Affiliate marketing is one of the many methods of promoting web businesses. The success of a web business largely depends upon the number of traffic the website generates. This is where the role of the affiliate enters. The merchants or the advertisers of the web business appoint affiliates, who are responsible for bringing in visitors for that site or customers for that business. The affiliate is rewarded for their efforts through a percentage of the sales generated or sometimes, simply for bringing in the traffic.

Affiliate marketing is thus a form of internet marketing. This industry includes networks of individuals acting as the affiliates, affiliate management companies and affiliate managers of the web business itself. The job of the affiliates or the publishers is to employ various methods to publicize the products and services of the particular business.

The basis of affiliate marketing strategy is to utilize one website in order to uphold another. The method of this type of advertising is not too different from other forms of internet marketing. The work of the affiliates in advertising the business is somewhat similar to all that the merchants themselves do in promoting their business:

• Search engine optimization
• Paid search engine marketing
• Email marketing
• Banner advertising
• RSS capture

Compensation processes:

Revenue share (Cost per Sale, or CPS) is the method of choice in most cases. Sometimes, Cost per Action (CPA) mode is also used.

Traditionally, Pay per Click (CPC) used to be the affiliate marketing process. The publishers were required to put up the advertisement on their websites. Every time a visitor clicked on that advertisement and visited the merchant’s website, the publisher received a commission. The publisher did not have to bother about whether the visitors did comprise of the target audience the merchant was aiming at. Many frauds and scams ensued, which gradually led to the diminishing of the popularity of this type of affiliate programs.

In CPA and CPS, the responsibility of the affiliate is greater. The publisher will not get a commission unless the visitor is converted into a customer. Thus, advertiser needs to send targeted traffic to the merchant’s website, to increase chances of a successful conversion. Hence, affiliate marketing is now referred to as “performance marketing”. The compensation model applied to affiliates is quite similar to that used for the in-house sales personnel of business merchants.

Multi Tier Programs

In some cases, multi-tier affiliate marketing programs are offered in which an affiliate may build up a referral network. They need to entice other individuals into becoming affiliates for the business they are promoting. They receive a certain percentage of the commission the referrals amass. The hierarchy works like this:

• A becomes an affiliate, and is rewarded for successfully conducting the agreed performance, say generating customers.
• Affiliate A attracts individuals B and C to sign up for the same affiliate program.
• All activities of affiliates B and C will generate additional commissions for affiliate A.