The online market share of affiliate-based sales is huge. Forrester Consulting estimates the US market to be worth $3.4 Billion in 2014, projecting it to reach $4.5 Billion by 2016. There are over 10,000 online businesses which rely on Affiliate Marketing for some part of their revenue. In the UK, Price Water House Cooper reports that online Affiliate or Performance Marketing, with its over 4 billion clicks, translates into over a 100 million transactions. These transactions result in sales and leads, making between 8 – 10% of online spending, which is roughly 0.8% of the country’s GDP. To put that in perspective, that is almost the same amount as that earned by Agriculture.
Affilliate-Marketing-1Affiliate Marketing or performance-based marketing first began way back in 1994 and is attributed to William J. Toben and his company, PC Flowers and Gifts as the first business to offer an Affiliate Program. The next huge leap came in July 1996 when Amazon started with its Associates Program. Now the world’s largest retailer, Amazon, has more than a million affiliates worldwide.
There are different ways to run, manage or promote an Affiliate Program. It might involved multiple participants in an number of complex combinations but it all boils down to two main parties – the party who has the product (The Merchant or Advertiser) and the party who knows how to sell it (The Affiliate or Publisher).
An Affiliate Program is a business arrangement whereby one party – the Merchant, agrees to pay another party – the Affiliate, for the referrals of Sales, Leads, Subscriptions or other qualified actions. The payment is remitted for all the actions that occur when the end consumer clicks the affiliate link. This click leads to the Merchant’s website and results in an action that the advertiser desires, for example, an online sale. There are a number of business models used in Affiliate marketing, but the two most frequently used are the “Paid For Sale” and the “Paid for Lead” models, which are self explanatory. Payments are made to the affiliate on all confirmed and valid leads and orders.
Sometimes affiliate programs are called Associate, Reseller, Commission, Revenue sharing or Bounty Programs. Whatever the name used to describe this type of business, these are online sales and marketing programs.
An affiliate marketer:
An affiliate marketer is an independent marketer who may choose to promote a business and be paid based on performance. It could be considered an art form in that the marketer is finding successful and unique ways of marketing a merchants products better than that merchant could market for themselves and being rewarded and profiting from the effort.
In a recent study of affiliate earnings
39.9% earned less than $5,000 per year
11.8% earned between $5,000 – $10,000 per year
13.1 % earned between $10,000 – $24,000 per year
9.2% earned between $50,000 – $100.000 per year
Just like a real world business it takes time and substantial effort to start making very profitable returns.
So how much can you expect to earn? Well it depends on a number of factors and these are a few of the terms and definitions that you will using a lot when it comes to affiliate marketing
Click Through Rate ( CTR ) – This depends on how targeted your traffic is and the type of linking you will be using such as Banners, Text Links, Video, Product links or Reviews.
Conversion Rate (CR ) – This is the percentage of traffic that converts to desired action
Average Order Value ( AOV ) – or also referred to as the Average Affiliate Referred Ticket – which is the sum total of all affiliate orders
Payout – The commission or Flat amount paid to the affiliate per Sale or Lead
Reversal Rate ( RR ) – This is the percentage of affiliate referred transactions that get reversed by the merchant.
Earnings per click ( EPC ) – This is the metric that tells you what other affiliates are already making on this affiliate program.
Example: We have a fictitious online website which approximately 200,000 unique visitors to its pages each month.
Traffic / Click 200,000 x 1% ( CTR ) = 2000 Visitors
Sales 2000 x 5% ( CR ) = 100
Earnings 100 x $25 ( AOV ) x 12% Commission – 10% ( RR ) = $1,350
Remember that earnings differ greatly between merchants and affiliate programs, so it is important that you understand the terms and definitions of how your earnings are based.
Your initial investment in getting set up in affiliate marketing is very small. No reputable affiliate program or network will charge you to market their products and to be become an affiliate. There are however a couple of items you will need.
you will need a website which will cost you about $15 / year to register a domain name
You will need to have a hosting company host your website which will be around $10 / month
Next it comes down to the amount of time you are going to spend on the project. This really is up to you as you can spend as little or as much time as you have available on building your business. The amount of time you need to begin with is probably around 1 – 2 hours a day and build on that as your business becomes more successful and begins to become a full time occupation.
