Affiliate Marketing Programs
If you’ve spent any time on the internet in the last few years, you’ve almost certainly heard about affiliate marketing programs. It’s a pretty simple concept that has a lot of attractiveness for a prospective online marketer since there’s little or no cost at the beginning of the process, and if the marketing efforts are not successful, the marketer won’t have to pay. But are the tales of making a lot of money from affiliate marketing programs true, or is this just another Internet bubble ready to burst? Let’s take a look at exactly how the process works.
Affiliate marketing is a method of revenue sharing that works exclusively on the ‘net. At its base, it involves paying a certain percentage to people who refer your product or service to the people who buy it. The URL that is provided to the web browser contains a unique affiliate ID, and clicks that lead to sales using that ID are tallied and credited to the affiliate. The concept originated with adult websites in the early 90s, and it wasn’t long until mainstream online retailers were using it as well. Most affiliate marketing programs depend on a large number of affiliates to drive traffic and sales.
The great majority of affiliate marketing programs pay on a “cost per sale”, or CPS, basis – if the web surfer makes a purchase through an affiliate link, the affiliate gets paid. A smaller number of affiliate marketing programs use CPC, or “cost per click” – each clickthrough on an affiliate link pays a (typically much smaller) amount. Due to fraud and other issues, programs using CPC are on the decline. Additionally, many of these programs offer payment options either in cash or credit for the program owner’s business, keeping more of the money in their pockets.
If you are interested in creating an affiliate marketing program for your products and/or services, there are a few important business concerns to address. Foremost, you should ensure that you occupy a niche that can support this kind of venture – competing with an existing program for the same type of product is essentially a fool’s gambit, as their market penetration will make it very tough for you to build a large enough team of affiliates without offering more competitive financial terms. In addition, the administrative component of an affiliate marketing program can become quite overwhelming as the program grows – you will be making payments to hundreds, or even thousands, of individuals, and if they make over $400 you will be required to submit a 1099 form to the IRS for them as well.
Fortunately, there are some excellent affiliate networks that will help you out with this. If you offer a downloadable product, check out Clickbank. Commission Junction is one of the top networks for companies that sell physical products.
Affiliate marketing programs can be a powerful tool for a small business that has some internet savvy, but they’re not a short road to fortune. Be aware of their strengths and weaknesses before you invest the time and money it takes to develop one.
