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Finance

What Is an Affiliate Model?

By Alex Newth
Updated Feb 07, 2024
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The affiliate model of business, in which a business pays commissions to sellers for performing an action, is one seen largely online. That action is usually securing a sale, but there are other payment methods, such as getting a customer to fill out a form, click an ad, or just visit the company's website. The affiliate model requires an advertiser — the business with the product — and a publisher, the person bringing in sales. In this business model, both partners are making money, but in different ways. This can be used to help garner extra sales for a business while helping website owners make a profit from their website.

With the affiliate model, it all starts with the advertiser. This is the company paying commissions, and it is the one actually selling the product or service. When this company decides it wants to use affiliates to boost sales, it enters the affiliate model. The company promises a commission for each action, and they either run the affiliate program in-house or subscribe to an affiliate service to handle commissions and other administrative duties.

On the other side is the publisher. This website owner subscribes to the affiliate program and embellishes his or her website with banners and links featuring affiliate tracking codes. He or she then gets website visitors who click the link or banner. Depending on the affiliate program, the website owner will optimize his or her website to get the best affiliate sales for the advertiser company.

There are several payment methods in the affiliate model, and the advertiser may use one or several. The four main types are: pay-per-click (PPC), pay-per-impression (PPI), pay-per-lead (PPL) and pay-per-sale (PPS). The most common is PPS, in which a customer purchases a product, and the advertiser pays the publisher a portion of that sale. PPC means that the publisher gets paid each time someone clicks the affiliate link; PPI means that whenever a visitor lands on the publisher’s website, he or she will be paid; PPL is when a customer fills out a form, and the publisher gets paid for each form.

Both the publisher and the advertiser make money in this scenario. The publisher makes money because he or she is being paid a commission for any work that coincides with the affiliate program. Advertisers make money because they keep the majority of the sale, or get new leads and only pay the publisher if they help the advertiser.

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Discussion Comments

By allenJo — On Mar 10, 2012

@David09 - That makes sense. You need to keep your content fresh however. Ebooks grow stale quickly and when that happens your sales will start to dry up, and you’ll lose your affiliates.

You can use affiliate software to keep track of your marketing campaigns. That will give you an idea of how things are going. If you’re in the ebook business you need to keep writing in my opinion.

By David09 — On Mar 09, 2012

@miriam98 - Of course, it’s better to be on the other end of the business model. Be the creator of the digital content, instead of the affiliate. That way you’ll have tons of people selling your work especially if you offer a big commission on sales.

Some of those people will have lots of traffic and some won’t. Either way, you stand to make money eventually. It’s all passive income too.

Write once, profit over and over again. You can write your own ebooks and sell them this way for example.

By miriam98 — On Mar 08, 2012

@Charred - You raise an excellent point. There is one way to get in on the revenue stream where it will make you money however. If you don’t have enough traffic, offer to write content for a site that has tons of traffic and offers a revenue sharing model.

The site will have its own affiliate links and if you write the content they may let you in on a percentage of the revenue. You won’t make as much as someone who owns all the commission, but you’ll get the exposure needed to start seeing the money roll in.

By Charred — On Mar 08, 2012

There is a little known secret about the affiliate revenue model. That secret is that most affiliates won’t make a dime – not a single cent. That’s not encouraging, isn’t it?

Furthermore, people who sell stuff through an affiliate program are quite aware of this. While they may let just about anyone sign up to be an affiliate in their program, they actively seek only a few affiliates. Guess who they seek out?

They look for people with websites that have tons of traffic. You see, if you don’t have traffic, nobody will click on your affiliate ads. It doesn’t matter how generous the compensation program is.

I mean you can be selling a product that offers you 50% and sells for $50, but if you get seven visitors a day and the average conversion rate is 1%, how much of that product will you sell? That’s the reason most people don’t make money.

By golf07 — On Mar 07, 2012

I am involved with internet marketing and am an affiliate for more than one company. Google really has a lot of programs available for someone who is interested in this type of program.

It is free to be a Google affiliate, but they do have strict standards and guidelines that need to be followed. They also have great tracking system with their Google analytics program.

