What is affiliate marketing? [A comprehensive guide]

If you are a publisher looking for ways to turn your passion into livelihood, or a new e-commerce store owner looking to grow traffic to your store, this guide is right for you. It is fundamental and covers both aspects.

What is affiliate marketing in simple words?

In simple words, affiliate marketing is a collaboration between an online content publisher and an online product of service provide to promote the business of the seller. A more sophisticated and technical definition of affiliate marketing follows: "Affiliate marketing is a form of advertising where a seller or company pays content publishers to generate traffic and leads to the sellers’ products." Affiliate marketing has recently boomed as digital marketing, analytics, and a growing base of online users have emerged. Digital analytics make planning, execution, and measurement of affiliate marketing programs almost effortless. From the perspective of a publisher, affiliate marketing is one of many ways to monetize your content.

What is an example of affiliate marketing?

Amazon pays a large base of content publishers to promote its products to the people searching information on those products on the web. This contract between Amazon and its affiliates is a classic example of affiliate marketing. However, millions of large and small e-commerce merchants engage in affiliate programs for several benefits which we discuss next.

Why affiliate marketing?

Affiliate marketing is preferable over other methods of online advertising for three reasons. First, customers searching for products and services online are very careful about the quality of the products they purchase, security of payment methods, and post-sale experience such as returns and exchange. These customers are more likely to trust an impartial expert who has used the products than the seller themselves (Note, however, that not all affiliates may be experts in a niche or have used the products. We will discuss this under “types of affiliate marketing” later in this guide). Affiliates play the role of this expert and help overcome the mistrust especially for the new e-commerce merchants.

Second, affiliate marketing is a source of creating a long-term relationship with new users. The affiliates’ followers probably already have a relationship with them. Users who found you through an affiliate are more likely to be loyal customers than those who found you via say Google Ads. It is also easier to build long-term relationships with affiliates. They may be low-cost in the long-term and have deeper connection with your brand, and become ambassadors. As their own user base grows over time, you will have a growing base of users without having to spend on finding leads.

Finally, according to a report by Business Insider, around 15% of the e-commerce industry's revenue comes from affiliate marketing. This industry is growing and may even represent a larger share of revenue in coming years. Although other paid methods are not going anywhere, affiliate marketing may be one of the biggest models. Neither an e-commerce seller nor an affiliate would like to miss out on this opportunity.

How does affiliate marketing work?

Suppose for instance that an owner of an e-commerce store wants to grow their business. They can do it by bringing more customers to visit their website and see products, prices, promotions, and other benefits. There are multiple ways they can bring traffic to their website. Typically, the seller is an e-commerce platform owner selling products online. The publisher (affiliate) is usually someone who provides publishes content on related topics. However, affiliates may provide detailed information, reviews, and expert opinion on products to the customers searching for such information on the web. Since publishers have knowledge and influence, they have the power to refer potential customers to the seller. Affiliates have one or more websites and/or email lists of potential customers. They can promote their partner sellers’ products by recommending products and including an explicit link to the partner’ website, running display directly ads relevant to the content on each page of their website, sending out emails to their client base.

How does the e-commerce merchant track traffic from the affiliate?

This a very basic and must-ask question. But it is easy. The e-commerce merchant needs to embed a special link to their website code which contains a unique ID or username of the affiliate. Whenever a user visits their website through affiliate link, the website counts it as such. It also tracks the actions they perform on the website and whether they make a purchase. Alternatively, there are multiple tools and plugins like Voluum Affiliate Tacker that can help merchants track affiliate performance.

How does an affiliate get paid?

It is usually the case that the affiliate is compensated only when a lead sent by them converts (a conversion may be defined in several ways depending on the goals and objectives of the marketer, but we will limit the definition to a purchase made by the customer). The affiliate may be paid a flat fee for each conversion or they may be paid a share of the revenue made from each sale.

What does an affiliate marketer do?

Apparently, it might be tempting to think of an affiliate as a knowledgeable person in an area who writes content for the same niche. But in reality, that’s not all. An independent affiliate is required to posses a multitude of digital skills and capabilities, while an agency or affiliate company may hire a specialist for each area. Those areas include but are not limited to content writing, digital analytics, web management, and search engine optimization (SEO). Affiliate marketers may own several websites for the sole purpose of providing affiliate services to e-commerce merchants.

Types of affiliate marketing

There are three types of affiliate marketing depending on the affiliate’s level of expertise, involvement with the product and whether they have used the product themselves:

Unattached affiliate marketing

In this model affiliate is the least involved in the product. They might or might not have used the product, do not possess expertise and authority, and do not have a duty to recommend the product. Usually an unattached affiliate would run display ads on pages with content relevant to affiliated products. Users choose to click and visit the seller’s website. In unattached marketing affiliate is typically paid per certain number of click.

Related affiliate marketing

In related affiliate marketing, the affiliate has some sort of relationship with the products and services. Usually, a related affiliate’s content is highly relevant to the products. Related affiliates may be experts and opinion leaders in the niche, but may not recommend the product directly. For example, an experienced DIY plumber may include a few product names and links as a favor to their follower while getting paid by the seller.

Involved affiliate marketing

Involved affiliates have a deeper connection with the product. They have used the product, provide an explicit recommendation to their followers, are required to label the sponsored content as such, and their own reputation is affected by users’ experience with the product or service.

In my opinion related affiliate marketing is the best meth method because of the balance between involvement with the product and expertise in the niche. It may will create a more sustainable relationship between user, affiliate, and the seller.

Is affiliate marketing illegal?

No, affiliate marketing itself is not illegal. However, if you engage in any fraudulent activity in the process, it is considered affiliate fraud which is illegal. For example, the products you endorse are illegal, and various other activities may be considered illegal.