What is Affiliate Marketing

Understanding What is Affiliate Marketing and Its Various Types

Affiliate marketing is a business marketing strategy that benefits both businesses as well as website owners and publishers who help in business promotion. To know more about affiliate marketing, you must read on.
MarketingWit Staff
Last Updated: Jun 3, 2018
Affiliate marketing is a business promotion technique in which revenue is shared between a website owner and an online business. It is an Internet-based marketing technique through which e-commerce affiliates are rewarded for bringing in customers.

Wondering what an e-commerce affiliate is? A website that links back to an e-commerce site with the intent of gaining a commission for the referral, is known as an affiliate. Also, bloggers and members of online forums function as e-commerce affiliates.

History

Affiliate marketing originated from the practice of revenue sharing in which business revenue is shared between business affiliates. In late 1994, the concept of revenue sharing evolved into Internet affiliate marketing.

CDNOW was the first website to feature affiliate marketing. It was a music-oriented website that provided the Internet users with facilities to view lists of music videos and albums and also purchase the albums online. Soon, the e-commerce websites became a vital component of Internet marketing.

Web 2.0 services such as social networking, blogging, and video sharing gave a further boost to the affiliate marketing industry. Gambling and retail industries were some of the prominent players in this field. The cell phones business, finance sector, and the tourism industry are expected to reap the maximum benefits from affiliate marketing in the coming years.

Types

Affiliate marketing refers to the practice of business sharing between online businesses and online sales people. The percentage of the profits shared, depends on the amount of sales and the number of website hits. Some of the common ways of making money through this form of marketing are pay-per-click advertising, pay-per-sale advertising, loyalty websites, email lists, comparison-shopping, weblogs, and pay-per-lead advertising.

Pay-Per-Click: It refers to an Internet advertising model wherein an advertiser pays if a user clicks on an advertisement. In this advertising technique, advertisements relevant to the web page content are displayed along with the content. This increases the chances of web users clicking on the advertisements. Depending on the number of clicks an advertisement receives, websites charge the advertisers.

Comparison Shopping: There are several online shopping websites and shopping portals on the Internet. Many of them display price comparison lists of the products they offer for sale. Many shopping portals support price comparison services, whereby users can compare the cost-effectiveness of competitive products and services before the actual purchase.

Pay-Per-Lead: In this type, whenever a client registers at a merchant's website as a result of an advertisement on the affiliate's website, a stipulated amount of money is given to the affiliate.

Pay-Per-Sale: In this method, for every sale resulting from the advertisements featured on an affiliate's website, a share of the profit is given to the affiliate.

Business Promotion through Websites: Many websites offer reward-based purchase offers. They offer discounts and rebates to the customers who choose to buy online. Some of them offer free delivery services to the customers. Others feature product reviews and articles about products and services, thereby encouraging the readers to buy them. Some businesses prefer to use personal websites to communicate with their potential customers. Personal websites have in fact, been a major contributing factor to the emergence of affiliate marketing.

Emails, Blogs, Forums: Small businesses often use email marketing techniques to achieve business promotion. They use emails for developing customer relationships and obtaining customer feedback. Emails are often used to carry advertisements and promotional messages. Businesses can explain their business role and talk about their products and services through blogs. Forums serve as online platforms for interaction with customers.

Advantages and Disadvantages

Affiliate marketing has led to the emergence of several online companies and Internet marketers. Internet serves as the most effective platform for business promotion as it can target a large customer base. Merchants are not required to search for their customers. Rather, customers come searching for them.

An affiliate marketer does not require making huge investments. Moreover, he/she does not have to worry about customer support and record-keeping. All that an affiliate marketer needs to do is work towards promoting and reselling the product.

The potential of creating income is another important advantage of affiliate marketing. Both business merchants and websites benefit from it, without any additional expenditure of time or money. In fact, implementing affiliate marketing strategies does not require any technical expertise. Adding more websites to an affiliate marketing program to cover a wider range of products and services can increase one's earning potential. As long as the consumers continue with online business transactions, there is no stopping for this type of marketing.

One of the major disadvantages here, is that the affiliates may indulge in illegal and unethical Internet advertising practices. They may mislead the readers through false advertisements. Illegal use of brand names and company logos is common in affiliate marketing.

Spamming is another major disadvantage. Some affiliates tend to use email spam to promote their business. Others create webpages which are aimed at manipulating the indexing strategies of search engines.

Affiliate marketing does not conform to industry standards and lacks central regulation. Its practices make use of social networking websites, online forums, and other aspects of the Internet for advertising their products and services. As the Internet offers free access to users, it is difficult to implement any regulatory measures on its use. Currently, there are no training courses or certifications for this type of marketing. Perhaps, there is a pressing need to standardize affiliate marketing strategies and practices.

The rising popularity of online sale and purchase has resulted in the growth of this marketing sector. Affiliate marketing has given a new dimension to the online business arena. It is here to stay.