Affiliate Marketing: What's It All About?
By Peter Ishikawa
Affiliate marketing is a referral system in which promotional banners, buttons or text on your Web site are linked to a merchant's storefront site. Affiliate marketing is a win-win concept that accounts for about a quarter of all e-commerce revenues. According to LeadFlash.com, an affiliate advertising network, the sector saw a 30 percent growth in 2005.
The concept is to send traffic to the merchant's site where surfers may buy something, register, or at least receive a further pitch for the product or service offered there. In return, you get a percentage of the sale, a smaller percentage of future sales within a certain period, and in some cases a payment just for the referred click.
The merchant pays only for results, not for the affiliate's marketing efforts. You pay nothing except what it costs in time and money to do the marketing, plus you add-perhaps very significantly-to your revenue stream. Should your site incorporate affiliate marketing as its primary or a secondary revenue stream? Of course it should!
While the basic concept of referral and kickback is as old as the hills, affiliate marketing on the Web was essentially invented by amazon.com in 1996 when they used the mechanism very effectively to grow them into the giant they are today. Many others followed suit, and why not?
The affiliate merchant gets an expanded online presence, brand awareness, increased sales and revenue, and significantly lower customer acquisition costs. The referring site (you) enjoys very low marketing costs, generates additional revenue, expands the content of his or her site, and adds value to it with additional relevant (and revenue-generating) links.
Exactly how do you get paid? There are several models in use and the specifics will vary according to the program in question, or what you may mutually negotiate. Cynthia Arko [2001] is Product Director for internet.com's Refer-it.com affiliate directory and defines the main payment schemes as follows:
- Pay-Per-Lead: commission structure where the merchant pays the affiliate a flat fee for each qualified lead (customer) that is referred to the merchant site.
- Pay-Per-Click: commission structure where the merchant pays the affiliate a fee for every unique visitor that is referred to the merchant site.
- Pay-Per-sale: commission structure where the merchant pays a percentage or flat fee to the affiliate, based on the revenue generated by the sale of a product or service.
Introductory tutorials are also useful to the newbie affiliate marketer. AssociatePrograms.com [2006] has a good one that's also short. Not surprisingly, a lot of books have appeared on this hot topic. Amazon.com's best-sellers are:
Rosalind Gardner. The Super Affiliate Handbook. Webvista: 2005. Strategies and methods are communicated clearly and effectively. Great for newbies to affiliate marketing and for those who consider themselves at the intermediate-level.
Greg Helmstetter. Affiliate Selling: Building Revenue on the Web. John Wiley & Sons: 2000. How to plan, implement, and manage a successful program. Details the types of affiliate programs and explains how to choose one that fits your goals.
There are also many electronic newsletters that will not only provide you with an introduction but also keep you up to date with the most current developments. Two of the best ones are:
APD Newsletter (LINK). Excellent current affiliate and home business news from Affiliate Programs Directory. Includes affiliate program reviews, home business opportunities as well as practical articles and timely scam alerts.
Refer-It Industry Newsletter (LINK). Jupitermedia's Refer-it Industry Newsletter is one of the very best monthly chronicles of the affiliate marketing industry. Each issue features valuable articles, tips, trends, stats, and updates on the industry.
A number of companies offer what is essentially a turnkey solution to affiliate marketing. These service bureaus maintain a stable of cooperating affiliate merchants to choose from, do most of the initial and ongoing paperwork and accounting for you, and have proprietary software for tracking performance and other tasks. A couple of well-established and typical examples are:
- Commission Junction (www.cj.com). Commission Junction's commissions are higher than some major online retailers and operate on a pay-per-performance basis.
- LinkShare (www.linkshare.com). LinkShare boasts a number of major high-profile brands, including 1-800-Flowers, Borders.com, JCPenney, OfficeMax, Dell, and Disney.
Although a service bureau can do practically everything for you, outsourcing limits your flexibility to a greater or lesser degree. Therefore, many webmasters will decide on the do-it-yourself solution. Thousands of merchants already have an affiliate marketing program in place and can be approached directly to sign up.
Signing up to display a merchant's banner on your site isn't like applying for a bank loan-they seldom say "no" or even ask many questions. After all, so long as you aren't going to damage their brand in some way (e.g. by deciding that spamming e-mail might be a brilliant marketing idea) they have nothing to lose and everything to gain. The hardest part is finding and selecting the merchants you want to be affiliated with.
Fortunately, numerous directories of willing affiliate merchants are available to you. These directories often have a significant amount of informational materials on the site as well-helpful articles, lists, leads, and tutorials useful to both the new and experienced affiliate marketer. These are three of the very best:
Affiliate Match (www.affiliatematch.com). Almost 3,000 affiliate programs are covered in this directory, which is searchable by keyword or a categorized list. The programs have full descriptions and also webmaster evaluative ratings.
APD: Affiliate Programs Directory (www.affiliate-programs-directory.com). Examines thousands of affiliate programs each year and carefully reviews and ranks them. Offers a searchable directory and a range of useful and informative resources.
Refer-It (www.refer-it.com). Launched in 1997 and part of Internet.com, this is the leading search engine for affiliate programs. The classified database includes descriptions and ratings of programs.
This brief introduction, plus what you glean from the various resources mentioned, should make you conclude that affiliate marketing deserves a place in your bag of e-commerce tricks. The risks to you are minimal and the potential rewards great. What is our advice? Go for it!
Peter Ishikawa is a Toronto-based marketer specializing in small and home-based businesses. Contact him at ichikawa@canada.com. Find more of his articles and other useful resources for online entrepreneurs like yourself at www.eBizTutors.com.
References
"Affiliate Program Tutorial," AssociatePrograms.com 2006.
http://www.associateprograms.com/affiliate-program-tutorial.shtml.
Cynthia A. Arko. "Helpful Affiliate Terms," Refer-It.com 07/12/01.
http://www.refer-it.com/article.asp?id=157,
Part Two: http://www.refer-it.com/article.asp?id=158.
Roger Park. "Affiliate Marketing 30% Growth," iMedia Connection News 12/25/05.
http://www.imediaconnection.com/news/7664.asp.
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