Affiliate marketing is a revenue-sharing venture between a website owner and an online merchant. The website owner places advertisements on the site to either help sell the merchant's products or to send potential customers to the merchant's website. This is done in exchange for a share of the profits. There are three ways to earn money through this form of marketing: pay per click, pay per sale and pay per lead.
In pay per click marketing, every time a potential customer leaves the affiliate website by clicking on the link leading to the merchant's website, a certain amount of money is earned by the affiliate. This amount can vary depending on the product or service that is advertised and the agreed-upon commission. The money might be electronically transferred immediately to the affiliate; the money might be transferred at regularly scheduled times of the day, week or month; or a check might be mailed to the affiliate at regular intervals.
Pay per sale advertising allows the affiliate to earn money every time a sale is made as a result of advertising on the affiliate's website. The affiliate might earn a percentage, or commission, based on the amount of the sale or might earn a flat rate, depending on the agreement.
In pay per lead advertising, every time a potential client registers at the merchant's website as a result of the advertisement on the affiliate's account, a previously determined amount of money is earned by the affiliate.
Advantages and Disadvantages
For many website owners, affiliate marketing is a great way to earn extra money without actually having to "do" anything. All it involves is placing an ad on the affiliate's website, and there's no selling or promotion of any kind. The affiliate can just sit back and wait for the profits to roll in.
It also is beneficial to the merchant. By placing advertising on websites all over the Internet, the merchant can attract customers and doesn't have to pay unless or until it gets results. The more websites with which a merchant is affiliated, the more exposure the products or services get.
Although affiliate marketing has its benefits, there also are a few disadvantages. The merchant has to share the profits with an outside party, for one. If an affiliate uses unsavory means to bring customers to a website or the site includes material that some people might consider objectionable, it might affect the merchant's reputation.
A website owner is advised to thoroughly research the merchant before agreeing to affiliation. Not doing so can result in providing advertising for a merchant that refuses to pay commission fees, relocates or changes businesses without informing the affiliate. This is rare, however, and most merchants and affiliates have a pleasant and profitable business arrangement.
In some cases, an ad can be placed on an affiliate's website for months before a potential customer clicks on it or purchases anything. If the commission is very small, this can lead to a frustrating relationship. Both the affiliate and the merchant are advised to do what they can to ensure that the relationship will be mutually beneficial.