In the last decade, the Internet has exploded from a niche product used by a few techie types to a mainstream tool used by just about everyone. The World Wide Web, once used merely as another promotional device by companies looking to advertise, has become a mainstream force in conducting business. There are now more than a billion Websites and many of them exist only to conduct business, offering products directly to the public without the necessity of a conventional storefront. The market for all products on the Internet has become quite competitive, however, and companies are always looking for additional ways to help make more sales. A system to do just that has become quite popular in recent years, as it offers money-making opportunities even for Website owners who do not have retail sites. That system is known as affiliate marketing.
In the Internet system, a business pay owners of other Websites, or affiliates, money simply to have their products sold. The product is sold as a service to the affiliate’s Web site. The affiliate will engage in promotional activities, including posting on the Web site of the business with links to the retailer’s Web site. If any visitors from that site buy any products, the affiliate is paid a portion of the amount of the sale. Once a business determines that an affiliate is worth the effort, the business can set up a program to pay the affiliate a regular sum, even if the sales are small.
One type of affiliate program involves a pay-per-click system. In this system, affiliates are paid a sum based on clicks on a retailer’s Web site. The effort involved in this affiliate program is minimal, since most of the clicks occur automatically. The affiliate is paid whether or not sales are made, however, because the business is taking no risk. It is paying the affiliate an agreed upon amount of money, rather than spending money for advertising and other costs. This program, however, can be more profitable for both the affiliate and the retailer, therefore attracting more affiliates to the retailer’s site.
Another affiliate program, which involves actual sales, involves more effort, but may be more lucrative for each party. In this situation, the affiliate is paid based on sales made to visitors coming from his site. These visitors are tracked by special software on the affiliate’s computer, and the software records the sales on a special code-based tracking number attached to the Web site address. This special tracking number is unique to the affiliate, and it is included in the address when the site is viewed. The merchant, therefore, can determine from which affiliate the customer came. If the customer uses another Internet address to enter the site, the software system can track the sale to the affiliate. The merchant can then pay the affiliate based on the sales, even if it is through different Websites.
There are no legal requirements regarding the nature or type of affiliate program, or the compensation scheme. All Websites are different, and it is up to you to determine which program will attract the most customers. If the site is popular, it may be a good idea to consider a pay-per-click arrangement, otherwise you may want to go with a pay-per-sale scheme.