What Is Affiliate Marketing?
Affiliate marketing is an advertising model in which a company compensates third-party publishers to generate traffic or leads to the company’s products and services. The third-party publishers are affiliates, and the commission fee incentivizes them to find ways to promote the company.
Key Takeaways
- Affiliate marketing is a marketing scheme in which a company compensates partners for business created from the affiliate’s marketing tactics.
- Digital marketing, analytics, and cookies have made affiliate marketing a billion-dollar industry.
- Firms typically pay affiliates per sale and less frequently by clicks or impressions.
- The three main types of affiliate marketing are unattached affiliate marketing, involved affiliate marketing, and related affiliate marketing.
Understanding Affiliate Marketing
The internet has increased the prominence of affiliate marketing. Amazon (AMZN) popularized the practice by creating an affiliate marketing program whereby websites and bloggers put links to the Amazon page for a reviewed or discussed product to receive advertising fees when a purchase is made. In this sense, affiliate marketing is essentially a pay-for-performance marketing program where the act of selling is outsourced across a vast network.
Affiliate marketing predates the internet, but in the world of digital marketing, analytics and cookies made it a billion-dollar industry. A company running an affiliate marketing program can track the links that bring in leads and, through internal analytics, see how many convert to sales.
For instance, an e-commerce merchant wanting to reach a wider base of internet users and shoppers may hire an affiliate. An affiliate could be the owner of multiple websites or email marketing lists; the more websites or email lists that an affiliate has, the wider its network. The hired affiliate then communicates and promotes the products offered on the e-commerce platform to their network. The affiliate does this by running banner and text ads,