Affiliate Advertising: your national sales team

Affiliate ads are identical in appearance to online display ads. The difference is in the commercial arrangement between the publisher (website owner) and the advertiser.

Freelance sales person

Display advertising works on a fee-to-display model, where the conversion rate of referred visitors is ignored. Affiliate advertising is based on a fee-per-action model, where:

• the action is an order placed at the advertiser's website within a period of time.
• the fee is a percentage of the order value

The advertiser is normally a business-to-consumer merchant but the model is increasingly being used in business-to-business sales. The role of the publisher is that of a sales agent, acting on behalf of the merchant.

How it works?

One of the best known examples is Amazon's associates programme. Anyone who runs a website can apply to become an affiliate and earn commission on orders placed by referred visitors.

Amazon provide all the creative material (text, graphics & images) and the ads link to categories, special promotions or even specific products on the Amazon site (sample ads are shown to the left of this article).

The ads are embedded with a unique code that identifies the affiliate, and Amazon's system uses cookies to track orders placed by referred visitors.

Affiliate Networks

In one important aspect the Amazon programme is unusual: there is a direct relationship between the merchant and thousands of affiliates.

Most businesses use the services of an affiliate network to run their programmes. An affiliate network is an intermediary organisation that recruits affiliates and manages day-to-day operations, including revenue and commission tracking. Examples in the UK include Paid On Results and TradeDoubler.

A network makes an affiliate scheme feasible, especially for small businesses.

Is it right for me?

Although affiliate schemes are well-established, the commercial relationship is not without its challenges:

Affiliate concerns

• Dependency on the merchant's competence in maximising conversion rates
• If the website offers telephone orders, what are the consequences for affiliate commission?
• Delays in paying commission

Merchant concerns

• Controlling independent agents (e.g. protecting your brand or other sales channels)
• How much of the revenue would the merchant have secured without the affiliate?
• Does the programme offer a good return on investment?

These issues are not necessarily show-stoppers, but they illustrate the need for careful management.