If someone is just getting started with an affiliate program, they also give you a free incentive with Google ad words. This is just one way you can take advantage of using the affiliate model.

Some companies will also offer you a free affiliate website, but I would discourage against this. I think you have better chances at making a go of this if you have your own website.

By myharley — On Mar 07, 2012

What I have seemed to notice with some affiliate websites, is they get your interest by giving you something for free.

This free product is basically just a teaser to get your interest in their product or service. I agree that you have to stick with companies you are familiar with.

There are many affiliate products that are just junk and you will feel like you have wasted your money.

Like most business models, there is a right way and a wrong way to be successful with this. If you would like to become an affiliate, I would make sure and stick with a product or company that is professional and reliable.

I think in some circles the work 'affiliate' is a negative word because so many people have abused the way this model works.

There are also many people who have become incredibly successful with this way of doing business and making a living.

By LisaLou — On Mar 06, 2012

@andee - You do have to be careful and do your homework because there are a lot of scams out there.

There are also a lot of huge, well respected companies that use affiliates to promote their products.

This can be a win-win situation for everyone. The company sells more products, and everyone ends up making money.

Amazon is one of the biggest affiliate companies that I am familiar with. There are a lot of people who are signed up for this program. If someone buys an Amazon product from their website, they get a small percentage of that sale.

While there are several questionable affiliate networks, a company like Amazon is one that most people feel like they can trust.

By andee — On Mar 05, 2012

I have looked at a few different affiliate business models. They make it sound so easy and that you can be making a lot of money just by getting people to click on your banner or visit your website.

I quickly learned this just wasn't for me. First of all, I was overwhelmed by all of the programs and competition that is on the internet.

I don't know what makes one affiliate model more successful than another one, but there sure are a lot of them out there. Many of them seem like they are scams or untrustworthy for some reason.

There also seems to be some technical know-how that is involved. When it comes to something like setting up my own website with banners and tracking codes, I feel like that is way over my head.

By seag47 — On Mar 04, 2012

@Oceana – You should make sure that your web content is search engine optimized. This means that it contains enough keywords that when someone searches for the topic that you write about, your site will show up in a search engine.

For example, if you are writing about the benefits of vitamin C, you should include the phrase “benefits of vitamin C” several times within your text. However, you shouldn't overdo it, because search engines can tell when you are trying to trick them into giving your site a high ranking.

Used responsibly, search engine optimization can help you become attractive to advertisers. That's how the affiliate model operates.

By Oceana — On Mar 03, 2012

@OeKc05 – I would think that the PPI ads would be the best kind to have. Getting paid just for having someone view your site with the ad on it sounds like an easy way to make money.

I haven't been able to get a lot of traffic to my website, probably because I can't afford to advertise my site. I've only been able to get PPS ads, and since no one visits the site much, no one has bought anything.

At this point, I would be happy just to make a few cents off an ad. Does anyone know how I can increase traffic and eventually get more income from advertising?

By orangey03 — On Mar 02, 2012

My friend owns a party supply store, and her website makes use of the affiliate model. Since she sells items like wine glasses, her site publishes ads for local liquor stores.

Also, since she carries items for weddings and showers, businesses that print wedding invitations and other specialized items are happy to run ads on her website. She actually generates a nice amount of revenue this way.

In addition, she places ads for her store on related websites. Though she has to pay for this, she believes it has increased her sales and brought more customers into her store. Even people who might not have come in yet have become aware that her store exists, and they will likely keep her place in mind when they have need of party supplies.

By OeKc05 — On Mar 02, 2012

I was excited to learn about the affiliate model when I began developing my own website. I wanted to have articles about gardening on there, but I had no clue how I was going to make money off of it.

I found that many garden related businesses would be willing to pay me to place their ads on my website if I generated enough traffic. I started writing before I had any ads, and as my readership increased, so did my desirability to advertisers.

At first, I only had PPC ads on there. As my traffic continued to increase, I got some PPI ads, and this was very exciting to me. I began to get paid just for having visitors!

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