How does Affiliate Marketing Work?

There are three parties involved in the process:

• Seller and product creators – A vendor merchant, product creator, or retailer with a product to market. The seller does not need to be actively involved in the marketing but they share the profit with the affiliate.
• The affiliate or advertiser – The affiliate can be either an individual or a company that markets the seller’s product to potential consumers. If the consumer buys a product from the link shared, the affiliate receives a portion of the revenue made.
• The consumer – Affiliates share these products to consumers on social media, blogs, and websites and when consumers buy the product, the seller and the affiliate share the profits.

An affiliate program uses a cookie to track the user’s online activity. Cookie has definite life and the referral needs to purchase within the lifecycle of cookie otherwise the lead will no longer be trackable and the affiliate will not get his commission.

Type of Affiliate Marketing

• Influencers – An individual who holds the power to impact the purchasing decisions of another person. It’s easy for them to direct consumers to the seller’s products through social media posts, blogs, and other interactions with their followers
• Bloggers – The blogger writes reviews of the seller product and services and promotes the brand, driving traffic to the seller’s site
• Paid search focused microsites – These sites are advertised within a partner site or on the sponsored listings of a search engine. It offers content focussed for a specific audience and it leads to increased conversion rate
• Email lists – It is an old and effective way of affiliate marketing to promote the seller’s products. The affiliate sends an email newsletter that includes hyperlinks to products to target people and earns commission after the consumer purchase the product
• Large media websites – These sites are created with a focus on building a huge audience and they promote seller’s products to these audiences through the use of banners and contextual affiliate links.

Global affiliate marketing spending growing at 27% CAGR while US spending is growing at 10% CAGR from 2015 to 2020 and UK spending in 2017 grew by 15.1%. In 2017 traffic originates by the affiliate from mobile devices was 50% while market spending on smartphones increased by 49% in 2017

Key Takeaways on Affiliate Marketing

• Unlike most marketing channels, the seller only pays per transaction with affiliate marketing. In other words, the seller only spends money when the seller makes money. This strategy is important for small businesses that have limited resources to spend on advertising.
• It’s easy for anyone to be an affiliate — even if an affiliate doesn’t have a website and he can rely on aff social media channels, entirely.
• Affiliate marketing spending has grown by 27% CAGR and expected to grow by 10% in the next few years.
• US, UK, and Germany together hold 65% of the total affiliate market share while the retail sector accounted for 43% of total affiliate industry revenue.