In basic terms, affiliate marketing is when a publisher drives traffic to an ecommerce site in return for commission if those visitors take a specific action within a set timeframe. 

Usually the desired action is buying something, and the publisher will get a share of that sale in return for directing the customer to the product page. 

How does it work?

The process is split between the following four participants (I’m sure there’s a better word for it than that, but bear with me):

  • The merchant
  • The network
  • The publisher
  • The customer

The merchant

Otherwise known as the retailer or advertiser. A brand is looking to increase sales but all those content campaigns ate up its marketing budget and it certainly doesn’t want to shell out for more staff. 

So the brand researches how to achieve this seemingly impossible feat and comes across affiliate marketing as an option. 

‘What’s that? We can get other people to do all the work creating content and attracting customers and we only have to pay them once we actually make a sale? Where do I sign?’

Again, this is an extremely simplified version of events, but generally this is how it works from the retailer’s point of view:

  • The merchant gives a publisher a trackable link to its site.
  • The publisher includes the link in its content.
  • If someone follows that link to the retailer’s site and buys something within a certain timeframe, the retailer pays that publisher a percentage of the sale. 

The network

Some retailers, such as Amazon, have their own affiliate programmes. But many will go through affiliate networks. 

These networks effectively act as the middle man between multiple merchants and publishers. So a publisher could sign up and get access to any merchants that network is working with, and vice versa. 

(Note: these types of affiliate display ads obviously won’t get past most ad blockers)

Working in this way ultimately makes life easier for the merchant, but it does mean they give up a certain amount of control over where their products are advertised. 

The publisher

These are the guys that include affiliate links to retailers on their sites and promote the products of said retailers in the hope that people will click the links and buy something when they get to the other side.

If that does happen, the publisher will get paid a percentage of the sale.

Either that or they’ll get paid for each click or action the customer takes, depending on the arrangement they have with the link provider.

Some publishers include affiliate links in their everyday content, while other sites are dedicated to producing content with the specific goal of selling affiliate products. I’ll cover both types in the example section below. 

The customer

This is the consumer who clicks on the links on the publisher’s site and hopefully purchases something when they get to the merchant’s site at the other end.  

Different compensation methods

Around 80% of affiliate programs use revenue sharing to compensate, i.e. the affiliate gets a percentage of any sales that result from their affiliate links. 

But there are other payment methods available, such as cost-per-action (CPA), which could be used when the brand in question isn’t actually selling physical stock. 

Then there is cost-per-click (CPC), where the brand is simply paying the affiliate for traffic.

A couple of examples…

If you’re still not 100% sure what affiliate marketing is after my earth-shatteringly brilliant explanation, perhaps these two examples of slightly different approaches will help enlighten you. 

Smart Passive Income

This is an example of a site where the publisher built up a following and then started using affiliate links to gain additional income. 

The products are ones the author regularly talks about anyway, and his/her readers trust his/her opinion, so there is an opportunity to make money by using an affiliate link.

smart passive income affiliate marketing

As you can see from the image above, this particular author is very honest about the fact that he gets commission when people follow the links and make a purchase.

This is because he doesn’t to damage his audience’s trust.

Kitchen Faucet Divas

Some sites are specifically designed to make money through affiliate links, such as the example from Kitchen Faucet Divas below. 

This site is full of content related to kitchen faucets, including blog posts, buyer’s guides and how-to articles, with plenty of affiliate links to Amazon included. 

Kitchen Faucet Divas affiliate marketing

Kitchen Faucet Divas doesn’t explicitly say it makes commission from the links, but by only linking to Amazon pages that are completely relevant to the content, it is likely to avoid annoying its readers. 

Conclusion: an additional revenue stream requiring relatively low investment

Whether you’re a retailer or a publisher, affiliate marketing, like anything in the digital marketing world, is not going to fix your dying balance sheet all by itself.  

What it can do, however, is add another revenue stream without the need to expend masses of effort or money. This is particularly important for publishers with the rise of ad-blocking. 

But brands that go down the affiliate marketing route need to remember that it is effectively a form of advertising, and there are certain responsibilities that come with that.

Namely: protecting the trust in your brand or products.