Affiliate marketing is an advertising strategy where a business pays third-party companies to generate leads. The latter – also known as affiliates – receive payment from the business in exchange for its ‘promotional’ activities.

This makes affiliate marketing a ‘pay for performance’ network, where the selling itself is ‘sub-contracted’ to the other people. As the main goal is selling more, it benefits both the business and its affiliates.

The Popularity of Affiliate Marketing

Though affiliate marketing predates the internet, the latter has made it more popular. Today, 15% of e-Commerce revenues come solely from affiliate marketing.
The trend started with Amazon, which encouraged bloggers to place product links on their websites. Amazon ends up paying a commission for every purchase made through the link.

How Affiliate Marketing Works

A company that wishes to reach out to more clients should hire an affiliate, which could be someone who owns several websites – or various email lists. Basically, the more websites or email lists the affiliate has, the wider his or her reach.
The affiliate works by promoting the company’s products through text ads, banner ads, email marketing, or links to other websites. The promotion may appear in articles, blog posts, or videos as well.
Whenever somebody clicks on the promotional material, the e-Commerce site pops up. Should the client push through buy the product, the company will pay the affiliate. The commission often ranges from 5% to 10% of the item’s amount.

Advantages of Affiliate Marketing

Affiliate marketing is good for both parties because of the following reasons:

Targeted Traffic

With affiliate marketing, the company can focus on clients who are more likely to buy. Compared to regular advertising, affiliate marketing is not shooting blind – it’s dealing directly with interested customers.

Low Cost

While affiliate marketing costs some money, it’s not as expensive as other advertising strategies. For one, there’s no need to employ a staff of marketers. You only need to pay for the sales – or the leads – depending on what the agreement is.

Low Risk

As long as the company pays for performance, affiliate marketing comes with relatively low risk. It doesn’t need a lot of lead nurturing, which is a strategy that’s still subject to failure.

Time-Saving

You don’t have to invest a lot of time in affiliate marketing, since it’s the affiliate’s duty to bring you buyers. As such, you can better spend your time on other more important activities – whether it’s for the business or your family.

Issues With Affiliate Marketing

In the early days, the affiliate commission depended on the clicks (traffic) and miles (impressions). However, some affiliates used this to dupe many companies. Instead of attracting customers, they used software that generates clicks and impressions.
To prevent such fraudulent activity, affiliate marketing programs have shifted their focus to qualified leads and actual sales. They have also set some stringent conditions before they pay up.
Currently, firms have banned the act of installing adware/spyware that redirects clicks to the company’s page. Some even have specifications for mentioning before they validate the link.
Despite these rulings, some affiliates continue to commit illegal acts. Some marketers use misspelled domain names to get payment from redirects. Some use fake or stolen information on registration forms, while some buy AdWords for which the company ranks.
Because of these issues, it’s necessary for a company to monitor its affiliates and make sure they follow the rules.
Affiliate marketing, which is all about product promotion, is good for both the seller and the affiliate. While it does have some risks, it does save time – and is relatively inexpensive!