Affiliate Marketing is an incredibly inexpensive and effective way to grow a business, and (depending on the type) has an incredibly low-risk factor for business.
In a nutshell, Affiliate Marketing is a way of promoting on-line and web business through affiliates (or publishers.) The affiliate is rewarded for every customer, visitor, subscriber, or sale that is the result of their efforts and advertising. It's a way of empowering other websites to market your business through their own channels (internet, e-mail etc.)
Affiliate Marketing is often confused with Multi-Level-Marketing (MLM), so some companies prefer to use the term 'performance marketing' to limit this confusion. MLM and Affiliate Marketing are simply not the same thing, as MLM is based on an entirely different system. Affiliate Marketing is basically a form of advertising and commission, but the affiliate does not move or sell the product. They merely advertise and are rewarded according to their efforts based on the merchant's parameters. While there are many multi-tier programs of Network Marketing that use Affiliate Marketing in their program, these are strictly not considered as Affiliate Marketing.
So, what are these types and their differences?
Simply put, in the early days of the internet, Cost-Per-Click (CPC) was the general program used. This is when the affiliate only needs to display banners on their website, or send out emails, advertising the product or merchant. Every time a click on a banner or link in the email happens, a redirect to the merchant's website happens. The merchant then pays the affiliate a certain amount of money for every 'click.'
Google's AdSense program is an example of this kind of Affiliate Marketing, however it's not entirely the same, as AdSense is more contextual advertising (only displays adverts that relate to the website they are displayed.)
Because CPC could so easily be manipulated, spam sites and emails became prevalent amongst many unethical affiliates, as well as click fraud and other issues. This has resulted in only 1% of the on-line market using CPC these days.
The other types of Affiliate Marketing are CPS (Cost-Per-Sale) and CPA (Cost-Per-Action.) Basically, the affiliate is only rewarded with a commission when the advert they have generated ends in a sale (CPS), or a subscription or lead (CPA.) This can be very rewarding for the affiliate, especially if the customer buys a fairly expensive product, or high quantities. 80% of the market currently uses the CPS system, whereas 19% use the CPA system.
The wonderful thing for merchants on CPS and CPA is that they actually take no risk. The risk now lies with the advertiser or affiliate. And, since this form of marketing is usually just in the form of displaying adverts on the affiliate's website, there is very little (if at all) risk involved.
Because of the success of early companies like Amazon.com and CDNOW using Affiliate Marketing, proving its high efficiency, it has now become an integrated part of business plans - not just for e-commerce - but for all types of business.
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