A site that provides business reviews and lists of the current top-selling business-related books from publications such as Business Week, The New York Times, the Wall Street Journal, USA Today, and more.
– HarperCollins – A site to promote its authors and their books. However, like many book publishers, HarperCollins sells its books through bookstores rather than directly to the public.
2. Acquiring a smaller number of highly effective affiliates with substantial website traffic that offers web page content, products, and services directly related to the merchant’s offerings.
Affiliate Programs as a Revenue Source
Participating in an affiliate program and maximizing your participation involves:
– Selecting the right merchant and affiliate program for your e-business.
– Understanding the terms of the affiliate agreement.
– Adding custom links to the merchant’s site from affiliate web pages.
– Building traffic on your affiliate site to increase click-throughs to the merchant’s site.
Top 10 Tips for Choosing the Right Affiliate Program
1. Identify a product or service for which there is a demand, and one that you genuinely enjoy promoting. Start by searching for “Affiliate Programs” in search engines.
2. Ensure that the product or service is relevant to your website.
3. Join a long-standing, reputable affiliate program with a good reputation, as verified by organizations like the Better Business Bureau and online forums and discussion groups.
4. Examine the commission structure and select a program that pays at least 35% to ensure successful business operations.
5. Ensure that there is a reliable tracking system in place to record clicks and sales generated through text links, banners, and other advertisements.
6. Consider the “hits per sale ratio” to gauge how much traffic is needed before a sale is made.
7. Understand the frequency of commission payments; avoid programs requiring excessive sales to reach the minimum payout threshold.
8. Choose between single-tier and two-tier affiliate programs, with two-tier programs offering additional benefits.
9. Opt for organizations that provide a range of tools and resources, including banners, text links, brochures, websites, and training.
10. Carefully read and comprehend the affiliate agreement before joining, regardless of the program’s reputation.