What Is Affiliate Marketing And How Does It Work?
Exploring Affiliate Marketing
Before a consumer can buy a product or service they need to know it exists, making both business profile and customer attraction key considerations for pretty much every company. Affiliate marketing is one of the most common ways to achieve these ends, but how does it work?
What is Affiliate Marketing?
The online world has transformed business practices in many ways, from vastly increasing the potential of working from home through to collaborative business project software. One such area that has been altered substantially by the rise of the internet is advertising, and one new form of it is affiliate marketing.
Affiliate marketing functions by allowing third parties to make money from companies that benefit from web traffic and sales being generated in the direction of their products or services. A percentage of commission is given to the third party, which provides them with a strong incentive to encourage their readers or viewers to check out the advertising company.
The approach is endorsed and followed by numerous business sectors, from Amazon’s Audible business to online casin. This makes affiliate marketing an appropriate commercial activity for a broad swathe of firms.
Knowing the Audience
A critical aspect of making affiliate marketing work properly for all concerned is to know the audience and to ensure that a marketing message reaches those who might be interested in it. A spa treatment deal focused on a Formula 1 website may not necessarily hit the mark. However, a fantasy videogame that makes a strategic decision to advertise its wares on a blog or Youtube channel that explores subjects such as mythology, fantasy, history, or videogames is much more likely to find a receptive audience.
On a similar note, some bloggers/Youtubers are much better natural salesman than others. This can mean there’s better value with seemingly identical third parties (in terms of viewer/reader figures). Likewise, some audiences can be a lot more engaged. If an individual has a business model based on direct support via superchats (Youtube donations), bits (Twitch), and/or Patreon subscriptions, and PayPal donations then their audience, even if smaller in overall numbers, may be more willing to click through to help that third party out. At the higher end, major newspapers such as the Guardian have also made use of affiliate marketing.
It can also be the case that consumers stand to benefit directly by using affiliate links, typically through a discount. If a reader of a history blog sees a related product and can get a 10% price cut that clearly increases the chances of them clicking through and buying. Another method that can be used for either free-to-play games, educational streaming services, or even the likes of Audible (Amazon’s audiobook wing) are signup codes that offer some sort of bonus content, or free access for a month or two, or a free audiobook.
Sometimes third parties stand to make a little extra if a certain number of click-led sales happen, or codes are redeemed. This can also add some emotional weight to the draw as ardent supporters of the third party who are on the fence might go the extra mile to help out their favorite creator.
Advantages of Affiliate Marketing
Dan Dubey, chief of content and affiliate at Top10casinos.com, mentions that the biggest benefit of this approach is that the initial cost is essentially nothing, provided the third party is only paid for clicks or clicks converted to sales (the latter being better for the advertising firm). Nowadays, the latter is much more common, and clicks alone are rarely used as the metric.
Blogging may seem old hat compared to social media giants but blogs are still very popular and are a prime source of affiliate marketing. From the bloggers’ perspective, income from this source can be as high as six figures for the most successful.
Bloggers are far from the only third parties who can benefit from affiliate marketing, however. Youtube channels catering to specific audiences are also well-placed for this sort of commercial activity, and the same can go for e-mail lists/newsletters. By knowing the audience of a given third party, a business knows it has a far more receptive consumer base than the general population, increasing the chance of clicks leading to sales.
It’s important for both legal and moral reasons for the third party to be upfront about sponsorship or affiliate marketing because a key advantage online personalities have is a sense of personal connection with the audience. Being upfront and honest about advertising is completely fine, but if you recommend something, and stand to personally profit from clicks leading to sales, then not being honest about this can cause harm to your reputation.
How Successful is Affiliate Marketing?
This advertising model accounted for some 7.5% of digital spending among retailers in late 2016. The figures from the United States, in particular, tell the story, with year-on-year rises from 2015 until 2020, going up from $4.21bn in 2015 all the way to $6.82bn in 2020 (a more than 50% increase). As of 2017, 81% of firms were making use of affiliate marketing, showing that it is both productive and popular with businesses.
That brings us to the end of this concise consideration of affiliate marketing, which is an inexpensive and effective means of attracting customers, and one which is rising in popularity year-on-year.