If you’re asking yourself a question like “What is affiliate marketing?”, chances are you’ve recently been exposed to someone who makes money online in some form or another. Have you recently watched a YouTube video that mentioned making money using the internet? Or maybe one of your friends or someone you’ve recently come in contact with has mentioned affiliate marketing and making money online?
Regardless of how you stumbled upon this page, I’m going to answer “What is affiliate marketing?” and also give you 3 reasons why you should start today.
What Is Affiliate Marketing? – Basic Definition
Affiliate Marketing is a form of marketing where retailers or other companies rely an individual to refer or generate a sale. This is a very loose definition but encompasses the basic transaction that occurs.
Here’s an example:
‘Company A’ pays Johnny $10 for every person he refers to their store. Johnny would be considered an “Affiliate” of ‘Company A’. If Johnny referred 10 new people to ‘Company A’ in a week, his affiliate commission would be $100.
It is a very simple transaction but isn’t as easy as it sounds. Just because you are sending people to the company doesn’t mean that the company is making money from those individuals. This is where the term Cost Per Action or CPA comes into play. This probably isn’t what you had in mind when asking the question,”what is affiliate marketing?”, but keep reading!
Cost Per Action Defined – What is Affiliate Marketing?
Cost Per Action is a payment model used within affiliate marketing. In this payment model, advertisers only pay when a desired action has occurred. Just referring someone to a company may not be enough. Some companies may only pay when a sale occurs. Others may pay when a registration or signup occurs. Some companies will pay you for each click you generate on their website. CPA is an umbrella term for many action-based payment types.
What is affiliate marketing when broken down into payment types? Here is a quick breakdown of just that!
CPS – Cost Per Sale
This payment type is the most typical that you will find within affiliate marketing. Most companies or advertisers are comfortable with paying a commission once a sale has occurred. Since they ONLY pay when revenue has been generated, there is virtually no risk for them other than potential refunds that might occur.
CPL – Cost Per Lead
This payment type is very different than CPS as the advertiser is responsible for generating the sale. The advertiser will pay you for a lead in which they intend to try to convert into a sale with their website funnel or sales team. Typically you will get paid when a user completes a form field and provides their information.
Some CPL advertisers require 12 fields of data to be completed in order to pay you. This is typical with mortgage or insurance advertisers. Other CPL advertisers may only require 1 to 3 basic fields such as “first name, last name and email”. This is completely determined on how they intend to convert these leads into sales.
Advertisers are typically weary of the potential for fraudulent leads and therefore are reluctant to allow unknown affiliates to promote their CPL offers. Scammers are known to manually enter fake information into CPL offers. This is essentially stealing money from advertisers and NEVER ends well for the affiliate. What is affiliate marketing? Not this!
CPI – Cost Per Install
This payment type typically only applies to mobile app advertisers or browser installs. As the payment type implies, advertisers will pay you when a user installs their browser extensions or mobile app from the Google Play store or the Apple App Store. This might seem like a fairly simple payment type, however most CPI offers have requirements known as KPI’s or “Key Performance Indicators”. An example of a KPI would be that a user must keep the app installed for a minimum of 10 days in order for you to get paid. Other KPI’s may require the user to achieve a specific level or milestone within the app in order for payment to occur.
CPC – Cost Per Click
Just as this implies, advertisers will pay an affiliate on a per click basis. For each user that clicks an ad or link, the affiliate will be rewarded a commission. The value of the commission is typically very low. In come cases it can be as low as $0.01 per click.
CPM – Cost Per Mille or Cost Per Thousand
In this payment model, affiliates are paid based on every 1000 impressions that occur on a banner or advertisement. An impression is simply when an ad is displayed to users as they are browsing a website. Each time they see the advertisement, it’s considered an impression.
So now that you understand the basic concept and model of affiliate marketing, let’s dig a little bit deeper and ask a few questions.
How Do Affiliates Generate Commissions from Affiliate Links?
This is a fairly complex question but the short answer is ‘Web Traffic’. The next time you are driving down the highway or a major strip in your city, look at the billboards and ask yourself a question…
Why Are Billboards Placed In These Locations? Is It Random or Is It Strategic?
The answer is that these billboards are placed in very specific and strategic locations in order to get the most views as possible. Billboards are typically on the busiest streets possible to maximize exposure to their advertisements. They want streets and roads that are high in ‘Traffic’.
The same is true with online advertisements. Think of your website as a billboard. You need to place your website in particular places on the internet in order to maximize the potential web traffic. The more traffic you have, the more of a chance that someone may convert into a sale as they browse through your website.
Web Traffic Is Key To Everything! – What is Affiliate Marketing?
Without web traffic, there are no sales. Web traffic is the most sought after element in affiliate marketing. It’s so valuable that you can actually buy it online. In fact, the best web traffic available comes from media giants like Facebook and Google/Youtube.
Is Affiliate Marketing Pay To Play? – What is Affiliate Marketing?
The short answer is YES… but that’s not completely true. By ‘Pay to Play’, I mean that most affiliates start buying web traffic from the beginning of their affiliate marketing career. This is the fastest way to get started for a beginner but it’s also the fastest way to fail. Buying traffic as a beginner is very risky considering the knowledge that it takes to successfully configure campaign tracking, properly read data and then optimize accordingly.
There is a massive amount of free traffic available for new affiliates. The catch is that it takes some serious hard work and dedication to take advantage of the free traffic. These methods are also often delayed. It can take 6 months or more for a new affiliate to start seeing results for their efforts. However, this is exactly what new affiliates should be doing as they begin their career.
Google search is a prime example of free traffic. By creating a blog and writing quality content, you can easily rake in thousands of free clicks to your website. In fact, some affiliates make $10,000 each month from free google traffic.
Reason To Start Affiliate Marketing #1 – What is Affiliate Marketing?
Affiliate marketing is a ever growing industry that’s worth an easy annual 88 billion according to some sources.
This is a massive amount of money being pumped into the affiliate marketing industry. A very large portion of that $88 billion goes directly and indirectly to affiliates like you. With the amount of information available today, almost anyone can start affiliate marketing and earn commission.
Reason To Start Affiliate Marketing Today #2 – What is Affiliate Marketing?
Online retail is the way of the future. Online sales now account for 10% of all retail sales globally. Most of this increase has occurred over the past 3-5 years with increasing growth of eCommerce platforms like Amazon and Shopify. This has negatively impacted brick and mortar locations who rely on increased margins in order to pay their overhead. Amazon Prime now offers 2 day shipping on their products. This is going to increase the trend of consumers buying online instead of going to local stores.
Some day in the future, potentially 20 years, nearly everything could be purchased online. That means TODAY is a perfect time to start affiliate marketing. Are you glad you asked “What is affiliate marketing?”. Those who start now will have a head start on the future of retail sales.
Reason To Start Affiliate Marketing #3 – What is Affiliate Marketing?
It’s easier than ever to start affiliate marketing. There are great training communities and other resources available that will help you get started immediately.
Check out one of our Podcasts to gain insight into the world of affiliate marketing from a real affiliate’s perspective.
You should now be able to answer the question “What is affiliate marketing?”. You should also know why it’s important to get started now as affiliate marketing is as profitable as it has ever been and will only become more profitable each year to come.
If you would like to learn more about affiliate marketing, I highly recommend you read the following articles:
Top 8 Free Affiliate Marketing Programs For Beginners & Easy Methods To Promote Them
4 Easy Ways To Survive in CPA Affiliate Marketing
6 Tips on How To Make Money From Your Website
3 Fool Proof Affiliate Marketing Amazon Strategies To Make Money Online