How Does Affiliate Marketing Work?

How Does Affiliate Marketing Work?

The concept of affiliate marketing is very simple … but it is often so bogged down in jargon that the simplicity is lost

So this is my simple explanation.

A website owner agrees to promote a merchants product or service in exchange for a commission from any sales that are made as a result of the promotion.

So for example:

I have a website about gardening.

I agree with a lawnmower manufacturer that I will promote his lawnmowers in exchange for a 3% commission on any sales that result from the promotion on my site.

Someone comes to my website and reads a review about a particular lawnmower. As a result of reading my site, they click on the link on my page which takes them to the lawnmower website. When they make a purchase, I get paid 3% commission on the sale. If the lawnmower was $300, my commission payment is $9 (3% x $300).

That is affiliate marketing.

Who is Who in the Affiliate Marketing Chain?

If you are a website owner who promotes third party products, you are known as the ‘affiliate’ or ‘partner’.

The person or company with something to sell is known as the ‘merchant’.

Affiliate Marketing Description with Jargon!

An affiliate program is a business arrangement whereby a merchant agrees to pay another party, known as an affiliate or partner, a referral fee or commission. This commission is paid for all the sales that occur in the event of the end customer clicking the affiliate links which leads to the the merchant’s website and results in a purchase.

The Simplest Way to Get Started

The simplest way to get started is to sign up for one of the many affiliate networks. These companies manage the whole affiliate marketing process for you. As a publisher it is free for you to sign-up, although some of them have an approval process to ensure your website is of a high enough standard for their merchants.

The networks sign-up hundreds, or even, thousands of merchants and agree with them what products they want promoting and what commissions they are prepared to pay. Commissions vary depending on the products or services being sold. A travel company selling holidays, may pay 0.5%, whereas someone selling a downloadable ebook may offer 50% commission.

You can browse through the merchants and select the one you want to promote on your website. Be sure to only promote products and services that are relevant to your audience.

The affiliate network takes care of monitoring which of your visitors make purchases, collecting the commissions and ensuring you get paid.

A few of the bigger networks include:

Big is not always best, but it is a good place for the beginner to start.

There is a further article about The Top Seven Ways to Find an Affiliate Merchant Partner.


The Affiliate Marketing Process

When you sign up for an affiliate program this is the process that you go through.

1) Affiliate Sign-Up 

The affiliate – the website owner wishing to get a commission from promoting other products and services on their site – signs up to the affiliate program or affiliate network.

2) Selects Merchants

The affiliate selects the merchants that they want to promote on their site and picks the most suitable advertisement or link. Each merchant usually provides a choice of ads or link text.

3) Ad Appears on Affiliates Pages

The affiliate copies a small piece of HTML code and pastes it into the code of their page. This will display the ad on their website.

4) Visitor Clicks on the Ad

Hopefully, visitors to the site are attracted to the ad and they click on it. The link in the ad takes them through to the merchant’s site. At the same time, the affiliate program software captures the affiliate ID so that commissions can be assigned to the affiliate if a purchase is made.

5) Cookie Placed on the Visitor’s Web Browser

A small, invisible software program, called a ‘cookie’ is placed on the visitor’s web browser. This cookie contains their unique affiliate ID.

6) The Cookie Tracks Any Sales

If the visitor makes a purchase on the merchant’s site, the cookie captures this information and upon completion of the transaction sends the data to the Affiliate Program company. The data its sends are:

• The unique affiliate ID
• The amount of the transaction
• The time and date of the transaction
• What was purchased, usually in the form of a product code

7) Merchant Approves the Transaction

Periodically, the merchant views the transactions to make sure none are fraudulent. If the transaction is legitimate, the merchant marks it for payment and an email is sent to the affiliate confirming the sale and the pending commission.

8) Commission Report

At the end of the billing cycle, which is usually a month, a report is created that summarises which affiliates are owed what amounts.

9) Commissions are Paid

The final step is for the merchant to transfer the funds to pay the affiliates’ commissions.

That’s it. Simple.


Affiliate marketing is becomeing one of the most successful and profitable ways for content website owners to make money from their free content. Indeed some full time affiliate marketers make millions of dollars a year from their affiliate sites.

The great news is it is very simple to get started and I recommend every website owner should give it a go so they understnd how it works and the potential of the revenues they can make.

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