Affiliate Marketing: What is it and how does it work?
What Affiliate Marketing?
Imagine you are reading about Apple’s latest iPhone launch on your favourite blog. At the end of the blog, you are shown an attractive deal about the same phone from some online e-commerce store. You click on it, check out the phone and buy it. So, who gets paid? The e-commerce store, the seller and your publisher too – because, at the end, he is the one who guided you there. That’s affiliate marketing for you.
By definition, affiliate marketing is when a company or brand allows third parties to advertise their products and earn a commission for each sale they make. At its core affiliate marketing is a form of revenue sharing arrangement between a seller and his sales agents. The process has been made popular in the digital world by automating the sales agent recruitment, sales process and commission pay out.
One of the oldest form of digital marketing, initially being made popular by Amazon, the model has gained attraction from all types of online sellers across the globe. This has also opened up new windows of revenue opportunity for publishers since most affiliate models do not require publishers to block their regular Ad positions but integrate the showcase somewhere between the relevant content.
The relevancy, which is the key to success to any affiliate marketing module, has been automated too through advanced algorithms. So, the product display is uniquely matched with the content and users are often shown the best deal to buy things they are reading about.
How does Affiliate Marketing Work?
Affiliate Marketing is a performance-based marketing system that basically involves four distinct elements: the merchant, the affiliate, the consumer and the network. The merchant, also known as a seller or retailer, is an individual or a business that sells a product or provides a service. The merchant and affiliate marketer collaborates to promote the products and services.
The affiliate is an individual or publisher who promotes products and services and gets commission on each sale. The affiliate will use ads, links and banners to showcase the merchant’s products and services to his readers or his network and generate buyers from there. For every buyer he manages to send to the merchant website, he gets paid a part of the sales commission.
Affiliate networks, like agencies and ad networks, acts as intermediary between publishers (affiliates) and clients. However, clients in these cases are not advertisers but sellers who pay out commissions on a per sale basis. Major e-commerce companies like Amazon run their own affiliate programs and allows clients to refer their readers to buy products and earn commission. The model works exceptionally well for publishers who do product listings and product reviews. The consumers are people like you and me who finally buys the product and trigger off the entire revenue flow mechanism. We may or may not always be aware that we made the purchase through an affiliate. Not that it matters anyway.