Introduction To Affiliate Programs

Affiliate marketing is a form of internet marketing where different companies like affiliate networks, affiliate management companies, in-house affiliate managers, specialized third party vendors, and various types of publishers promote the products and services of their partners.

In affiliate programs, two or more businesses come together in a partnership for mutual benefit. Both businesses do the marketing efforts and then the revenue is shared between them. The shared revenue depends on the number of customers one is able to get to the other’s site. If a customer visits the site of one affiliate due to the efforts of other, he is rewarded for it. A commission is given to the affiliate who gets the customers to the website.

Amazon used an affiliate program for the first time in 1996. When users would click on the Amazon link from the affiliate’s website and place an order for a book, the affiliate would be paid. Reportedly in 2005, affiliate marketing generated sales of more than $1 billion and this number more than doubled in 2006 at well over $2 million.

Affiliate programs are most successful in adult gambling and retail industries these days. The prospective sectors of heavy growth in future are the mobile phone, finance, and travel sectors. Then there is also entertainment sector that includes gaming and Internet-related services such as broadband. There are different types of affiliate programs like Search affiliates, Comparison shopping websites, Loyalty websites, Personal websites, Weblogs, Email list affiliates, Shopping directories etc.

Affiliate programs use a method called cost per click for measurement. Display advertising and paid search are two popular affiliate programs. In another method called cost per mille, an affiliate only needs to display an advertisement to his web site in order to get the commission. Whether the advertisement is clicked or not is no responsibility of the affiliate as he always gets a fixed amount.

Another method is of ‘pay per click’. In this method, the user doesn’t only have to look at the advertisement but also to click on it. The number of clicks is counted and then the payment is made. Though, this method is not very reliable as there is occasionally fraud with this type.
There are some companies that provide multi-tier affiliate programs. In these programs a hierarchical network of affiliates is formed. There are a number of partners and sub partners to which the referral commission is distributed. The affiliates may or even may not know of the existence of each other, but can yet generate income for each other. A very successful implementation of this sort of structure can be seen in a company called Quixtar, which is a division of Alticor and in other countries this giant company is known as Amway.

The biggest advantage of affiliate marketing is that the merchant does not have to pay any money unless some revenue is collected. This is considered a ‘pay for performance’ model. This can help businesses that do not have initial capital but have great business ideas. The only drawback of affiliate advertising could be that it is not easily scalable.

Business giants of today like Amazon.com owe its success to affiliate marketing technique only. The rapid growth of Internet businesses day by day and the number of users that are now ready to shop and do business online provides greater scope for maturation of affiliate marketing.