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Understanding Affiliate Programs
by Sharon Housley
Affiliate programs are commonly misunderstood, in
order to understand affiliate programs lets start with
terminology. For clarification purposes, an affiliate
is defined as any referrer or website that promotes
a product in an effort to earn revenue. A merchant is
defined as someone who owns a product and is sharing
revenues with an affiliate based on the affiliate's
performance. Affiliate programs can drive targeted traffic
to your website.
There are 3 basic affiliate programs, though only the
first two are commonly used.
Pay Per Click - this is when an affiliate
is compensated for sending traffic to the merchant.
(AdSense is an example of PPC affiliate program)
Pay Per Sale - this is when the affiliate
is compensated by the merchant if the referral generates
a sale or purchase.
Pay Per Lead - this is when the merchant
agrees to pay for a qualified (or sometimes unqualified
lead), which is very uncommon because it is subjective
and up to the merchant.
Affiliate websites tend to provide information, entertainment,
and content services to their customers. The online
merchants sell products, goods and services online.
These are programs permitting affiliates to earn money
based on the visitors to your site who click through
to another's website. Some pay a token amount for the
click through and others provide a percentage of sales
when a visitor clicks through to your site and buys
a product or service on the other party's site. This
could represent a value added service to your visitors.
Affiliate programs allow you to pay and track incentives
from other websites that send web surfers, leads or
paying customers to your website. Commissions based
on purchases made by traffic sent from the referring
website can be paid. Besides a commission, an affiliate
can receive a flat fee, or other incentives for all
valid transactions it refers that generate a sale or
Be careful that the affiliate's web page is not cluttered
with banner ads that may crowd out your link, or that
be annoying to customers. Affiliate programs enable
affiliates to leverage their traffic and customer base
in order to profit from e-commerce while merchants benefit
from increased exposure and sales.
Commonly traffic to merchant sites is measured and
affiliates can clearly see conversion rates. Meaning,
they track the percentage of people they are referring,
and how much of it results in earned revenue. If the
affiliate finds a very low conversion, they will find
a better way to monetize that traffic, quite possibly
with a competing merchant product.
In order to be a successful affiliate, the affiliate
site needs to either have tons of traffic or target
a specific audience, frequently one untapped by the
merchant. It has been my experience, the closer the
affiliate site content resembles the merchant products,
the higher the likelihood of a good conversion rate.
Once you are committed to the idea of affiliates, the
next step is to determine the kind of tracking system
you are going to use. Sales can be tracked by HTML code,
which is placed in a shopping cart or on the 'order
confirmation'/'thank you' page, and cookies, which are
created after the customers click on a banner ad. Cookie
killers have been a problem for the affiliate industry.
Software vendors have an advantage over other merchants
in that new technologies allow software developers to
better control compensation. Vendors can 'wrap' their
software insuring that their affiliates are compensated
for referrals, even if the customer downloads a trial
version prior to purchasing. Buy now buttons in the
software have affiliate ids imbedded in the download.
Combined tracking systems have more success than those
that rely on a single tracking technology.
In order to develop a successful affiliate network,
merchants must realize that affiliates spend ad dollars
on site, and product promotion. If the affiliate is
not compensated fairly they will not remain in the merchants
network. The bottom line is that affiliate relationships
are partnerships, when both sides feel the situation
is fair and equitable the relationship will be a success.
About the Author:
Sharon Housley manages marketing for NotePage, Inc.
a company specializing in alphanumeric paging, SMS and
wireless messaging software solutions. Other sites by
Sharon can be found at http://www.feedforall.com
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