Affiliate marketing is a method that merchants use to obtain new sales leads and increase total revenue. Publishers who agree to become affiliates in an affiliate program will offer various products or services on their web sites, in exchange for some form of compensation. Affiliate programs may combine a number of products under a compensation scheme agreed with each publisher.
Publishers – usually the web site owners themselves – are compensated under an affiliate program in a variety of ways. Cost per click (CPC) or cost per mile (CPM) are used frequently bysearch engines like Google.com, cost per click in this case, but are becoming less popular. Cost per click indicates the publisher is compensated for each valid click through to the advertisers' web site. Cost per mile is a method of compensated rated for each 1,000 displays of the advert itself and does not relate to how many times the advert is clicked.
Both cost per click and cost per mile advertising methods do not directly link to how successful the advert will have proven to be in generating new sales from the merchant. However advertising networks like Google Adsense from Google.com do monitor success rates and will adjust the cost per click where conversion rates have proven to be disappointingly low. In so doing, they keep the advertisers happy.
Commissioned sales has more recently become the compensation method of choice for affiliate programs. Tiered compensation rates, often based on number of sales rather than value, allows for appropriate compensation for valid sales that were not ultimately refunded or canceled. Advertisers are given incentives to keep their list of enrolled affiliate programs to a minimum via increasing compensation with higher numbers of transactions each month.
Traditional affiliate programs also provide a wide range of incentives to publishers to put more focus on their brands and product promotion. This often includes special discounts on popular items, combination packages, get one free and other similar offers. Custom images for the web sites are also provided to make it easy for publishers to update their web sites quickly. In some cases, a graphic like a banner advert, is hosted on the merchant's web site and is updated on-the-fly, which in turn automatically changes the banner displayed across the Internet on the advertisers' web sites.
Affiliate networks can also be useful because they collect thousands of affiliate programs and make them accessible within their network. A single compensation method simplifies billing. Application for each merchant's affiliate program is also made easier because you can apply for several affiliate programs quickly once accepted into the network. Merchants will often join multiple networks to make their affiliate program widely available.