Authored by Jackie Acosta in Internet Marketing
Published on 12-02-2008

There are plenty of marketing trends that come and go from time to time—most them prove effective while others are just faddish or too gimmicky. Affiliate Marketing might sound pretty new to several people but it has been around for quite some time now, thus proving that it is not just a passing marketing trend but an effective practice.

Affiliate marketing is an online marketing practice that has both the channel and the client earning profits from advertising activities. The channel, which is the website, opens up spaces for possible advertisers to place their ads in. These spaces are in the form of ad banners or hot links. Advertisers who venture into online advertising usually have a niche market who consume online media instead of the traditional TV, radio, and print ads, which make perfect sense on why they choose to spend their budget there. In any case, these banners and links either push to sell the advertiser’s product or service or link them to the advertiser’s website. The website is paid through profit shares from sales or through the ad’s performance.

The website and the advertiser usually discuss beforehand how the ad’s performance will be measured. There are three ways to measure performance: 1) pay per lead, 2) pay per click, and 3) pay per sale. Pay per lead is measured through number of registers at the advertiser’s website that came from click through from the ad banners and links. A simple and faster way to earn through this agreement is through pay per click, which measures how many times the banner or link is clicked. This number determines how much will be paid to the website in return. Lastly, the pay per sale method determines how much the website will earn through the number of successful sales made from clicking on the ads.

This set up is both convenient for the website owner and the advertiser as it is cost-efficient and results-oriented. The website generates revenue without putting out more money and using existing resources. The ad will simply be put into the space and linked to wherever the advertiser wants it to lead and the website will just have to try their best to get their customers to click on their client’s banner in order to gain from the placement.

The advertiser on the other hand, also benefits greatly from this marketing effort. As mentioned before, online advertising is much less expensive compared to using other channels such as TV and print ads as they do not require a lot of production and space. More advertising budget is saved with this setup as the advertiser only pays a small amount for the production of the ad and pays for the ad space based on its effectiveness. If the ad does not bring profits, the advertiser still gains from the venture with the free exposure it gets from the placement.

Like everything else, there are also a few downsides to this setup. First, the advertiser’s profit will be lessened as it would be shared with the channel. Both website and advertiser should also be wary of each other’s image or else they can be affected since they both carry the other’s name and are associated. In these cases, advertisers and websites should be careful and take extra measure to protect themselves before getting into any ventures.