In a nutshell, affiliate marketing is promoting a web-based business. When the visitor you refer subscribes or becomes a customer of site, the affiliate is paid either a percentage of the sale or for the lead.
Affiliate programs are attractive to the merchant because they only pay if the campaign is successful. In other words, their return on investment is guaranteed.
Affiliate marketing reportedly was the brainchild of Amazon CEO, Jeff Bezos. The story goes that he was at a dinner party and was approached by a woman who wanted to sell books on her website. Bezos idea was that he could link the woman to Amazon and could pay the woman a commission for the books she sold. That idea later became known as the "Amazon Associates Program" and linked associate websites to Amazon through the use of a banner ad.
Since then, the idea is widely practiced and is available in many forms of compensation models.
Models:
Pay-per-sale (PPS) or Cost-per-sale (CPS)
Pay-per-sale pays the affiliate or publisher a percentage of the sale amount generated by the referral. This is by far the most common type of affiliate program used by online retailers.
Pay-per-click (PPC) or Cost-per-click (CPC)
The Pay-per-click model pays the publisher every time a potential customer clicks on the merchant’s Ad. The most popular example of this model is one run by Google with its program called Adsense.
Pay-per-impression (PPI) or Cost-per-mil (CPM)
Mil=1000 times an ad is displayed (M is the Roman numeral for 1000). The affiliate is paid an amount $X for every 1000 times the Ad is displayed on the affiliate website. The cost per impression is not tied to actual clicks.
Pay-per-lead (PPL) Cost-per-acquisition (CPA) Cost-per-lead (CPL)
Cost per lead affiliate model pays publishers for every referral to their website who performs an action like filling out a survey or signing up for a newsletter. This is a popular method for sites that sell services.
Well, that gives you a basic overview of the evolution of affiliate programs and the forms they take. In a future article, we will explore some of the higher rated affiliate programs, their benefits and weaknesses.
Happy marketing!
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