Affiliate Marketing: What is it and how it works

Affiliation Marketing is the great unknown of the digital world. Anyone who has a job that is minimally related to this sector (and possibly any basic Internet user) will know more or less about explaining What is the SEM? or the Email marketing, but the thing changes when it comes to affiliation Marketing. Few agencies have specialists in this area and there is not much information on the net.

Son, What is affiliation Marketing?

During my stage at Neo @ Ogilvy, I spent almost 3 years working in the agency’s affiliation department. When my mother asked me for the first time what she was doing at work, I explained it to her as follows:

-Mom, your boss sells threads, and for that he has a network of representatives, right?

-These representatives try to sell the yarn to other companies and when they do, your boss gives them a commission, right?

I do something like that, but on the Internet.

It is not the best explanation of the world, but it is a good starting point to understand it. Obviously, transferring this process to the Internet makes it more complex and raises some questions.

For me the marketing of affiliation is only the management of digital campaigns through partners that we call affiliates.

What does an affiliate do?

Affiliates promote a product or service in exchange for a commission for each conversion recorded through their campaigns.

From the Affiliate’s point of view, it is to channel conversions to the Web page of a third party with a monetization objective. From The Advertiser, is to reward a partner who has brought a conversion.

Payment Models

The most widespread payment models in affiliation Marketing are the followings:

• CPA (cost per acquisition).
• CPL (cost per lead).

In the case of the CPA, the affiliate receives a commission when it generates a sale from its campaigns. When working under a CPL model, a fixed amount is usually offered for each lead that has been generated through the campaigns that the Affiliate has launched (for example filling out a form or registering in a newsletter).

No Risks! If you are an advertiser…

The advantage of these payment models is that they displace the risk to the Affiliates, since the advertiser will only pay the commission once, its purchase or lead objective has materialized.

The Affiliate, however, must assume the costs of launching a campaign (time and money) but does not have the assurance that it will make the investment profitable. If it does not generate any conversion there will be no return. If this is the case, the support will have been sending traffic to the advertiser for free.

Is it profitable for affiliates?

For many yes and for others not. If you are an affiliate, that your campaigns are profitable will depend mainly on whether you are addressing the right public for the product or service you are promoting. If you have the means to do it you can make a lot of money

Let’s put the case of a luxury travel blog that will launch a newsletter to its database (very niche and well segmented) promoting a holiday in the hotel chain Iberostar and offering, moreover, some added value as free access to the spa. In this case, it is most likely that the affiliate maximize better send it to a CPL or CPA model, which collects the consignments to CPC or CPM.

In any case, the market itself regulates itself. If an affiliate does not have good results by promoting your program, it will leave it, and if it has good results it will push it more, so that you end up working with the affiliates that your campaigns are profitable. Everybody wins.

How do you measure all this?

Relationships with affiliates are managed through an affiliate network, which is a tool that allows affiliates to be contacted with advertisers. Through these platforms, advertisers share advertising materials, track the results of each affiliate and manage payments. If the Advertiser is big enough, you can have your own network affiliate program. Amazon and Desigual are two examples of this.

The registration of conversions, clicks and prints is done by a tracking code that identifies each affiliate.

The Advertiser raises an advertising piece and the affiliate downloads already trackeada with its unique code, so when the affiliate launches the campaign, the tracking begins to record all the activity of that piece for that affiliate. If a conversion is generated, the system associates it with a commission and attributes it to an affiliate.

Attribution Models

What happens when a conversion has been generated and there have been several supports that have sent traffic to the advertiser? Who takes the cat to the water? Depend on the Attribution model.

The most widespread attribution model in affiliation Marketing is last click, so that a conversion would be assigned to an affiliate as long as it has got the last click on advertising content before the visitor has Made the purchase.

In some cases, the advertisers decide to give the conversion to the first support that referred to the customer (first click), while others share the commission among all the supports that impacted the customer before the purchase (linear). However, these models are less widespread, among other things, because they are more complicated to measure.

For me there are no more or less fair models, they are just different. Depending on the channel that the affiliate works, it will benefit you more one model or another. For example, affiliates who do SEM campaigns will benefit from a last click model, since the click on search ads is often the one that generates the sale. On the other hand, a display affiliate probably better monetize their campaigns with a linear model or first click.

So far, we’ve shed a little light on Membership Marketing. We will continue to deepen, as we will soon talk about the Different affiliation networks And types of affiliates that we can find in them. Best regards!