I’ve worked in Affiliate Marketing since the year 1999, and this question has followed me for the entire 15 year period. I’ve explained it to friends, family, and even some to-be employees any number of times…
The truth is, Affiliate Marketing may sound like a new word or new concept – but the basic principles have been in play for decades (if not centuries).
As an introduction to this publication – I’ll start out with the most basic of definitions and then show you step-by-step how that definition expands and impacts how a retailer can use Affiliate Marketing to its maximum potential.
Affiliate Marketing is simply advertising, tied to a performance metric.
When you think of advertising – you think of a publisher being paid to display a product or service on their media. Going back a few years – that typically meant either a TV station, radio, or print (magazines and newspapers). As time moved on, media began to include the internet as well.
The fundamental difference between advertising and Affiliate Marketing – is how any individual publisher is paid for their efforts.
In traditional media (TV, print, etc..), a rate is negotiated between the advertiser and the publisher. For example, let’s take a look at this year’s Super Bowl advertisements. A 30-second spot cost approximately $4 million dollars. This cost has no connection to how many customers that 30-second spot brings them; it is simply a negotiated rate. This form of advertising is powerful for larger brands looking to make a splash, but its lack of tie-in to any performance metric makes it a very risky proposition for any retailer.
Affiliate Marketing recognizes this fact, and focuses on it.
In Affiliate Marketing, the negotiated rate is a commission percentage based on the number of actual customers brought in from the advertisement, as well as how much those individual customers buy. While the ad formats are the same (videos, banners, links, product descriptions, etc…) the metric of payment is tied directly to a performance metric.
CBS, ABC, the Washington Post and other large media publishers can reach millions of potential customers, but Affiliate Marketing recognizes that there are millions of other media publishers who have influence over a subset of consumers.
In 2012, this info-graphic from Blogging.org shows that while somewhat difficult to estimate, there are over 50 million bloggers active. The vast majority of those bloggers will never negotiate a major Super Bowl level advertising contract – but nonetheless have a very real impact on, and influence over their readers.
So, in one sentence, Affiliate Marketing is a form of advertising where the compensation for an ad is tied directly to how well that ad brings in customers and sales.
Well, that’s great but what does it mean for me?
As an online retailer, there is no one advertising campaign that will allow you to reach all of your potential customers. Even a top-5 Super Bowl ad isn’t going to get you there.
However, with a strong strategy in Affiliate Marketing, you can reach potential customers via your Affiliates and their wide range of readers. Over the course of the next few chapters – we will look at some of those strategies and find the right ones for you!