Understanding Affiliate Programs
by Sharon Housley
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 commonly used.
Pay Per Click - this is when an affiliate is compensated
for sending traffic to the merchant. (AdSense is an example
of PPC affiliate program)
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
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
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 technology.
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