Affiliate Marketing Principle Theory

In the very early days of the World Wide Web, web sites were plain, primitive, and labors of love. People shared content – advice, articles, tips, stories, reviews, and favorite bookmarks – for free. Many people feel that this ‘tradition’ of free content on the Internet should dominate. And for the most part it still does – thanks, in large measure, to affiliate programs. This is because affiliate programs of all kinds – whether commission-based, pay-per-action, pay-per-click, or pay-per-impression – allow webmasters to recover the costs of developing and sharing free content. Monetization is simply the process of making a content site pay.

Affiliate marketing involves revenue sharing between two web sites. The Affiliate site normally provides free advertising for an e-commerce site and compensation is based on performance i.e., sales, clicks, registrations, or a combination of all.

Affiliate Marketing is the new marketing strategy significant for the e-business world. The reason for the success is that the ‘Merchant’ (advertiser) pays only for the results rather than paying to reach the audience. ‘Pay-for-performance marketing’ is the other apt name for Affiliate Marketing. In addition, the ‘Affiliate’ gains an incentive by permitting the Merchant to post an advertisement on his webpage.

Functioning

Affiliate Marketing is a widespread method of promoting a website, wherein an affiliate is paid a commission by the merchant for every visitor, subscriber and/or customer that he provides the merchant through his efforts. It is a modern variation of the practice of paying finder’s fees to the individuals who introduce new clients to a business.

Compensation may be based on a certain value for each visit (Pay-per-click), registrant (Pay-per-lead), or a commission for each customer or sale (Pay-per-Sale). The Merchant offers to pay the Affiliate ‘x’ amount for either a click through from the link of Affiliate’s site, or for a lead (where the visitor signs up for a newsletter, fills in a form etc.) or a percentage of a purchase made by a visitor as a result of a click through.

Even if the visitor does not make a purchase on the advertiser’s site immediately, most programs will offer ‘cookie duration’ of usually around 30-90 days. This means that as long as the visitor has the cookie in their cache; even if they return to the Merchant’s site one month later, the affiliate will still receive the commission from the sale.

Core Components:

Members Involved

The e-Affiliate Marketing Program has a three-tier interrelated structure.

• The Merchant (the advertiser / publisher)
• The Affiliate Network (the intermediary)
• The Affiliate or the Partner (the website owner)

Here some important term about affiliate marketing.

• affiliate – the publisher/salesperson in an affiliate marketing relationship.
• affiliate directory – a categorized listing of affiliate programs.
• affiliate forum – an online community where visitors may read and post topics related to affiliate marketing.
• affiliate fraud – bogus activity generated by an affiliate in an attempt to generate illegitimate, unearned revenue.
• affiliate marketing – revenue sharing between online advertisers/merchants and online publishers/salespeople, whereby compensation is based on performance measures, typically in the form of sales, clicks, registrations, or a hybrid model.
• affiliate merchant – the advertiser in an affiliate marketing relationship.
• affiliate network – a value-added intermediary providing services, including aggregation, for affiliate merchants and affiliates.
• affiliate software – software that, at a minimum, provides tracking and reporting of commission-triggering actions (sales, registrations, or clicks) from affiliate links.
• exclusivity – contract term in which one party grants another party sole rights with regard to a particular business function.
• payment threshold – the minimum accumulated commission an affiliate must earn to trigger payment from an affiliate program.
• return days – the number of days an affiliate can earn commission on a conversion (sale or lead) by a referred visitor.
• super affiliate – an affiliate capable of generating a significant percentage of an affiliate program’s activity.
• two-tier affiliate program – affiliate program structure whereby affiliates earn commissions on their conversions as well as conversions of webmasters they refer to the program.