As for skills, you don’t need to be a genius to succeed. It isn’t necessary to be a computer programer or a boffin of some kind but a willingness to explore and learn new ideas and concepts must be embraced.
Affiliate marketing is all about independence as you grow your business into a successful venture. Remember to keep yourself on track by forecasting your projected earnings so you can see what targets have to be met in order to achieve your goals, don’t fall victim to incorrect projections and wrong assumptions, always do your homework.
Do not think that you will be building this massive passive income stream because it isn’t going to be that way, affiliate marketing can be a great earner as the figures above outline but it takes time and effort like any real world business to succeed.
Affiliate Compensation Models
This is simply for which consumer actions can the affiliate be compensated for. These fall into a number of models:
Cost per sale ( CPS ) or Pay per sale ( PPS ), is the most popular, which is when the affiliate gets paid a percentage of each sale they refer, approximately 80% affiliate programs use this use this payment model.
Cost per lead ( CPL) or Pay per lead ( PPL) when affiliates receive compensation for referred leads ie. subscriptions, forms submitted, free trials etc.
Cost per Click ( CPC ) or Pay Per Click ( PPC ) this model is ending, or sometimes known as a ceasing model mainly to the high volume of fraud. There may be variations on this model such as eBays Quality Click Pricing ( QCP ), where the pay per click value changes daily based on based on the value of affiliate referred traffic.
Pay Per Call ( PPCall ) this is where Advertisers pay affiliates for ” Hot Leads ” of prospects call in – Inbound calls or Pay Per Call bridges the gap between online and offline.
CPS + CPL
CPS / CPL + PPCall
CPS + CPL + PPC
An Affiliate might be paid for:
Other actions ie. Downloads, installs, free trials, subscriptions, Views or some other specified action
At the core of all these payment structures is the basic idea of performance based remuneration for action which is the bases for all affiliate programs.
Core Concepts of Affiliate Marketing
When ever you are involved with calculating your earnings for affiliate work there are number of things to bear in mind.
The idea of a “Qualified” referral – A Qualified referral is set by the Advertiser, it is he who predetermines what constitutes a “qualified action” – an Affiliate receives compensation only upon meeting these conditions.
The possibility of payout reversals – Customer Reversals happen when:
The customers payment authorization fails
A customer conducts a Fraudulent sale
There is a returned order or an unclaimed shipment
There is a Repeated / duplicate order
When there is a Cancelled order
Possible Affiliate Behavior which can result in a reversal:
An Affiliate puts through a fraudulent transaction
A test transaction will usually be reversed by the advertiser
Self-referral transactions if they are prohibited
Possible Merchant Behavior which can result in a Reversal:
Order adjustment ( correction )
The notion of a “Waiting” or “Locking Period” – An affiliate commission only becomes irreversible only once the “Lock Date” has been reached until then it could be reversed. This Lock Date is predetermined by the advertiser and can typically be up to and sometimes past 60 days.
Types of Affiliates
First time online marketers often ask us to explain the different affiliate avenues or channels available to them. When it comes to re-selling another company’s product, there are numerous options to explore. Which options work best for you will depend upon the product(s) you are affiliated with. You might even find that a combination of channels will work best for you. And, in online marketing, it pays to think outside the box. In most cases, you would generally follow the primary promotional method used by those who already are affiliated with that product or merchant service.
Content Publisher Affiliates
The Content Publisher Affiliate monetizes content-saturated websites with affiliate links such as banners, widgets, text links, product links etc. which are related to that content. In other words, affiliates make money by driving traffic to a product landing page on an affiliate program or the actions that occur on those pages. That might be a sale of a product, or an action like downloading a trial software.
These Content Publisher Affiliates fall into two categories: (1) business owners with existing websites and (2) affiliate marketers who create a web sites specific to their affiliate topic.
The business owner with an existing website usually has their own real world business website which is filled with industry- or product-specific content. Their business website presents the perfect opportunity for them to drive their already existing website traffic to a related products and services affiliate. For example, an interior decorator who has a large number of visitors may put up banners, links, and other widgets which drive traffic to other affiliated products. They may be paid for the click through or for the sale, depending upon that merchants affiliate program. The point is this person has their own business and they are adding “additional offerings” through their website and benefiting financially for helping another merchant either obtain leads or sales.
