An affiliate, also known as affiliate marketing, affiliate program or associate program is a robotic marketing program which is based on performance and aims at generating sales. Affiliate programs remunerate through commissions which may vary from 1% up to 75%. Indeed, commissions fluctuate according to certain conditions, for example: the type of market, the retailers’ recognition and the type of product.

Transactions in affiliate marketing are usually a 3 party process. The parties involved are the visitor or customer, the affiliate (internet publisher) and the merchant (advertiser).

Thus, affiliate marketing is an agreement by which a merchant website employs an affiliate website to direct visitors or customers to its website by means of advertisement. The advertising tools are provided by the web advertiser itself, and compensation is determined by the number of visitors and/or customers that land in the advertiser’s website.

Types of affiliate programs

Affiliate programs are categorized depending on how the payment/cost for online advertisement is arranged. The most important are:

  • Pay-per-click (a.k.a. cost-per-click): In this type of affiliate program, the focus is in the amount of clicks that a particular affiliate link gets. In other words, in the PPC program it is irrelevant if a transaction is completed or not, the number of clicks is all what matters.
  • Pay-per-lead (a.k.a. cost-per-lead): Payments in this affiliate program are done on the basis of the visitors’ percentage rate that are directed through an affiliate link to leads in the merchant’s site and perform a desired action. For instance: subscribing for a newsletter, downloading a file, signing up for a reward program, etc. It is important to emphasize that the payment is done if, and only if, the requested action is completed.
  • Pay-per-sale (a.k.a. cost-per-sale or revenue sharing): In these affiliate programsthe affiliate is paid depending on if a purchase is done. Explicitly, the costumer arrives to the merchant’s site through an affiliate link and if a sale is completed, the affiliate will get paid. The PPS payment arrangement can be done in two ways, either it is paid a fixed price per sale or a commission is paid based on the price of the sold item. While PPS is generally the best paid affiliate program, it normally has the lowest visitors’ percentage rate.