The Little Black Book of Online Business: 1001 Insider Resources Every Business Owner Needs

Chapter 2. Affiliate Marketing

This concept has been around since Amazon first implemented an affiliate program on its site, yet many people still don't know what an affiliate program is.

An affiliate promotes a product on behalf of a merchant. For instance, if you sign up at Amazon.com as an affiliate, you can then add special links on your web site (or in your e-mails) to direct people to the listing for specific books at Amazon.com. If somebody goes to Amazon.com via your affiliate link and purchases the featured product, you get a commission from Amazon.

Affiliates can be paid based on any combination of CPM, CPC, CPA, or CPS. We've discussed the first three—ad impressions, visits, and actions. In cost per sale (CPS), the affiliate is paid only when a sale is made.

Being paid based on advertising views (CPM) is rare, unless the affiliate is an advertising network. Being paid based on clicks is usually reserved for affiliates of PPC search engines.

For most merchants, affiliates will be paid based on leads generated (CPA) or sales. This is great for the merchants because they are paying only for performance. If the affiliate's efforts generate no leads or sales, it costs the merchant nothing.

Of course, this is a double-edged sword. If the merchant's sales copy can't convert enough of the affiliate's visitors, the affiliate will not make any money and will then start promoting a different merchant's product! So it really is a case of "you scratch my back and I'll scratch yours." ...