The Affiliate Marketer who creates a website specifically filled with content they want for the purpose of promoting their affiliate business. In other words, the whole purpose for their website is actually to promote their affiliate business. Many times these websites are created within social networking applications like Ning or WordPress based on user-generated content. That means that the web site owner and/or visitors add content to the web site like forums or social networking web sites. These web sites are typically considered gathering places for large numbers of people who all have common interests. The affiliate marketer then posts their banners and advertisements with links that drive traffic to their affiliated products pages. Again they may be paid for clicks to the page, sales leads or product purchases.
The following are the types of avenues that these two category of affiliates can gravitate to or include in their mix. It all depends upon the particular affiliation which of the following they might incorporate into their mix:
Coupon and Deal Affiliate offers coupons for all kinds of things like offering free shipping and merchant discounts, etc. Prospective buyers of products typically find these coupon affiliate websites by doing a search in the search engines for coupons pertaining to specific types of products and services. It’s important to note, however, that many merchants and E-commerce managers are not allowing coupon affiliates into their affiliate programs. That is because when a customer visits the merchants web site through other marketing efforts and discovers a “coupon” field when checking out, they often will go and do a search for a coupon on that product they have already decided to purchase. Instead of completing the sale right then, the customer goes into a coupon affiliate website and clicks on a link which gives a coupon code. When the customer puts the coupon code into the shopping cart, it actually gives the coupon affiliate credit for a sale they really didn’t help create. Merchants are losing money on this and are not happy about it. Therefore, many are not allowing coupon affiliates to be affiliates for their products, or getting rid of ones they already had. That is not to say that coupon affiliates are not needed or used by the public. It just means many merchants are not allowing you to be an affiliate for their products. So, you may not be able to make the kind of easy money these affiliates are use to making just through the merchants having a “coupon” field in their shopping carts.
Data Feed and Comparison shopping Affiliates work with the Merchants products feeds, putting together useful websites which sell the merchants products through this comparison. //www.datafeedfile.com/ CHRIS I FIND THIS TO BE TERRIBLY COMPLICATED ACTUALLY LOL
Display Advert Affiliates promote merchants by placing display advertising like banners with imbedded affiliate links. Each banner leads to a specified affiliate website. Traditionally, display advertising is “graphical advertising” on the World Wide Web that appears next to content on web pages, Instant Messaging (IM) applications, email, etc. These ads–often referred to as banners–come in standardized ad sizes and can include text, logos, pictures, or more recently, rich media. Rich media, synonymous for interactive multimedia, is enhanced media that utilizes a combination of text, audio, still images, animation, video, and interactivity content for active participation from the recipient of the ad.
You may imagine display advertising just like magazine or newspaper ads, only online and like TV commercials with the possibility of moving from static to interactive, flash and video. However, display advertising has a significant advantage over advertising in magazines, newspapers and TVs:
targeting options such as demographic and behavioral targeting are available to laser in on your audience and, you can track the performance of your campaign daily to measure metrics such as impressions, clicks and conversions to calculate your ROI. Re-marketer Email Affiliates market a merchant or product through email. This also includes re-marketing which is when an affiliate will “re-target” a “non-completer.” The “non-completer” is the customer that arrived on a landing page and who left at any one of the various stages of the selling /or conversion process. In other words, they left something in the shopping cart and changed their mind, for example.
In email and online marketing, remarketing or ecommerce remarketing refers to the techniques, strategies and often the automated email systems used by marketers and online merchants to follow up with website visitors who do not make a desired action on the Web site—usually it is when they abandon their shopping cart.
Think of it like this: you use marketing to bring a visitor to your website, and if he or she doesn’t make a purchase, you then use remarketing tactics to bring the visitor back to your website and convert him or her in to a paying customer.
People often refer to ecommerce remarketing services as “conversion marketing” or “cart abandonment email marketing.”
