Affiliate Marketing Basics

Affiliate Marketing is said to be the most effective form of Internet marketing – but it’s a lot more than just banner ads and banner exchange. If you ask top affiliate business owners the secret of their success, it’s more than likely a revenue sharing program and a well-compensated network of partners (known as Publishers or Affiliates) are involved.

What Is Affiliate Marketing?

A company that seeks to generate more web traffic, sell more products, or reach out to potential customers through leads will create a program whereby an affiliate’s web site is utilized to make these connections. A mutually beneficial relationship is formed. The company (also known as the Advertiser or Merchant) gets their increased leads, sales, or prospective customers from the Affiliate’s web site. The Affiliates promote an offer on their web site to drive leads to the Advertiser’s web site and then receives a commission from the Advertiser when the desired result is achieved.

Advertiser Best Practices

Your company will be examined by potential affiliates to be sure its something they are willing to feature on their site. Is your product competitively priced? It should be! Affiliates will not likely want to sell a product that is not priced competitively or a product they don’t believe in themselves. Be sure to create variety of banners and buttons for your Affiliate partners and keep in touch with them through emails, newsletters, and program updates. Finally, the best Advertisers make it easy for their Affiliates to join and stay current with their program. Utilizing a third party provider (also see Affiliate Networks above) can effectively handle all the administrative aspects of your program – from tracking click thrus to tracking and even payment of commissions – so your affiliates can feel comfortable with the relationship and well-informed.

Glossary Of Affiliate Marketing Terms

Be sure to familiarize yourself with the following terms as you enter the exciting, cost-effective, and profitable world of affiliate marketing…

Advertiser: The company (also known as Merchant, Retailer, E-retailer, or Online Retailer) -- a web site selling products or services -- who offers an affiliate program by placing ads and links to their products and services on Publisher’s sites and pays a commission for sales or leads generated by that site.

Affiliate Network: Secondary companies known as an affiliate networks can provide you with the means to easily and quickly become a publisher. You can start selling advertising space on your site via a company that serves as a liaison between the advertiser and your website. The affiliate network sells advertising space on your web site and then gets a cut of profit generated from that advertising. This can be an exceptional method for small sites or those just embarking into the advertising market as it can be hard to find individual advertisers by yourself. Plus, the kinds of hardware and software required to run and track ad campaigns are handled by the affiliate network.

Banner Ad: This is most widely used type of ad and tends to be the most effective method of selling advertising. Common sizes include 468 x 60 pixels, 120 x 60 pixels, and 88 x 31 pixels. Affiliate programs tend to offer a variety of sizes and designs. The most effective tend to be animated, but good static banners can also be effective. It is very important to take file size into consideration when you design/place banner ads as a large banner ad can quickly reduce the speed of your web site.

Click Thru: This reporting statistic indicates how many clicks from individual viewers your ad has received.

Cost Per Action (CPA): CPA refers to pay per lead and pay per sale affiliate programs.

Cost Per Click (CPC): The amount an advertiser pays per click. It is a bit less common than the CPM method of selling advertising but it is still utilized.

Cost Per Lead (CPL): This is the amount an advertiser pays per lead. This is a very common method of selling advertising. A lead can be anything from an e-mail address for a newsletter to a complete survey that needs to be completely filled out and verified in order to get credit. CPL prices can range greatly depending on the program.

Cost Per Thousand Impressions (CPM): This is the amount an advertiser pays per 1,000 impressions and it’s one of the most common methods of selling advertising. Generally, prices per thousand impressions range from $3 to $25, depending on the ads and site on which they are displayed.

Cost Per Sale (CPS): This is the amount an advertiser pays per sale. This is a very common method of selling advertising. When a viewer clicks on an ad on your site and then buys something from your advertiser's site, you get a credit for a sale. Sales don’t always occur right after the click and most advertisers will set a certain timeframe (known as the “cookie duration”) during which both the sale and click thru must take place in order to receive your credit. Revenue you receive for CPS programs is usually a fixed percentage of the total sale. In other instances, advertisers may pay you a fixed dollar amount per sale.

Creatives: (Also known as Links) A general marketing term applied to the materials used to generate leads and sell advertising. This includes banner ads, pop-ups, e-mail ads, text links, and many other materials.

Click Thru Rate (CTR): This is the percentage (ratio) of click thrus to impressions. Divide your total click thrus by the number of impressions to calculate your CTR. This provides a good way to judge how effective your ad campaign is as it reveals what percentage of the people seeing your ads are actually clicking on them.

Earnings Per Thousand Impressions (EPM): This is a good way to see how effective your ad campaign is. Divide your total number of impressions by 1,000 and then take your total earnings and divide them by this number to calculate your EPM.

Earnings Per Click (EPC): To judge how effective your ad campaign is, divide your total number of clicks by your total earnings. This helps to show what percentage of clicks are actually converting into leads and sales.

Impressions (IMPS): This is the actual number of times your ad has been viewed. At times this statistic is given in unique impressions or “hits.”

Interstitials (Pop-ups): An interstitial or pop-up is an effective method to generate ad revenue. Although considered annoying by some, interstitials often get higher click thru rates. Interstitials offer a variety of options including size, frequency, and when they open up – on initially on visiting the site, while leaving, or after a defined time period. Pop-ups should be used sparingly as they can cause an adverse reaction from visitors to your site.

Lead: Leads can range from e-mail addresses to surveys that must be fully completed and verified in order to obtain credit. The requirements to be considered a qualified lead varies from program to program.

Pay For Performance: This is how many affiliate networks classify themselves. It means they offer pay per lead and pay per sale programs.

Pay Per Lead (PPL): This is a kind of affiliate program that pays out on a per lead basis.

Pay Per Sale (PPS): This is a kind of affiliate program that pays out on a per sale basis.

Pay Per Click (PPC): This is a kind of affiliate program that pays out on a per click basis.

Pay Per Impression (PPI): This is a kind of affiliate program that pays out on a per impression basis.

Publisher: (Also known as Affiliate, Associate or Partner) A web site, who receives commission for promoting the products or services of an Advertiser through links, pop-ups, banner ads, etc. that appear on the site.

Sale: When a viewer clicks an ad on your site and ends up purchasing from your advertiser's site, you receive a credit for a sale. (Please see Cost Per Sale definition above for more about cookie duration.)