18. What is Affiliate marketing?

You must have heard about performance marketing or pay per sale programs. These comprise of Affiliate Marketing. It is a revenue sharing arrangement between a website owner and an online merchant. The website owner places advertisements on his website/s to either help sell the merchant's products by sending potential customers to the merchant's website, all in exchange for a share of the profits.

Therefore the website owner is the affiliate and the seller the merchant.

There are three way s to earn money through affiliate marketing: 

Pay Per Click - Every time a potential customer leaves an affiliate website by "clicking" on the link leading to the merchant's website, a certain amount of money is due to the affiliate as a fixed / agreed cost per click. The currency and the payment terms can be mutually decided if case of large deals. For new affiliates, they simply have to follow the existing norms. The returns here are limited.

Pay Per Lead - Every time a potential client registers at the merchant's site as a result of being directed to site from an advertisement on the affiliate's website, a previously determined amount is given to the affiliate as a per lead payment.

Pay Per Sale - Every time a sale is made as a result of traffic directed from the affiliate's website/s, a percentage, or commission, is paid to the affiliate's. This obviously is a high risk option but one which if managed smartly can result into huge earnings.

For many website owners, this is a great way to earn some extra money without actually having to "do" much. All it involves is placing an ad on the affiliate's website. There's no selling or promotion of any kind. The affiliate has to manage his website well and use tactical marketing methods and wait for the profits to roll in.

It's also beneficial to the merchant. By placing affiliate marketing advertising on websites all over the Internet, he has free advertising and doesn't need to do much selling on his own. The more websites a merchant is affiliated with, the more exposure his products get, and all he has to do is allow ads for his products to appear on someone else's website.

Like all businesses affiliate marketing has its benefits and few drawbacks. If an affiliate uses unsolicited means to bring customers to his website and sell the merchant's products, the merchant will have to contend with doing a little damage control on his reputation.

The affiliate has to do thorough research on the merchant before agreeing to affiliation. Not doing so can mean landing up with a merchant who refuses to pay commission or packs up without informing any of his affiliates. Most merchants and affiliates have a pleasant and profitable business arrangement. It's important to choose wisely.

Its also important to understand the business cycle, in some cases, an ad placed on an affiliate's website may not results in clicks for months from a potential customer. If the commission is a small amount, it can lead to a frustrating relationship. Both the affiliate and the merchant therefore must work to ensure that the relationship stays long and is mutually beneficial.

Today, Affiliate marketing is considered one of the best ways of earning easy money online. If you wish to pursue this, you would be better off if you researched each merchant thoroughly before tying up. Well as they say, the rest can be history as you wait for the profits to roll in!