What is Affiliate Marketing?

Imagine for a moment that you one day receive a call from an advertising company who want to put your web site address on bill boards all around the country. You tell them that is sounds rather expensive, to which they reply that they will put the boards up without any upfront cost to you, but instead will charge you a small percentage of whatever revenue they generate. No new sales, no charges.

If this situation sounds too good to be true then this is a good time to introduce you to the concept of Affiliate Marketing. Affiliate Marketing is essentially paid on results online advertising. Other websites advertise your shop / products and you give them a share of the profits from any sales that they generate for you.

The obligatory example

Let me use an example to demonstrate the concept a little better: PigsBladdersRus.com is a (fictional) Online Store selling morris dancing paraphernalia who are interested in generating more sales so set-up an Affiliate Program.

Ilovemorrisdancing.com is an equally fictional hobby site that is popular amongst morris dancing enthusiasts, but generates no revenue for the owner, Bob, who is stuck with a regular hosting bill for the site.

Noticing that PigsBladdersRus now has an Affiliate Program running, Bob puts adverts for PigsBladdersRus on his site, which his users see with interest and click on. Whenever a user follows the advert from Bob’s site and makes a purchase, this is recorded by PigsBladdersRus and added to a total for the month. At the end of the month Bob receives a cheque for his help in sending more sales to PigsBladdersRus & everyone is happy (presumably that it except for the pigs).

Back to reality

The above example is typical of the concept and spirit of Affiliate Marketing, but in truth is more than a little dated. Whilst the bulk of affiliates are those looking to make a few extra pounds in their spare time, those that generate the bulk of the sales (and therefore earn the bulk of the commissions) are a very different breed.

Affiliate Marketing has now spawned it’s own industry professionals. These are full time affiliates who often operate a range of specially created targeted websites capable of generating many thousands of pounds in commissions each month. Of course, amongst these professionals there are still a good number of people like Bob earning modest but regular commissions from their hobby.

Risk free advertising?

Running an Affiliate Program is not however totally risk free. Whilst running your own program requires little in the way of upfront costs, it does require a commitment to making the program work.

Setting up tracking, recruiting affiliates, moderating commissions, communicating with affiliates and cutting and sending monthly cheques to all your affiliates all take time. Employing an affiliate network to do some of these jobs for you is one approach, but then does increase the costs.

So, does Affiliate Marketing work?

Whilst Affiliate Marketing is not without risks, it does provide a mechanism for potentially fast expansion of market share without significant upfront cost. To answer whether it works or not, it would seem appropriate to mention the web’s best known Affiliate Program: Amazon.com

The Amazon.com associate program is often quoted as being the first ever affiliate program (although in truth the adult industry had most likely been using the model for some time). Started in July 1996, the Amazon program now boasts over half a million members with untold millions of links pointing straight back at the Amazon online cash registers. How revenue the profit generates for Amazon is hard to figure, but as Amazon themselves say “the Associates program drives significant double digit contribution to Amazon's revenue”.

- 27th August 2004

This is an exclusive MerchantSite.co.uk article. Permission is not given to reproduce this article in part of full in any form. If you see this article elsewhere please let us know.