Digital affiliate marketing started in 1994-ish – way back at the beginning of eCommerce. 20 years of this type of digital marketing and it is still shrouded in questions and consideration. Also called “performance marketing”, affiliate marketing is based on the premise of paying commissions for sales after the sale is delivered. While commissioned sales have been around since the dawn of business, so too has affiliate marketing been around eCommerce. It has certainly grown and changed over the years, but it is still undervalued and often misunderstood as a viable sales channel.

In its simplest form, affiliate marketing involves three parties –How Affiliate Marketing Works

  • Affiliates (or publishers)
  • Affiliate Networks
  • Merchants (or advertisers)

Let’s take a look at how these points work together to develop and deliver sales.

Affiliates

Affiliates share the name often used with offline referral transactions. They are known for publishing content; hence, the name publisher is also used to describe affiliates. The content produced can range from reviews of items for sale to information that can help to complete a sale – like deals/coupons, etc. Affiliates can be big (Retailmenot is a publicly traded deals/coupons website) or small (a one person blog like MindCradle.com. Regardless the size, they derive revenue by placing links within their websites that are encoded with tracking information. This tracking information follows the customer through the shopping process and when a sale is completed, the affiliate is given credit for the sale in the form of a commission.

Affiliate Networks

The digital world is almost a perfect place to track things that happen. Cookies, url’s, pixels and software combine to measure and follow how people proceed around the web and what they are doing. In the case of affiliate marketing, networks came to life that are essentially clearinghouses that append tracking information to url’s and cookies on web browsers that can determine what link was clicked from a publisher and if/when a transaction took place as a result of that click. The networks (e.g. Shareasale) are mostly independent and get paid by the merchants for the service of monitoring and managing the flow of clicks and sales so that the performance can be rewarded when it occurs.

Merchants

Merchant may be too specific a term to use. Companies that sell goods and services make up the advertisers on the internet. As they promote items to sell online. They contract with the networks, and in turn the affiliates, to distribute that marketing as far and wide as they wish. When a merchant approves an affiliate to promote for them, they are saying “go and sell what I have and I will pay you when you make a sale”.  Like affiliates, merchants can be large and small. The smaller ones tend to use affiliate marketing more due to the “pay after sale” method.

Why Affiliate Marketing?

Aside from organic traffic, affiliate marketing is really the only marketing channel that is performance based. The merchant pays AFTER a sale is made. With display, PPC, even e-mail, the cost is borne by the merchant even if a sale is not completed.

Further, affiliate marketing sparks a legion of websites/people that develop passions for brands and products. That is the whole basis behind distributed marketing. The best example heard that is analogous to this is Coke. They don’t put all their sodas out on the loading dock in Atlanta and hope people find their way to it. They distribute out to where people buy sodas – stores, vending machines, restaurants, etc. With an activated base of sellers, merchants are able to use the affiliate marketing force in similar fashion.

Detractors will point to whether or not affiliate marketers provide any real value. Discussions about “attribution” and “purchase intent” permeate all the discussions about the pros and cons. Generally, and of course there are exceptions, affiliate marketers are solid people working to support brands and products in a meaningful way while creating a source of income for their business.

If you are using affiliate marketing, take a deeper look at who your affiliates are and manage the channel like a trues sales force. If you are not using affiliate marketing, consider checking it out. Since it is performance based, the least you can do is test it and see how it goes. If you are still not sure, attend Affiliate Summit and meet some of the people in this business – and a great group it is. Ultimately, value is in the cash in the register.Affiliate Summit

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