HERE?)… here’s one: //www.upsellit.com and here is a great article about shopping car abandonment: //blog.cj.com/01082013/reduce-shopping-cart-abandonment-affiliate-marketing-cj-qa-upsellitcom
Loyalty and Incentive Affiliates offer incentives for desired actions . This may include Cash Back, points, virtual currency etc. They will re-share a part of their payout, a part of the payout received from the merchant, in return for the desired action.
Mobility & Pay Per Call affiliates concentrate on mobile marketing and pay per call marketing. They will frequently bridge the gap between the online and offline world. They may intertwine with location based marketing.
Search Engine Marketing affiliates employ Search Engine Marketing to drive conversions to the advertiser, utilizing SEO, PPC or both.
Social Media Affiliates use social media from forums to blogs to leverage existing social networks or in some cases creating their own social networks, to market the merchants they promote. (CHRIS WOULD THIS JUST BE THE AFFILIATE MARKETING CONTENT PUBLISHERS WHO BUILD THEIR OWN SITES OR SOCIAL NETWORKS JUST TO MARKET THEIR AFFILIATIONS…WHY IS THIS DIFFERENT.
Video Affiliates focus on video creatives. This method has been known to yield a 29% dwell rate and a 45% higher conversion rate.
Whichever channel you decide to employ, getting Compass Marketing to go over your campaign with you or perhaps to even design it for you will probably save you a heap of time and money in the long run so why don’t you get in contact with us and we’ll advise you on your best strategic move.
There are two basic types of affiliate platforms – Affiliate Networks and In-house (indie) Platforms
Affiliate Networks are basically mediators who connect affiliates with Affiliate Programs, providing tracking, reporting and maintenance services.
In the Merchant / Affiliate relationship, Affiliate Networks are the ones who pay affiliates, helping to aggregate payments across different programs, streamlining the payment process for both parties involved.
Key Affiliate Networks in the US
CJ by Conversant formally known as Commission Junction
eBay Enterprise formally known as Peppergem
Post Affiliate Pro
Proprietary solutions ie. Amazon
Network Platforms vrs “Indie”
Working with Merchants through affiliate networks is more convenient for beginning affiliates due to the ability to aggregate payments across numerous affiliate programs and to get across the board reporting which is very good to study and understand.
If the niche market you decide to work in includes or is mainly with in-house affiliate programs, don’t let that put you off from participating. There are Indie Giants like Amazon and eBay and using them should not result in any problems with reliability or service. With smaller merchants its better to start small and to take it easy until you are sure of their reliability and feel more secure in the relationship.
For most affiliates its not a simple choice of working with either Network Affiliates or Independent Affiliates but rather its a combination of both kinds to allow you to work with a larger number of relevant merchants.
Tracking: Clicks vrs Conversions
Clicks are tracked by the platform upon a click on an affiliate link.
Conversions are tracked by a string of code, also known as the “Tracking Pixel” on the Merchants ‘Sale Confirmation’ or ‘Thank You’ page.
Cookies are important because affiliate sales are normally tracked using cookies, which are small text files which are stored on the visitors or customers computer for a set amount of time and provide information on the conversion process.
The set amount of time which a cookie remains on the customers’ computer is known as the cookie life and this is the time period between the end users’ click on an affiliate link and the last day when the merchant is willing to pay a commission on the conversion.
As an affiliate marketer, you want the sale or action that the customer takes to be attributed to you and not to someone else, so if the customer goes away from your link for whatever reason and then returns via another marketer’s link you lose the conversion if the cookie life on their computer has expired.
Today “Last Click Wins” is the predominant model of attributing affiliate referred sales. This means that regardless of how many affiliates touch the customer in the pre-sale process it is the last affiliate that sets the cookie on the customer / visitors’ machine before they place the order through that will get the full commission.
Cookies are not the only way or method used to track affiliate conversions and commissions. There are a number of both software and affiliate networks that use a variety of methods that do not depend on cookies for tracking.
There tracking methods might be tied to;
The shopping cart
The end users IP address
Be URL based
Or it may incorporate a number of cookie less solutions which are software based such as those offered by
Or affiliate Networks such as:
As you sort through and select affiliate networks inevitably you will come across various programs which offer extremely short cookie life periods. This is an unfortunate reality and your first reaction might be why even bother with these affiliate programs, however if you dig deeper you will find that an encouraging 85% to 91% of conversions occur either immediately or within 24hrs after the end customers click on an affiliate link.
