Affiliate marketing is the process of sharing marketing and sales programs
between companies that want to sell products (merchants) through other companies
(affiliates) that are willing to promote these products to their customers.
The affiliate merchant compensates the affiliate partners for their role
in communicating and selling to customers.
Affiliate programs are commonly setup as pay for performance
programs which allows the merchant to control their marketing costs as promotional
costs only occur when sales are controllable actions occur. Affiliate programs
can produce higher advertising revenue for promotional partners as the affiliate
commission can be much higher than advertising revenue that is received
from other types of advertising (such as banner ads). The typical ad revenue
for banner and other ads is approximately $10 to $20 per thousand unique
visitors. The revenue from affiliate links may generate over $100 per thousand
For affiliate marketing to work, a company that has a marketing interest
that is similar to another company’s contacts them to propose a shared
marketing relationship. The affiliate partner (also called a publisher)
may promote the products or services on their web site, by sending email
messages, using search engine marketing programs or other forms of communication
to potential customers. The affiliate merchant provides the affiliate partner
with content (such as product images and descriptions) to use in their promotional
After the terms of the affiliate relationship are negotiated,
an affiliate marketing link account is created and hyperlinks with account
codes are provided to the affiliate partner. An additional link and login
account may be created to provide the company or person with a link that
can be used to track the referred sales activity of the affiliate partner.
This figure shows the basic operation of affiliate links. This example shows
that affiliate links are provided to affiliate marketing partners and these
links are inserted on pages that have a common interest with the affiliate's
product. When visitors to the affiliate web sites click on the affiliate
link, this link provides the web address of the destination page along with
an affiliate ID code. When the destination page is accessed, the affiliate
ID code is stored during the visitor's session. If the visitor purchases
a product, the affiliate ID is stored along with the order information.
This order information and affiliate commission table is used to calculate
the commissions that are paid to the affiliate partner.