Click Wrangling: Demystifying Affiliate Marketing

Posted on November 28, 2012 by Nikhil P Naik

Affiliate Marketing: In the vast sea of internet commerce, affiliate marketing is still something of a little fish and therefore often overlooked as a viable marketing option. There are a number of factors to which this relative small fish-ness is attributable but there are a couple of biggies. One- a bad reputation lingering from the net’s less-regulated past. Two- a fuzziness regarding exactly what affiliate marketing is among e-businesspeople. Both are reasonable concerns and (thankfully for you, possible future affiliate marketer) both are pretty simply alleviated.

Regarding the tarnished reputation- affiliate marketing is no different from any other branch of e-commerce (or anything else) that operated in the Wild West days of yore when the internet was younger. Shady people found ways to do shady things and professionals responded by battening down the hatches and de-shady-fying the process. As for any reluctance attributable to an unclear picture of affiliate marketing- well, read on.

affiliate marketing

In the broadest strokes, affiliate marketing is performance and result-driven advertising. The process works as follows- the merchant/brand/retailer, like Amazon for instance, posts an affiliate marketing offer on the affiliate network. (Anyone doubting affiliate marketing’s effectiveness should consider Amazon- the affiliate market test-case to beat them all.) The affiliates cruise the network for merchants to partner with. An affiliate’s partnering decisions are generally based on finding an acceptable pricing/payment structure and (ideally) finding a merchant with a product or service that will appeal to the affiliate’s visitors. Amazon’s size and brand-ubiquity makes it an awkward example but a used book shop or retailer would be wise to partner with Amazon, considering their compatibility.

When Acme Used Books accepts Amazon as an affiliate marketing partner, they (Acme) hosts Amazon’s ad. Amazon then pays Acme for the performance of that ad. Affiliate marketing is widely considered synonymous with “pay per click” (PPC) and/or “pay per mile” (PPM). (For the unfamiliar- pay per click is a system in which Amazon pays Acme for every Acme visitor that clicks on the Amazon ad while pay per mile is a similar arrangement but Acme would be compensated for traffic- like every 1000 visitors.) However, PPC and PPM only account for about 1% of all affiliate marketing. The other 99% is split between revenue sharing or “pay per sale” (80%) and “pay per action” (19%). Pay per action is like pay per sale but other actions, like submitting a form, survey, etc. are rewarded as well.

That’s pretty much the long and short of it. Affiliate marketing’s obvious benefit to parties involved is the system’s performance-based reward structure. Affiliates get compensation for the success of their site or marketing prowess, while the merchants get an excellent picture of what sites or what sort of sites are yielding sales and have to pay nothing unless their advertisement is yielding sales. There are cons, but few beyond issues that are applicable to pretty much all e-commerce. The possibility for unscrupulous affiliates trying to “game” the merchant whose ad they’re hosting with spam or hit-stuffing tricks is one of those issues. There have been, and are still, some concerns regarding the application of local taxes and whatever other physical vs. digital monetary intricacies that attend all internet business (as mentioned). Beyond those non-specific complexities, perhaps the chief drawback to affiliate marketing is that to be successful, a considerable amount of oversight and maintenance is required.

Anyone willing to put in that work, though, the rewards can be considerable. For instance, in the introduction I referred to affiliate marketing as a “little fish in the vast ocean of internet commerce” (an excellent metaphor, I know). Well, in the cyberspace marketplace “little fish” is a pretty relative term. In 2006, affiliate marketing alone netted British retailers more than $2.6 billion- almost twice the previous year’s profits. The same year, affiliate marketers in the US made more than $6.5 billion. Even little fish can be whales online.

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About the Author: Harlan Campbell is a digital enthusiast and blogger for an , intent on spreading awareness of smart marketing and e-media communication. In his spare time, he enjoys exercising his game consoles, watching horror movies and wandering through used book stores.

About Nikhil P Naik

Nikhil Naik has a Master's Degree in Information Systems, and is currently working as a Software Engineer at Microsoft. He also loves playing cricket, listening to music, and traveling. Twitter Handle - @buzz_nikhil.

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