Taking this into account plus the reality that the above referenced brands generally yield higher than average conversion rates, using an affiliate network which predominately uses short cookie life spans really depends on the product and how quick the customer makes up their mind and completes the sales process.
There are tools to help you unify the reporting process across the different affiliate networks and merchants. These are called affiliate statistic segregators such as can be found at:
You can also get Microsoft Excel to do the work for you. By exporting the info from your particular platform that you are working on and then importing the information into an Excel spreadsheet manually or by using the interface supplied by the network platform, you can get the information arranged and accessible on your computer.
One of the most popular questions when setting up an online business is a fundamental one to all of us. How and when will I get paid? It’s an important question to every one of us.
How are payments to affiliates handled on some of the most common affiliate networks and in-house affiliate programs?
When does one get paid?
In which manner does one get paid?
Most affiliate networks and in-house affiliate programs either pre-set a payment threshold or allow you, the affiliate to choose the threshold. In most cases, the affiliate chooses the payment threshold and upon reaching it their payment will be remitted to them.
You will also in most cases get to choose the currency that you will be paid in however that option is not available on all US networks where sometimes $US is the only choice. You must decide, when setting up your affiliate account the payment method that you will receive funds in. These options vary from network to network and program to program so you may well have to set up a number of different ways to receive payments.
Below is a breakdown of some of the different programs and networks and the methods of payment that they use.
AvantLink – Pays by cheques, direct deposits (US Banks only) and PayPal
CJ by Conversant – Pays by direct deposit and by cheque. It’s direct deposit option is only available for select countries.
The Google Affiliate Network which was retired in 2013 was paying out their affiliates through their AdSense accounts.
Rakuten LinkShare – Pays by direct deposit for select countries and also by cheque.
ShareASale – Pays via direct deposits for US, Canada, UK and EU based accounts that support this payment method. They also pay by cheque which can be sent via regular mail or via FedEx.
Select Networks – (eg. Avangate, MarketHealth.com, GdeSlon.ru and affiliate programs (eg. eToro) use solutions like Payoneer where they pay through pre-paid personal MasterCard, local ewallets and international cheques.
Payment terms and options are highly dependent on the platform specifics of the various programs and networks. Be aware of the “Locking Periods” and possible reversals of sales or qualified actions.
Another question, which is often asked, is whether or not it is possible to be an affiliate without having a website. The short answer is yes.
Technically one may be an affiliate without a website – an example of that would be that you could be a Paid Per Click search affiliate who runs paid search campaigns’ linking your ads through affiliate links directly to merchants’ websites. Or you may be employing email marketing or perhaps running Pay Per Call campaigns which work offline.
Whatever the method employed to promote your niche, it is highly recommended that you have a website where you will explain the marketing methods that you use. Many merchants will not even consider your application to become an affiliate if you do not have a website.
If you don’t have a website or are planning on doing offline campaigns, always check with the merchant that your planned methods of promotion are acceptable to that merchant. This needs to be done before you begin as you don’t wish to find that your commissions are reversed because the merchant does not wish to be associated with a particular style of promotion.
Can I promote more than one merchant or multiple advertisers from my niche market? As a free marketer you are compensated by performance. You decide which merchant you are going to invest your effort into. You are also only paid when performance occurs, merchants are well aware of this and it is very rare that a merchant will ask for exclusivity. A everyday example of multiple competing merchants is any price comparison website.
There are two kinds of contracts or agreements that you will need to enter into with Affiliate networks or Merchants. These are Network agreements and Program agreements.
Affiliate Network Agreements: – These are agreements that govern your relationship with the affiliate network. They are contracts which cover the Terms of Network Service, Promotional rules and restrictions and Payment Terms. These agreements are legally binding so you must adhere and comply with their terms and conditions or there will be repercussions. It is very important to understand them fully so you can set the correct expectations as to what you might earn from any particular network.
It is very important that you fully understand all the clauses and terms before you begin to work with an affiliate network so there are no misunderstandings. It is a really good idea to keep track of all the different affiliate networks and the conditions which are particular to that network in a spreadsheet program like Excel.
