Introduction to Affiliate Marketing

Posted on September 29, 2006 by Eric Hebert
Filed Under General, Affiliate Marketing, Internet Marketing 101 |

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 Most companies that want to advertise on the web have the option of doing so in a very traditional way. They purchase space on a website, usually as a banner ad, and pay the website owner a nice sum of money to put the ad on many pages. The price of the ad obviously relates to how many hits and visitors the website receives in a certain amount of time. Most websites charge the advertiser by per-thousand impressions, or “page views”. While this form of advertising does work, it can be costly. What other options does a small business owner on a budget have to advertise in a similar fashion?

In addition to its search marketing potential, the small business owner also has options through affiliate marketing. Much like direct & multi-level marketing in the traditional marketing world, affiliate marketing uses the work of others to do the advertising for you, and in return you pay these people small amounts of commission for each sale. This is all done through similar looking banner ads that normally would have a large upfront cost.

As always, an example will help simplify this concept. Imagine you run an online bookstore, and you meet five other businesses owners that each specialize in different markets. They all agree to put a banner ad on their websites, that each has a separate tracking code within them. Anytime somebody visits their website and clicks on your ad, the visitor gets sent to your website. Because of the tracking code, you get to keep track of where each visitor comes from. In return, you agree to pay each business owner 10% of profits from any products or services sold on your website.

Let’s say each website brings you an extra 500 visitors each month, and an extra $1000 in profit. You’d pay each of the business owners $100; everybody would be happy.

Now imagine if you found 100 other websites to do the same thing. I’m sure you see the marketing potential this would have for your business.

Not a bad transaction. They get to make some extra money from their website, and you get the advertising. The beautiful thing here is that you only pay for the advertising after you make a sale. That is why affiliate marketing is often referred to as performance marketing: you only spend money based on the performance of your ads!

Again, a simple example of how affiliate marketing works. By the way, that example is based on a real life online company called Amazon.com. Now you know what made them one of the most successful companies to ever sell products over the internet.

While this method sounds simple, as with anything else here it can get a little complicated. Affiliate “managers” exist to ease the burden of starting an affiliate marketing campaign and assist in keeping track of commissions and clients. They also assist in “approving” affiliate clients, because you may decide not to just let any shmuck on the web running your ads. Even though there is great potential in affiliate marketing, a poorly run campaign could tarnish the image of your brand and company. Turn to a well known affiliate manager or develop one in house to keep on top of this ever-growing method of online marketing.

Finally, don’t forget that while you may want to start an affiliate campaign of your own, their are also programs you can join to add to your own site. Just look at the right hand side of this page—everybody can benefit from affiliate marketing, and it’s a business model that works for you in multiple ways.

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