Affiliate marketing has been going on for many years now. But what exactly is an affiliate? How do you get to be an affiliate? What do terms like 'CPA' and 'CPC' mean? And, most important of all, can you make money from affiliation? In this article we'll try to find out.
Affiliation
Some dictionary definitions of 'affiliate' that are relevant here: "to associate (oneself) or be associated"; "to receive into close connection or association"; "a person or organization that is affiliated with another". Being 'an affiliate' means that you have formed an association with a business that is selling something. As an affiliate you are advertising, marketing or directly selling the products or services of that business with the aim of receiving payment in return. That payment can come in various forms but will often come as a percentage of the total value of the item you are selling on their behalf. That business receives its payment from the customer and passes the agreed and relevant percentage or the sale value (e.g. 25%) to you.
Early Days
In the very early days of affiliate marketing, the process was fairly direct. Marketers (affiliates) would form 'an association' with a business and sign an agreement to use their best efforts to sell the product or service in question. The agreement would state the terms of what constituted a result (sale), the level of the payment and how that payment would be made. These arrangements could work well but were often rather bureaucratic to set up because each business would have a different type of agreement, so setting up several agreements with different businesses could be time-consuming. The bigger problem, though, was that each business would have its own method of tracking sales. Some of these tracking methods were reliable and others were not. And what's the point of making sales for a company when they lose track of the sales you have made and end up not paying you for your efforts?
The Coming of Amazon.com
One of the first (and highly successful) online 'affiliate programs' to be introduced was, of course, Amazon's. For many pioneering internet marketers the Amazon program provided their first taste of affiliate marketing success. Commissions weren't great and, at least at the beginning, the range of products was limited, but it worked. The sign-up process was easy, the tracking worked properly, and successful affiliates got paid.
Affiliate Networks
Affiliate networks, such as Commission Junction (CJ) and ClickBank, solved any remaining issues by providing standardised agreements and reliable, consistent sales tracking. They made the process simple: Vendors (also known as advertisers), i.e. the companies selling the products and services, signed up with the affiliate network; the affiliate network then displayed those products and services to affiliates (also known as publishers), who could then choose companies offering the most relevant items and the best deals, conversion rates and percentages. The affiliate network provided a tracking code to go with each advert so that the affiliate could be sure that they would get their money if they made a sale or conversion for a vendor. The payments to the affiliate then came in via the affiliate network.
Affiliation Today
Nowadays the bulk of affiliate transactions are handled via affiliate networks. All aspects of the process have been improved over time - it's now even possible to get data feeds of individual products rather than just generic adverts. This means that you can set up a 'shop' displaying nothing but items from vendors. Maybe you've seen sites like this selling eBay products. The owners of these sites have signed up to the EPN (eBay Partner Network) to market eBay goods via their own websites. If you are successful at creating this type of shop you have the great advantage of never having to handle any stock at all. The customers simply buy from the vendors and you get your commission delivered straight to the network, then to your bank or PayPal account.
Cost Per What?
Not all affiliate programs are equal. Some pay bigger percentages than others and some use different commission-calculation methods than others. In affiliate-marketing-speak you'll often see terms like 'CPA' or 'CPC'. These are just different terms used by advertisers when looking at the cost to them of a particular event such as a click-through. Hence an advertiser/vendor might talk about CPC (Cost Per Click) or CPA (Cost Per Action). CPC would be the cost to the advertiser of gaining a click-through to their site. CPA would be the cost to the advertiser of getting a potential customer to take a particular action such as filling out an insurance quotation form. On the other side, the publisher/affiliate would get paid by the vendor for getting the customer to take the action.
Affiliate Success
Getting started as an affiliate marketer can be tough. People running their own websites often think that they can just put up a few affiliate network ads on their site and they'll immediately start receiving decent commissions. Unfortunately it's not that easy. The advertising needs to be highly relevant, well presented and targeted before you have a chance of even getting a visitor to click through to a vendor site, never mind actually buy something there. But there also are many success stories and wealthy affiliates. ClickBank, for example, pays out millions of dollars per year to successful affiliates and vendors. The commissions on ClickBank are excellent too, with some vendors paying as much as 75% per sale!
Author Resource:
Affiliate blogging is a great way to promote the affiliate programs you have joined. Your pitch to prospective customers will be much more convincing if you are writing about subjects about which you are passionate.
D.J. is an internet marketer based in Scotland. He also runs several ecommerce websites.
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