Affiliate marketing is an advertising model in which a company compensates third-party publishers to generate traffic or leads to the company’s products and services. The third-party publishers are affiliates, and the commission fee incentivizes them to find ways to promote the company.
The internet has increased the prominence of affiliate marketing. Amazon (AMZN) popularized the practice by creating an affiliate marketing program whereby websites and bloggers put links to the Amazon page for a reviewed or discussed product to receive advertising fees when a purchase is made. In this sense, affiliate marketing is essentially a pay-for-performance marketing program where the act of selling is outsourced across a vast network.
Affiliate marketing predates the Internet, but in the world of digital marketing, analytics, and cookies made it a billion-dollar industry. A company running an affiliate marketing program can track the links that bring in leads and, through internal analytics, see how many convert to sales.
Affiliate marketing can yield great rewards for the advertising company and the affiliate marketer. The company benefits from low-cost advertising and the creative marketing efforts of its affiliates, and the affiliate benefits by earning additional income and incentives. The return on investment for affiliate marketing is high as the company only pays on traffic converted to sales. The cost of advertising, if any, is borne by the affiliate.
The advertising company sets the terms of an affiliate marketing program. Early on, companies largely paid the cost per click (traffic) or cost per mile (impressions) on banner advertisements. As technology evolved, the focus turned to commissions on actual sales or qualified leads. The early affiliate marketing programs were vulnerable to fraud because clicks could be generated by software, as could impressions.
Now, most affiliate programs have strict terms and conditions on how to generate leads. There are also certain banned methods, such as installing adware or spyware that redirect all search queries for a product to an affiliate’s page. Some affiliate marketing programs go as far as to lay out how a product or service is to be discussed in the content before an affiliate link can be validated.
So an effective affiliate marketing program requires some forethought. The terms and conditions must be clearly spelled out, especially if the contract agreement pays for traffic rather than sales. The potential for fraud in affiliate marketing is possible.
Unscrupulous affiliates can squat on domain names with misspellings and get a commission for the redirect. They can populate online registration forms with fake or stolen information, and they can purchase AdWords on search terms the company already ranks high on, and so on. Even if the terms and conditions are clear, an affiliate marketing program requires that someone monitor affiliates and enforce rules.
Amazon’s affiliate marketing program, Amazon Associates, is one of the world’s largest affiliate marketing programs.
Creators, publishers, and bloggers sign up to have Amazon products and services shared on their websites or apps, and in return, receive compensation for the sales their sites generate.
Amazon sets strict criteria for the types of sites and apps that host its ads. For example, sites must not contain replicated content from another site or creator and be available to the public. Websites must be active with fresh content and suitable according to Amazon’s standards. For example, they must not contain obscene or offensive content, promote violence or illegal acts, or contain any content deemed harmful to others.
Approval is contingent on a thorough review by Amazon staff and meeting a qualified sales quota (three within 180 days of the application). If an application is rejected, it will not be eligible for reconsideration. Once approved, commissions are earned as site visitors purchase products or services from Amazon.
Amazon Associates can earn up to 20% in commissions for qualified sales. Rates are fixed and based on product and program categories. As a bonus, Amazon offers special commissions on certain events.