Understanding Affiliate Programs
By Sharon Housley
Wednesday, November 10, 2004; 6:15pm EST
Affiliate programs are commonly misunderstood, in order to
understand affiliate programs lets start with terminology. For
clarification purposes, an affiliate is defined as any "referrer" or
website that promotes a product in an effort to earn revenue. A
merchant is defined as someone who owns a product and is sharing
revenues with an affiliate based on the affiliate's performance.
Affiliate programs can drive targeted traffic to your website.
There are 3 basic affiliate programs, though only the first two are
Pay Per Click - this is when an affiliate is compensated for sending
traffic to the merchant. (AdSense is an example of PPC affiliate
Pay Per Sale - this is when the affiliate is compensated by the
merchant if the referral generates a sale or purchase.
Pay Per Lead - this is when the merchant agrees to pay for a
qualified (or sometimes unqualified lead), which is very uncommon
because it is subjective and up to the merchant.
Affiliate websites tend to provide information, entertainment, and
content services to their customers. The online merchants sell
products, goods and services online. These are programs permitting
affiliates to earn money based on the visitors to your site who
click through to another's website. Some pay a token amount for the
click through and others provide a percentage of sales when a
visitor "clicks through" to your site and buys a product or service
on the other party's site. This could represent a value added
service to your visitors.
Affiliate programs allow you to pay and track incentives from other
websites that send web surfers, leads or paying customers to your
website. Commissions based on purchases made by traffic sent from
the referring website can be paid. Besides a commission, an
affiliate can receive a flat fee, or other incentives for all valid
transactions it refers that generate a sale or lead.
Be careful that the affiliate's web page is not cluttered with
banner ads that may crowd out your link, or that be annoying to
customers. Affiliate programs enable affiliates to leverage their
traffic and customer base in order to profit from e-commerce while
merchants benefit from increased exposure and sales.
Commonly traffic to merchant sites is measured and affiliates can
clearly see conversion rates. Meaning, they track the percentage of
people they are referring, and how much of it results in earned
revenue. If the affiliate finds a very low conversion, they will
find a better way to monetize that traffic, quite possibly with a
competing merchant product.
In order to be a successful affiliate, the affiliate site needs to
either have tons of traffic or target a specific audience,
frequently one untapped by the merchant. It has been my experience,
the closer the affiliate site content resembles the merchant
products, the higher the likelihood of a good conversion rate.
Once you are committed to the idea of affiliates, the next step is
to determine the kind of tracking system you are going to use. Sales
can be tracked by HTML code, which is placed in a shopping cart or
on the 'order confirmation'/'thank you' page, and cookies, which are
created after the customers click on a banner ad. Cookie killers
have been a problem for the affiliate industry. Software vendors
have an advantage over other merchants in that new technologies
allow software developers to better control compensation. Vendors
can 'wrap' their software insuring that their affiliates are
compensated for referrals, even if the customer downloads a trial
version prior to purchasing. Buy now buttons in the software have
affiliate ids imbedded in the download. Combined tracking systems
have more success than those that rely on a single tracking
In order to develop a successful affiliate network, merchants must
realize that affiliates spend ad dollars on site, and product
promotion. If the affiliate is not compensated fairly they will not
remain in the merchants network. The bottom line is that affiliate
relationships are partnerships, when both sides feel the situation
is fair and equitable the relationship will be a success.
About the Author
Sharon Housley manages marketing for NotePage, Inc. http://www.notepage.net
a company specializing in alphanumeric paging, SMS and wireless
messaging software solutions. Other sites by Sharon can be found at
http://www.feedforall.com , http://www.softwaremarketingresource.com