Affiliate Program Agreements: – These define and govern the relationship between affiliates and Merchants or Advertisers. Many merchants will have additional terms to those you see in Affiliate Network agreements that you will have to comply with. Make sure you understand all their terms before you start to promote a merchant.
In some cases merchants will summarise their terms in the first paragraph of the agreement whist others go into great detail and break down their requirements into easily digestible and understandable sections or paragraphs.
When reviewing Affiliate Program Agreements you need to keep in mind the following when you go through them.
Payment Terms: What is the number of referrals that you need to have or what is the payment threshold you need to reach before the merchant is willing to pay you? What are the “Locking dates” and what if any extension possibilities are there related to these time limits?
Trademark Policies: What can you do with trademarks? How do their policies relate to – Paid Searches, Domains, HTML Tags and Trademark + rules. You may not be able to bid on trademarks exclusively but it may be possible to bid on Trademark + additional keywords such as Brandname + review.
Coupon and Discounts Policy: Are you allowed to use only affiliate program specific coupons or is it acceptable to harvest coupons from other sources such as social media and email campaigns of that particular merchant? What are the non-commissionable sales or products?
Search Engine Marketing Rules: What if any rules pertain to Keywords, display URL, Ad copy and Direct Linking?
Domain Related Policies: What rules must be adhered to regarding Trademarks and specific keywords?
Content Related Policies: What constitutes unacceptable content? Where may you use trademarks and logos? May you make use of press releases?
Promotion related Rules: What may you do in relation to incentives, software, email, subaffiliates, social media and other promotional techniques.
When reading through and understanding affiliate Network and affiliate program agreements it is important to clearly distinguish between the two. Do not underestimate the importance of these legally binding documents to your business. Keep in mind the points outlined above relating to Payments, Trademarks, Coupons, Search Engine Marketing, Domains, Content and Promotional methods.
Before you undertake to jump into affiliate marketing, you should take a moment or two to map out the best route to get there. Take a moment to think about a couple of factors to include in your strategy before you start to build your affiliate website.
1. Select the niche – decide on the market you wish to target, don’t just think about getting in to those “Hot Niche” markets such as dietary supplements or free trials. You really want to position yourself to build increasing and lasting income which like any real world business takes time and effort.
2. Decide to get into a market which you know something about. Any lack of knowledge about a subject will soon become apparent and may impede conversions. Follow your passion! Keep an eye out for hot new trends and then monetise them. Keep an eye on trending subjects in google trends, twitter and FB hash tags and follow them. Become the key influencer or the key player in your selected market and become the ‘go to’ website.
3. Identify your customer and understand their needs. Know your target demographic from information provided by the Merchant / Advertiser or your own market research. Look closely at the basics such as gender, age, income, along with details like whether or not they have children, their religion, ethnicity, hobbies etc. and their geographical data. This kind of information is invaluable and can really help you begin to develop a clearer snapshot of your particular customer. Structure your marketing to provide for your customers wants and needs.
4. Decide on what type of website to build, focus on providing your followers with high quality entertaining and problem solving websites or a combination thereof which gives them what they want. These can be broken into a few basic structures.
A problem solving resource – which addresses the immediate problem that the customer has.
An entertaining website which keeps them amused and engaged in the selling process.
Perhaps a combination between problem solving and the amusement kind of website is appropriate for your market, find the right synergy and you are on the road to a successful site.
5. Choose the promotional methods which you are going to use to promote your product or service within your niche area. Which kind are better suited?
Coupons and deals
Data Feeds and CSE’s
Display (including retargeting)
Email (including remarketing)
Mobile and Pay Per Call
Loyalty and Incentives
Search Engine Marketing (Search Engine Optimisation and PPC)
6. Select a platform – 52 of the top 100 blogs on the internet are wordpress based. WordPress is a Content Management System, largely used for blogs but it is so much more and can handle anything you need to build. I recommend going with a self hosted wordpress.org website. There are over 77 million sites which are operating the wordpress platform and there are nearly a hundred WP affiliate marketing related plugins available to download on wordpress. It is user friendly and easy to optimize for SEO.
Select the niche market
Identify the target demographic
Decide on the type of website
Chose the promotional method you’ll use
Select the platform
Go for it