Excerpt 1 – How Affiliate Marketing Works

Affiliate Marketing is an Internet-based marketing practice in which a business pays a commission to one or more affiliates for each visitor or customer that is referred by the affiliate’s marketing efforts. Business is tracked by use of an affiliate code that is placed on a website.

Affiliate methods include organic search engine optimization (SEO), paid search-engine advertising, email marketing, and in some cases display advertising. Affiliates sometimes use other techniques, such as publishing reviews of products or services offered by a partner. We will cover these methods later in the book.

The payout is different with each affiliate merchant. Merchants set their own commission rate, which can range from referral fees to a percentage of the purchase.

There is also a downstream payout when other affiliates sign up under your affiliate account. These are called multi-tier programs. For example, publisher A signs onto an affiliate program with an advertiser and gets compensated for agreed-upon sales transacted by referred visitors. If publisher A attracts additional publishers B and C to sign up for the same affiliate program using publisher A’s signup code, all future sales that occur by publishers B and C will result in additional commission (at a lower rate) for publisher A.

Depending on the payout, the merchant/advertiser can do very well, as affiliate marketers/publishers will do all of the promotion and advertising.

One drawback of affiliate programs is the copious amount of spam they generate. Most programs prohibit the practice, and the affiliate will be dropped if caught, but it still continues.

Still, affiliate marketing can become a very solid business model when approached from the right perspective.