Definition: Affiliate marketing is a hybrid advertising and referral channel by which third parties promote another company’s product or service and receive a commission for any sales generated. Affiliates can be a major revenue driver for ecommerce stores, translating their visibility into brand awareness and sales.
Affiliate marketing is a grey area between advertising and organic referrals. An affiliate marketer's greatest asset is its audience: they are able to command a revenue share because of their relevant visitors and the highly-qualified traffic they drive to online businesses.
Affiliate marketers become successful by cultivating an audience and developing a rapport with them. Affiliates often excel at driving organic traffic for informational search queries about a brand or industry. For example, they may rank high for "best [product]" or "[brand] vs. [brand]" searches. Many affiliates excel at generating traffic from long tail searches, using traditional content mediums such as blogs or reviews.
While some affiliates primarily drive new visitors to their website via new users from organic and paid traffic, others earn a substantial following by providing engaging content and developing a rapport with their audience. These affiliates earn the trust of their readers and can act as a type of spokesman or brand advocate for an online business.
Successful affiliates often employ one or more of the following tactics:
Affiliate marketers benefit from this arrangement, because they don’t have to produce the product or service they're promoting. They simply need to refer people to the company they are affiliated with. Affiliate marketers often use the Internet to promote products and services via methods such as:
While businesses, including ecommerce businesses, can benefit from affiliate marketing as a way of driving additional sales without upfront costs, there are risks to the process.
While businesses, including ecommerce businesses, can benefit from affiliate marketing as a way of driving additional sales without upfront costs, there are risks to the process. These can include an affiliate misrepresenting a business as well as fraudulent affiliate behavior. The following steps are suggested for successful affiliate management:
Although most affiliate marketing is commission-based, payouts vary widely. Commissions may be only a few percent, or they might be half of the sales price. Additionally, some agreements have varying commissions, depending on how many units the affiliate marketer sells. Profit margins, product pricing, and LTV affect what an online retailer is willing to pay an affiliate for every sale generated.