How Affiliate Marketing Works

An advertiser that promotes its products via affiliate marketing is running an affiliate scheme or programme. Some merchants will manage their own programmes, where they are responsible for paying the advertiser directly. However, most will employ an affiliate network that will handle all the tracking and payments to publishers on their behalf. An affiliate network will also have existing relationships with publishers, enabling them to promote the merchant’s programme to their current advertisers and start driving referrals quickly.

The advertiser typically only pays on results with affiliate marketing, which is an attractive model for merchants. On top of the commission, some advertisers will offer opportunities to pay for placement to get additional exposure.

The process of affiliate marketing is as follows:

  1. Potential customer lands on the publisher’s website
  2. Customer clicks an affiliate link and it taken a landing page detailing the advertiser’s product.
  3. Customer buys product and tracking software records the purchase data and reports this to the network.
  4. Publisher earns a set percentage of the transaction value as a commission.

The affiliate link the customer clicks upon contains a unique code which identifies the publisher. The affiliate network the transaction using this code and pays out depending on their programme’s terms (e.g., 5% of sales not including shipping).

For example, when purchasing a new bike, a person may research offers on a bike-focused website (e.g., Singletrack). They read a review they like (a ‘Giant’ bike) and click through to the Giant site to purchase. In this case, Singletrack is the publisher, and the advertiser is Giant. Giant would pay Singletrack a commission for generating a sale through their site. If an affiliate network facilitates the programme, they will manage commission and tracking, and the advertiser and publisher will not communicate directly.

Tracking

Generally, affiliate programs work on a commission basis where the commission is awarded to the last publisher site which was visited before the consumer made the purchase.

To track the sale, the advertising merchant (or the network they work with) gives each affiliate a unique link to record who was responsible for a sale. When a user clicks that link, a file called a cookie is saved on their device. An affiliate cookie does two things:

  1. It helps the merchant attribute the sale back to the right publisher.
  2. It records the date of the interaction. Typically, publishers will get paid if a sale is made days or weeks after the visit. The advertiser sets this period.

When a consumer clicks upon a publisher’s affiliate link, they will be taken to the advertiser’s site. At the same time, a cookie will be stored onto the consumer’s browser, allowing the network to record the details of the consumer’s journey.

When a consumer purchase from the advertiser’s website, they will be taken to a confirmation page which contains the network’s conversion tracking. The affiliate network can now track the consumer’s purchase journey to purchase, enabling them to award the publisher’s commission.

Affiliate networks are services that mediate between the publisher and the advertiser. Advertisers publish their affiliate programs on an affiliate network, and publishers can search the network to find programs they wish to promote. An affiliate network manages the relationship between publisher including advertiser tracking and payments.

To use the services of a network, advertisers and publishers must first create an account with the network. Once they have been accepted, advertisers can add their programs to the network, to which publishers apply.

Publishers can apply to any programme in which they wish to participate. Once accepted as an affiliate partner with the advertiser, they have access to a choice of promotional texts or creatives for use on social media, emails or websites. The publisher places the affiliate link on their site, and when potential customers click on the link, they are taken to the advertiser’s website to complete their purchase. The visit is tracked by the affiliate network so that the sale can be attributed to the publisher.

Affiliate networks will typically offer two levels of service:

  • Self-service. Where the advertiser will manage their programme, including recruiting affiliates and managing commission.
  • Managed service. The network will manage the programme on the advertiser’s behalf, enabling them to employ best practice in running their programmes.

Affiliate Network vs Direct Affiliate Marketing?

Advertisers can work directly with publishers to promote their products, but it is more straightforward and secure to use an affiliate network. Benefits of using an affiliate network include:

Managed Affiliate Solution

Managing an affiliate programme is complex. Affiliate networks streamlines the process by providing technology, end-to-end tracking, payment and reporting making it easy to track, monitor and tweak your programme. The larger networks will also have a range of publishers already signed up to their network, ready for an advertiser to onboard.

Quick Programme Launch

Bigger affiliate networks will already have a range of publishers on their books who can be swiftly onboarded onto any new programme. Joining an established network means publishers are more likely to trust you and your brand, even if they do not know you. Having systems in place for tracking and payment offers publishers peace of mind that they will get paid.

Affiliate networks offering account management can support advertisers with reporting that provides feedback on performance and benchmarking. They can also suggest campaign ideas and recommendations to help the advertiser achieve their objectives.

Approval of Publishers

Publishers must apply to join an affiliate network and then get request approval for each advertiser program. Not all publishers are accepted, so your products are only promoted by publishers the network has decided are good partners for the advertisers on their platform.

Sales Tracking and Reporting

Affiliate networks should provide you with a comprehensive dashboard that tracks impressions, clicks, conversions, sales and revenue and generates reports. You can monitor which publishers and campaigns generate the most sales, allowing you to optimize your affiliate marketing.

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