Affiliate marketing is a rapidly growing industry. The business spending on affiliate marketing is expected to cross $8.2 billion in the US by the end of 2022, all the way from $5.4 billion in 2017. That’s almost a 10% increase each year. Affiliate marketing is a goldmine for both merchants and marketers.
If you wish to join this rapidly growing market, you must know how does affiliate marketing work. A clear understanding of the end-to-end process is necessary.
How Does Affiliate Marketing Work?
There are multiple things that you need to know to fully understand how affiliate marketing works.
First, affiliate marketing is done online. This means everything is carried electronically over the internet, starting from the affiliate link to the sale and transfer of your commission.
In simple words, you promote a merchant’s product, the customer buys the product, and you receive your commission from the merchant.
Everything is managed by an affiliate network that tracks clicks, processes sales, and distributes commission and funds between merchants and affiliates.
So, there are three key entities involved in the affiliate marketing process:
- Affiliate marketer
These three entities are connected by the affiliate network. Let’s see what an affiliate network is and what role it plays in affiliate marketing.
What is an Affiliate Network
An affiliate network acts as an intermediary between affiliate marketers and merchants. It connects both as a third party. It provides merchants all the affiliate marketing services that include:
- Affiliate link generation and tracking
- Payment processing
- Fraud protection
- Commission disbursement
- Access to hundreds of affiliate marketers.
On the other hand, an affiliate network provides the following services to affiliate marketers:
- Access to hundreds of affiliate products
- Guaranteed payment
- Fraud protection.
ClickBank, for example, is an affiliate network. It works for both sellers and marketers. Merchants can grow their sales with its marketplace while affiliate marketers can find top affiliate products to make money:
Merchants join affiliate networks to generate sales by making their products available to the network’s marketplace. Sellers don’t spend a dime on marketing and generate heaps of sales via affiliates. This is the reason why sellers switch to affiliate marketing. It helps them avoid spending money on marketing to generate sales.
Affiliates choose to work with affiliate networks to get access to products instantly. When working directly with a merchant, they’ll have to use tracking tools to track clicks and sales. And merchants might reject valid sales. To avoid such issues, affiliates prefer working via an affiliate network that tracks clicks, sales, and ensures commission is paid on time.
Affiliate Marketing Process
So, how does the actual process work when you join an affiliate network as an affiliate marketer? Here is how it all works:
1. Affiliate Link and Tracking
Once you register with an affiliate network of your choice (read this guide on how to start affiliate marketing if you haven’t registered with an affiliate network yet), you’ll have to grab your affiliate link.
An affiliate link is a unique URL that includes an affiliate ID. It is used to track clicks and sales by merchants (via affiliate network). All the affiliate links have a unique affiliate ID embedded in them that filters clicks. Here is an example of an affiliate link:
The affiliate link creates a cookie in the user browser once it gets clicked. The cookie is used to track clicks and sales, and is used for sale attribution.
For example, if a person clicks an affiliate link (the cookie gets stored in the device).
A few days later, the same person clicks the affiliate link of a different affiliate and completes the purchase. In this case, the sale will be attributed to the first affiliate whose cookie is already stored in the browser (unless it is expired).
The affiliate cookies have a specific expiration date (e.g. 30 days) after which it expires. If the sale is completed within the expiration period, you’ll get the commission. If a person completes the sale after the expiration period, you won’t get a commission for it.
So, a buyer has time to complete the purchase any time in the future and you will still get your commission.
2. Sales and Commission
When a potential buyer clicks an affiliate link, he/she lands on the merchant’s sales page. As soon as the sale is completed, the affiliate network does three things:
- Inspects the referrer link by inspecting the affiliate cookie to attribute the sale to the right affiliate
- Verifies the purchase. Detects fraudulent purchases generated by affiliate marketers
- Processes payment. The commission is sent to the affiliate, the seller gets the remaining amount, and the affiliate network keeps its service charges.
Here is how the complete process looks like:
It is the responsibility of the affiliate network to track sales and process payments. All the major affiliate networks process payments (or at least do all the tracking). This keeps the process safe, transparent, and secure.
Working with sellers directly as affiliates is risky and expensive for the following reasons:
- You’ll have to use your affiliate tracking tool (also known as link tracker). It costs money especially if you go a sophisticated one
- Even if you use a tracking tool, it will only track clicks – not conversions. You can’t tell if a click you generated resulted in a sale or not because you can’t put your tracking code on a merchant’s sales page
- You’ll rely on the seller. If you generated 1,000 clicks, and the merchant says it didn’t result in a single sale, you can’t do anything.
An affiliate network turns out to be your best choice as an affiliate marketer to avoid risk and money.
The best thing about affiliate marketing is that everything works in the background. As an affiliate marketer, you just have to grab your affiliate link and use it to send the traffic to the merchant’s sales page. Cookie generation, storing, tracking, and everything else is done in the background automatically.
You can check clicks, conversions, sales, and commission in the affiliate dashboard. This makes your life simple and comfortable.
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