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What is Affiliate Marketing: The Basics of Affiliate Marketing and Affiliate networks

A guy named Joel Gehman originally wrote an article back in 2000, and I thought it had a good answer to the question of what is affiliate marketing.

This is a question I field ALL the time, and I wanted to just start steering people into an article, instead of always offering the same explanation over and over.

But, Joel Gehman's site (AffiliateHandbook.com), and well as his contact information, seem to have gone missing.

This article is loosely based on Joel's article, but has been modified around the more modern state of affiliate marketing. (Giving credit where it's due, I have included some of his article here, because it helps people understand the background for how affiliate marketing works today.)

What exactly is affiliate marketing? And how can affiliate marketing be used in an industry in order to improve business?

Well, what affiliate marketing is today started with Amazon in 1996...

What is Affiliate Marketing: The Basics of Affiliate Marketing and Affiliate networks

A guy named Joel Gehman originally wrote an article back in 2000, and I thought it had a good answer to the question of what is affiliate marketing. But, Joel's site (AffiliateHandbook.com), and well as his contact information, seem to have gone missing.

This article is loosely based on that article, but has been modified around the more modern state of affiliate marketing. I have included some of his article here, because it helps people understand the background for how affiliate marketing works today.

What exactly is affiliate marketing? And how can affiliate marketing be used in an industry in order to improve business?

Well, what affiliate marketing is today started with Amazon in 1996...

When it comes to the web, Amazon.com really started the affiliate marketing method and scene. In July 1996, it launched its "associates" program and now counts over 450,000 sites in its network. They don't pay as well as many of their competitors, but most affiliate marketers I know have at least played with Amazon's program, because Amazon is such a force to be reckoned with online.

The basic model of affiliate marketing works something like this: A small website owner registers with Amazon (or any other affiliate program), she then puts various links, banners, and products on her web site. When her visitors click through, using these links, and purchase a book or other product, the small web site owner is paid a commission for generating the sale.

But since 1996, (and in the last seven years since the article was written in 2000), affiliate marketing has really grown.

While Amazon is remembered as the most visible pioneer, the concept really isn't new. In fact, one of the oldest practitioners of affiliate style marketing, Amway, took to the web using what they were calling affiliate marketing, using the brand Quixtar.

While Quixtar was still more of a network of distributors (Amway-style) for many years, some very large and successful companies have come up in the middle of the affiliate marketing space.

The model is that the affiliate is paid for their performance. In all cases, the goal is for marketers to only spend money when their particular performance objective is met. While Amazon only pays when a sale is made, merchants selling big ticket items like cars, or marketing services like credit cards, have modified the model paying instead for clicks or qualified leads.

(Adsense is the prime example in this space, but that will be reserved for another article as well.)

In fact, compensation schemes are as varied as the merchants themselves from a 15 percent commission on Amazon books, to 1 percent on Dell PCs. On the financial services side, lenders will offer affiliates up to $125 for a qualified application, many credit card companies will offer $20-$40 per enrolled cardholder, and many bigger ticket digital product items can result in commissions of 50% or more.

Consider a Third Party, otherwise known as an affiliate marketing network.

As merchants (people selling stuff) have rushed to build their own affiliate programs, and platforms using in-house software like Amazon, an entirely new category has been born: affiliate networks. Running your own group of affiliates is not rocket science, but it does require quite a bit of time and commitment.

And for that reason, many merchants are finding that outsourcing their affiliate program to a third-party providers (affiliate networks) is a compelling solution.

There are a huge variety of affiliate networks, with many springing up new every year. Many have disappeared or been consolidated within months of their launch, but two of the largest and longest running networks have been Linkshare and Commission Junction, otherwise known as CJ.

Most networks today, including Linkshare and Commission Junction, provide tracking, reporting, affiliate recruiting, cutting checks, sending out end-of-year tax forms, and responding to webmaster queries.

If you want to have an affiliate marketing program for stuff you sell, you can either build your own affiliate program using software like 1ShoppingCart, or you can approach a network like Linkshare, Commission Junction, or ShareASale. There are advantages of doing it yourself and also of outsourcing affiliate management to an affiliate network, which I'll cover in a different article.

In the 11 years since it's inception, affiliate marketing has become a significant force in how ecommerce happens. Hundreds of thousands of merchants now use affiliate marketing to make sales, track what's happening, and pay the affiliate marketers who are bringing them new customers.

And yet for all the jargon, hype, get-rich-quick stuff, and other affiliate marketing junk, in the end it's about is about connecting buyers and sellers and rewarding those that facilitate the connections. Affiliate marketing for the affiliate marketer (also known as a "publisher") is basically promoting/selling other people's products for a % of the sales price. Affiliate marketing for the company with the products (also known as a "merchant")

If you're going to spend your time as an affiliate marketer, the risk is low, and like most things in life, if you will take the time to study, understand, and apply the knowledge, there is a huge amount of potential to make money.

Sign up for Linkshare, Commission Junction, ShareASale, and ClickBank. Check out the products offered through the various merchants selling in these affiliate networks. To be successful however, you need to have a good grasp of Internet marketing and understand how to promote products, and more importantly, you should learn how to help both the people whose products you're selling, as well as the people you're selling to.

After all, the value isn't in the transaction, it's in the relationship...

Hopefully this has helped to answer the question, "What is Affiliate Marketing".

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