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What is Affiliate Marketing



Definition

Revenue sharing between online advertisers/merchants and online publishers/salespeople, whereby compensation is based on performance measures, typically in the form of sales, clicks, registrations, or a hybrid model.

Information

The advertisers/merchants are typically referred to as affiliate merchants and the publishers/salespeople are referred to as affiliates.
Benefits of affiliate marketing include the potential for automating much of the advertising process (accepting & approving applications, generating unique sales links, tracking & reporting of results) and payment only for desired results (sales, registrations, clicks).
Paying only for performance shifts much of the advertising risk from the merchants to the affiliates, although merchants still assume some risk of fraud from partner sites.
Affiliate marketing has contributed to the rise of many leading online companies. Amazon.com, one of the first significant adopters, now has hundreds of thousands of affiliate relationships. It is not uncommon to see industries where the major players have affiliate programs–often structured in a similar manner and making similar competitive changes over time.
Affiliate Income Calculator (Advanced) at MarketingDiscounts.io

Related Terms

affiliate manager,



Definition

A person responsible for managing an online affiliate program for an affiliate merchant.

Information

Typical activities include:
  • Recruit new affiliates and screen applications
  • Provide customer service to existing affiliates
  • Maintain the creative units and promotions.
  • Report on the affiliate program activity.
  • Finding new ways to increase performance through the affiliate marketing channel.
Affiliate management may be in-house (using a company’s own employee) or outsourced (using a 3rd-party specialist company). For in-house arrangement, larger programs may have a full-time affiliate manager position, or even a dedicated affiliate management team. Companies with smaller affiliate programs may assign the affiliate management tasks to a digital marketing generalist. Or they may work with an outsourced affiliate management company. These outside companies alleviate the issue of maintaining a right-sized staff, while providing experience and relationships within the affiliate marketing industry.

affiliate merchant
,



Definition

The advertiser in an affiliate marketing relationship.

Information

The affiliate merchant is responsible for implementing a sales tracking system, providing a selection of linking methods, attracting affiliates, monitoring results and paying affiliates. Some (or all) of these functions may be outsourced.
Affiliate merchants may track their program in-house using an affiliate software program or through a 3rd-party affiliate network. Actual day-to-day management
of the program can similarly be kept in-house or outsourced.

 affiliate network
,


Definition

A value-added intermediary providing services, including aggregation, for affiliate merchants and affiliates.

Information

For affiliate merchants, services can include providing tracking technology, reporting tools, payment processing, and access to a large base of affiliates.
For affiliates, services can include providing one-click application to new merchants, reporting tools, and payment aggregation.

affiliate software




Definition

Software that, at a minimum, provides tracking and reporting of commission-triggering actions (sales, registrations, or clicks) from affiliate links.

Information

Affiliate merchants that run 100% in-house affiliate programs need to find–and possibly customize–affiliate software to handle transaction tracking and reporting. Solutions range from free and almost-free scripts to expensive software packages.
Affiliate merchants that use affiliate networks do not have to directly manage the affiliate software, although integration must occur between the affiliate merchant’s site and affiliate network’s software.

two-tier affiliate program




Definition

Affiliate program structure whereby affiliates earn commissions on their conversions as well as conversions of webmasters they refer to the program.

Information

In a two-tier affiliate program, or a multi-tier program (two or more levels), the first tier of commission is the same as in a regular affiliate program. The only difference is the additional tier(s), whereby marketers also earn a commission on sales generated by people they referred to the program. Sometimes compensation will be written in shorthand as tier1/tier2 (ex. 10%/5%).
It is important to read the fine print to determine if the second-tier compensation is calculated as a straight percentage (% of revenue generated by “B”) or a percentage of a percentage (% of earnings generated by “B”).
Affiliate programs can theoretically have an infinite number of tiers, but there are practical limitations. As tiers are added, program attract webmasters who are more interested in profiting from the work of others, as opposed to doing any actual work themselves.


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