Affiliate marketing is a form of online marketing in which website operators (called publishers or affiliates) give third-party providers or advertisers (called merchants or advertisers) the opportunity to use advertising space on their platform. The whole thing is based on a commission system.
What is Affiliate Marketing?
Affiliate Marketing is an internet-based commission system, which is also referred to as an “affiliate program”. Companies that sell products in an online shop pay commission to other website operators if the users, who are sent to their shop via a so-called “affiliate link”, buy something.
Learn here how you can use affiliate marketing to increase your reach and sales on the Internet. In affiliate marketing, partners of publishers and website operators support them with online advertising. In return, they receive a performance-related fee.
The difference to banner advertising, for example, is that the payment depends on the user’s action on the target page and not on a simple click on the advertisement. If the user does not take the desired action, no commission will be paid. The remuneration for affiliate marketing is significantly higher than for simple banner advertising.
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“Affiliate marketing is the process of earning a commission by promoting other people (or companies) ‘products. You find a product that you like, advertise it and earn a piece of the profit for every sale you make. ”
Affiliate marketing has now become an integral part of modern online marketing. It is based on a performance-oriented commission program and is therefore also part of performance marketing. As part of affiliate marketing, sales and network partnerships between different participants are used to market products and services online. These internet sales networks are set up between an advertiser and an intermediary who decide to enter into online marketing cooperation. The intermediary acts as an interface between the dealer and potential customers. For many operators of niche websites (but also large websites), affiliate commissions have become a good source of income.
The providers of services and products are referred to as merchants, sellers, or advertisers. In order to generate more traffic on his website and thus new customers, he would also like to draw attention to his products via the website of third parties. To do this, he is looking for a suitable advertising space that could appeal to his desired target group. This could be free space on blogs, in online shops, or on other suitable websites.
Affiliates or publishers are the operators of the websites or niche websites that provide free advertising space for the merchants to advertise their offers. To do this, he places the advertising material provided by the merchant, such as images, which lead the potential customer via a link to the website with the actual offer. It is particularly effective to place related products that are highly likely to arouse the interest of the website visitor. Affiliate marketing can become a useful addition to your potential revenue stream.
How the partnership works in affiliate marketing
If cooperation between a merchant and an affiliate is concluded, a performance-related commission is agreed upon at the same time. The intermediary therefore only earns if he succeeds in drawing the attention of his website visitors to the dealer’s offer and getting them to take action.
In order to be able to measure the performance and the success of the affiliate, the traffic generated by him must be traceable on the website of the merchant. This is done by integrating specific codes in the advertising links, which clearly identify the sales partner at the retailer. In this way, the retailer can see exactly from where and, above all, by whom the customer was directed to his website.
This method is called tracking. The most frequently used tracking method in affiliate marketing are so-called cookies, which are stored on the hard drive of the website visitor and enable tracking and assignment to the agent even when activity is interrupted. A cookie runtime of 30 days is usual. After that, the customer can no longer be assigned to the affiliate. Affiliate marketing can also be carried out via a professional affiliate network.
Affiliate marketing through affiliate networks
Since most affiliates specialize in certain industries or advertising strategies, not all merchants are suitable sales partners. In the affiliate network, the existing merchants can be filtered according to such parameters, which makes the search much easier. In addition, such networks provide the necessary technical infrastructure and extensive support for successful marketing cooperation.
Here the affiliate can choose from many different products the ones he would like to advertise and the appropriate advertising material, such as advertising banners, is generated and made available to him directly. In order to keep an overview of the existing cooperations and advertising measures, all information is clearly listed for the users. In this way, merchants can see directly which advertising media their sales partners have just actively integrated on their websites, how successful they are and how high the respective commissions are at the current time.
The commission to be paid is calculated exactly by the network system and transmitted to the merchant. In most cases, there is also the option of automatic billing. Of course, the publisher also receives information on his current commission level and the success of his advertising measures. In addition, he can see at a glance which consumer goods or advertising materials have been released by the merchants and whether these fit his website. In order to be able to use the services of such networks, users have to pay a monthly fee and in most cases also a sales commission.
The most common compensation models in affiliate marketing
If the sales partner successfully places customers with the merchant, the merchant is rewarded on the basis of different condition models.
Pay per sale
Pay-per-sale is the most classic of the condition models in affiliate marketing and is also known as cost-per-order (CPO). With this form of remuneration, the affiliate receives a commission for every product sale that is generated through his advertising measures. The merchant can either pay out a predetermined fixed amount per sale or a percentage payment based on the value of the product sold. For example, the payout to the publisher is calculated as follows: The customer buys a product for $ 100.
Since a commission of 3% was set in the commission model for the partner site on each product sold, the agent receives a payment of $ 3. If the customer buys several products as part of an order, the value of the entire shopping cart can also be used as a basis for calculation.
Pay per lead
In addition to the direct purchase of a product, the possible future purchase by the customer is also of great value to the merchant. If an advertising measure by the affiliate does not lead to a purchase on the first visit to the website, the customer’s attention was drawn to the product anyway and an intention to purchase may have been aroused. In order to be able to actively convert this purchase intention into actual purchase, the retailer needs the contact details of the potential customer. Such a customer contact is also called a “ lead ”.
The aim of the pay-per-lead billing model is customer actions that require them to disclose their contact information. This includes, for example, the customer’s registration for a newsletter, participation in a competition or registration in an online portal. When a lead is considered complete must be determined in advance. The more data the customer has to disclose, the more valuable the lead becomes for the merchant.
As the value of the lead increases, so does the publisher’s remuneration. This billing model is mainly used for products and services that are too complex or require explanation. This includes insurance or individual services.
Pay per click
With this payment method, the affiliate receives a fixed absolute amount per click on the placed advertising material. This is intended to increase traffic on the merchant’s website. However, since only the clicks and not the actual visits to the website are rewarded, the remuneration is in the low cents range.
In most cases, a minimum number of clicks is required in order to achieve a payout of the commission. Since the quality of the traffic and the influence on sales cannot be measured directly, such billing models are now almost only used to generally increase the range.
Pay per action
As the name of the billing model suggests, the remuneration here is based on an action carried out by the customer. The advantage of this method for the merchant is that he can define the desired action individually but also exactly and only has to pay for the successful execution. This includes, for example, downloading a specific file, playing a video or posting a post in a forum. Since the requirements can be defined very freely, the amount of the commission is also very different.
The cost-per-mille billing model is also known as the thousand-contact price (TKP) in German. A fixed fee is provided for every thousand advertising contacts with users. Affiliates use displays such as layers and pop-ups as advertising media. These are placed in front of the website you are actually viewing and thus attract the viewer’s attention.
If a publisher sets a CPM of $ 2, he receives 150,000 / 1,000 x 2 = $ 300 for 150,000 views. However, this form of advertising is perceived negatively by most users, as their actual concern, such as reading an article, is disturbed. These negative effects on the image should always be taken into account by the merchant.
The lifetime remuneration is based on the idea of rewarding the affiliate for referring particularly valuable and loyal customers. If the customer repeatedly purchases from the website operator, the publisher is paid a percentage commission on the value of the shopping cart for each purchase.
The agent only incurs an expense for the initial referral of customers and, for example, their registration in the online shop system; the follow-up commissions are then generated automatically and without the assistance of the agent. “Lifetime” does not necessarily have to mean “for life”, however. Many billing models limit the follow-up commission to the first year after the first purchase or to a monthly amount as long as the customer is still a registered customer.