You are here
Affiliate Marketing Basics
Comments welcome on this page. See Rules of Conduct.
Affiliate Marketing Basics
One of the more popular advertising techniques for online retailers is affiliate marketing. Affiliate marketing is a commission-based referral partnership, typically between a website owner and an online retailer who wants to promote their product.
In most affiliate agreements, a website owner puts links or ads on their site that promotes the retaile;s product to the visitors of the site, ideally potential customers for the retailer. In exchange for the promotion, the retailer agrees to share a percentage of the profit with the website owner (or affiliate), if the transaction generates a lead.
Depending on the agreement, affiliates can earn commission each time a visitor clicks the ad, registers for more information, or completes an online purchase, for example. Commissions can vary depending on the nature of the transaction. Retailers generally pay a higher commission for transactions that result in sales as opposed to a page views or completed surveys. Commissions are usually paid as either a percentage of the sale or as flat fixed price.
Types of Affiliates
There's no black-and-white definition of what constitutes an affiliate site, but common examples are:
- Coupon or discount websites
- Shopping directories
- Search affiliates
- Personal blogs
- Niche product/services sites
Benefits for Retailers
Retailers that are not web savvy or do-t have a lot of time to invest in online promotions can outsource their promotion activity to take advantage of expanded audiences that affiliate marketing offers.
Affiliate marketing is also popular among retailers with tight advertising budgets because you can tailor your affiliate agreement to only pay for the promotions that result in sales.
Benefits for Affiliates
Website owners who are looking to earn some extra income find that affiliate marketing offers them the opportunity to make money online without a lot of extra effort, since their websites are already up and running. Affiliates who earn their primary income off marketing tend to spend much more time both researching new partnership opportunities and making their sites more desirable to potential advertisers' usually by increasing site traffic and building a good online reputation.
While it sounds easy, affiliate marketing is not a guaranteed success for retailers or affiliates. As affiliate marketing has become more popular over the last few years, websites have become oversaturated with ads. Successful affiliate and retailer relationships are more likely to be found in relevant partnerships where visitors trust both the product and site where they view the ads.
Affiliate marketing is a fairly new practice, so industry standards and regulations are not fully established. Recently though, the Federal Trade Commission enacted new rules for affiliates regarding solicitations obtained through transactions, credit reports, or third-party sources.
Currently, certifications and training resources are mostly offered on personal or commercial websites specializing in e-commerce activities.
- Making Money Online' When Are You a Business?
Affiliate marketing is comparable to being a commissioned sales person, and as a result the money paid to you must be reported on your taxes as income.
- Google Ad Words Explained
Explains pay-per-click advertising based on the Google AdWords model' including how it works, ways for determining if it's right for your business, and lessons learned from other small business owners.
- Small Business Guide to Online Advertising Law
If you plan to advertise online -- whether you're buying ads on search engines or direct marketing through e-mail -- you'll need to understand some basic rules.