James Bachini

What does Affiliate Marketing mean?

Affiliate Marketing Meaning

Affiliate marketing is when an “advertiser”, normally a brand or company, offers a 3rd party “affiliate” a financial incentive to promote their products and services.

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In this article we will discuss what affiliate marketing is, how it works and the types of affiliate marketing offers.

  1. An Introduction To Affiliate Marketing
  2. Affiliate Promotional Methods
  3. Affiliate Life
  4. Performance Marketing
  5. Affiliate Networks
  6. Affiliate Marketing Evolving
  7. Conclusion

An Introduction To Affiliate Marketing

Some of the biggest e-commerce sites in the world run affiliate programs such as Amazon and eBay.

Affiliates are either rewarded with a percentage of a sale or a fixed commission per sign up or new customer. Lifetime value rewards are also popular where the affiliate receives commission for the entire time that customer uses the advertisers products. In rare cases an advertiser will pay on a cost per click basis for each visitor the affiliate sends.

Advertisers provide affiliates with a tracking link as part of their affiliate offer. The affiliate will then use this link whenever they promote the offer. The link tracks that the affiliate sent the user/visitor to the site and the rewards are allocated accordingly.

Companies can leverage affiliate networks which are aggregators of affiliate offers to reach thousands of affiliates and employ a small army of promoters on a performance related pay basis. This provides a cost effective method to scale well performing products fast.

Affiliate Promotional Methods

The largest affiliates will promote offers using performance marketing campaigns. This might be using banners, search ads or social media influencers. Here is a more in depth article about what is online marketing, which includes details on traffic sources, optimisation and landing page design.

affiliate promotional methods

Affiliates tend to live and die at the cutting edge of the performance marketing industry so they are up-to-date with the latest traffic sources, techniques and systems to run effective marketing campaigns.

Affiliate Life

Affiliates are often solo-entrepreneurs or work in small teams or with virtual assistants. The stereotypical image of a digital nomad working out of coffeeshops in Thailand is fitting although not always the case. Affiliate marketing is big business and as the industry evolves we are seeing more traditional companies competing at the highest levels.

Affiliate marketers have a reputation of pushing boundaries too far. Having traffic sources close down accounts and advertisers refuse payments are common complaints on affiliate marketing forums. Fraud is a huge issue in any form of digital advertising and advertisers need to be aware and take precautions against fake sign ups and sales.

Over the last decade since I started affiliate marketing I have seen the sector evolve and there is now much more corporate atmosphere at affiliate events. The industry is maturing and becoming more professional.

Performance Marketing

Performance marketing is running marketing campaigns and optimising the results to continuously improve the performance of the campaign. A simple example of this is an A/B test where two banner ads could be used on the same campaign. Whichever ad gets the most clicks (click through rate) will be used and developed further.

There are a lot of aspects that go in to running a performance marketing campaign such as:

  1. The angle – a unique perspective or concept that the affiliate will use to promote the offer
  2. The creative – the ad creative that is used such as a banner ad, this can be broken down further to optimise the colour of a button or font used in a headline.
  3. The tracking – high volume tracking is a challenge in itself when dealing with millions of data points per minute load balancing and data storage becomes critical.
  4. The landing page – affiliates often use a jump page between their creative and the advertisers landing page. This can be used to collect data and improve conversion rates by pre-selling an offer.
  5. The offer – the affiliate has little control over the offer unless it is whitelabeled or they have a good relationship and high volume with the advertiser.
  6. The conversion – the conversion process will normally be a signup, install or sale this fires a pixel back to the the affiliate panel which records a commission.

Affiliate Networks

Affiliate networks act as the marketplace between advertisers and affiliates. An advertiser will approach a affiliate network and list their offer. The advertiser and network will agree a commission model such as:

  • CPC – Cost per click – Per click payout
  • CPA – Cost per aquisition – Pay out for an email lead.
  • CPI – Cost per install – Paid out on app install
  • Cost per call – Paid out on a call received to a call center
  • CPS – Cost per sale – fixed payout per sale of an item
  • Rev share – Percentage share for that customer

My personal favourite commission models are CPA and lifetime revenue share. There are specialist CPA networks that host low payout offers which convert on a new lead. This makes testing and optimisation affordable for affiliates.

CPA offers are usually labelled as either SOI or DOI. SOI is single opt-in and just requires an email to be submitted for the payout to go through. DOI is double opt-in which requires the user to click a link from the welcome email to verify their account.

The benefit of CPA offers is that they are really quick to test and optimise. If you have a $3 DOI CPA offer then you can test a hundred of them for the same price as a revenue share offer where the lifetime affiliate value is $300.

Having said that there are benefits to building a long term business with lifetime revenue share models. I have some affiliate revenues that come in from campaigns I ran 5+ years ago. It’s a form of passive income that trickles in and doesn’t take any maintenance. Lifetime revenue share offers do however take longer to setup, test and optimise. They are also cashflow negative as it may take a long time to earn back your ad spend whereas CPA offers are paid out immediately and from a cashflow perspective an affiliate can scale instantly.

Affiliate Marketing Evolving

Affiliate marketing is a fast paced industry where the game, players and competition changes rapidly. In the last few years we’ve seen the rise of push notification traffic, paid influencer posts, print on demand, drop shipping/servicing.

While the industry evolves there will always be pockets of profitable traffic that affiliates can find and convert into commissions. Advertisers will continue to scale their businesses leveraging affiliates and affiliate networks.

What does affiliate marketing mean?

Affiliate marketing is when an advertiser offers a 3rd party affiliate a commission for promoting the products and services. Affiliate networks act as a marketplace for affiliates to find advertiser offers to promote. Affiliate marketing is a fast paced industry where the top performance marketers can generate significant earnings.

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James Bachini

Disclaimer: Not a financial advisor, not financial advice. The content I create is to document my journey and for educational and entertainment purposes only. It is not under any circumstances investment advice. I am not an investment or trading professional and am learning myself while still making plenty of mistakes along the way. Any code published is experimental and not production ready to be used for financial transactions. Do your own research and do not play with funds you do not want to lose.