What Is Affiliate Marketing?
Affiliate marketing is an advertising model in which a company compensates third-party publishers to generate traffic or leads to the company’s products and services. The third-party publishers are affiliates, and the commission fee incentivizes them to find ways to promote the company.
Key Takeaways
- Affiliate marketing is a marketing scheme in which a company compensates partners for business created from the affiliate’s marketing tactics.
- Digital marketing, analytics, and cookies have made affiliate marketing a billion-dollar industry.
- Firms typically pay affiliates per sale and less frequently by clicks or impressions.
- The three main types of affiliate marketing are unattached affiliate marketing, involved affiliate marketing, and related affiliate marketing.
Understanding Affiliate Marketing
The internet has increased the prominence of affiliate marketing. Amazon (AMZN) popularized the practice by creating an affiliate marketing program whereby websites and bloggers put links to the Amazon page for a reviewed or discussed product to receive advertising fees when a purchase is made. In this sense, affiliate marketing is essentially a pay-for-performance marketing program where the act of selling is outsourced across a vast network.
Affiliate marketing predates the internet, but in the world of digital marketing, analytics and cookies made it a billion-dollar industry. A company running an affiliate marketing program can track the links that bring in leads and, through internal analytics, see how many convert to sales.
For instance, an e-commerce merchant wanting to reach a wider base of internet users and shoppers may hire an affiliate. An affiliate could be the owner of multiple websites or email marketing lists; the more websites or email lists that an affiliate has, the wider its network. The hired affiliate then communicates and promotes the products offered on the e-commerce platform to their network. The affiliate does this by running banner and text ads, posting links on its websites, or emailing clientele. Firms use advertisements in the form of articles, videos, and images to draw an audience’s attention to a service or product.
Visitors who click the ads or links are redirected to the e-commerce site. If they purchase the product or service, the e-commerce merchant credits the affiliate’s account with the agreed-upon commission, which could be 5% to 10% of the sales price.
Examples of Affiliate Marketing
Amazon’s Affiliate Marketing
Amazon’s affiliate marketing program, Amazon Associates, is one of the world’s largest affiliate marketing programs.1 Creators, publishers, and bloggers sign up to have Amazon products and services shared on their websites or apps and receive compensation for the sales their sites generate.
Amazon sets strict criteria for the sites and apps hosting its ads. For example, sites must not contain replicated content from another site or creator and be available to the public. Websites must be active with fresh content and suitable according to Amazon’s standards. For example, they must not contain obscene or offensive content, promote violence or illegal acts, or contain any content deemed harmful to others.2
Approval is contingent on a thorough review by Amazon staff and meeting a qualified sales quota (three within 180 days of the application). If an application is rejected, it will not be eligible for reconsideration. Once approved, commissions are earned as site visitors purchase products or services from Amazon.3
Amazon Associates can earn up to 10% in commissions for qualified sales. Rates are fixed and based on product and program categories.1
Amazon Associates. “Amazon Associates – Amazon’s Affiliate Marketing Program.” As a bonus, Amazon offers special commissions on certain events.
Etsy Affiliate Marketing
Etsy (ETSY) is a global online marketplace for vintage goods and other unique items—it promotes its products through various channels, including affiliate marketing partners. Applicants must submit an online application through its affiliate program portal. To qualify as an Etsy affiliate marketing partner, eligible candidates must be at least 18, have an active, unique website, have a brand identity, and meet other criteria.4
If approved, Etsy pays a commission to the affiliate for sales they procure—sales resulting from their site’s product promotion. Commission rates vary and are paid on the order price. Etsy sellers can be affiliates but cannot earn commissions on their products without special permission. Etsy declares that it has the right to terminate an agreement at any time for any reason and that it can withhold compensation for any legitimate reason.5
eBay Affiliate Marketing
eBay’s Partner Network is eBay’s affiliate marketing program that pays partners for sharing their personal listings outside of eBay Inc. (EBAY). The affiliate earns a commission and may earn credit toward their final merchant fees.6 eBay partners can also earn commissions on other sellers’ items.
Commissions are earned when a buyer bids on or immediately purchases an item within 24 hours of clicking the eBay purchase link on the affiliate’s site. For submitted bids, the commission is paid if the buyer wins the auction within 10 days of the bid.6
Commission rates depend on the category of items sold and range up to 4%.6 Gift cards, items sold by charities, and special promotions are generally excluded as qualifying sales because of their low revenue streams.
Buzzfeed
Buzzfeed is a New York-based digital media company known for viral news and entertainment stories, quizzes, and product reviews. Its Buzzfeed Shopping segment features and reviews different partners’ products and services. Visitors can read Buzzfeed’s product reviews and select affiliate links to purchase. Buzzfeed earns a commission from each sale generated from its website.
Types of Affiliate Marketing
There are three main types of affiliate marketing:
- Unattached Affiliate Marketing: This is an advertising model in which the affiliate has no connection to the product or service they are promoting. They have no known related skills or expertise and do not serve as an authority on or make claims about its use. This is the most uninvolved form of affiliate marketing. The lack of attachment to the potential customer and product absolves the affiliate from the duty to recommend or advise.
- Related Affiliate Marketing: As the name suggests, related affiliate marketing involves promoting products or services by an affiliate with some type of relationship to the offering. Generally, the connection is between the affiliate’s niche and the product or service. The affiliate has enough influence and expertise to generate traffic, and their level of authority makes them a trusted source. The affiliate, however, makes no claims about using the product or service.
- Involved Affiliate Marketing: This type of marketing establishes a deeper connection between the affiliate and the product or service they’re promoting. They have used or currently use the product and are confident that their positive experiences can be shared by others. Their experiences are the advertisements, and they serve as trusted sources of information. On the other hand, because they’re providing recommendations, their reputation may be compromised by any problems arising from the offering.