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1.1 The Background of Affiliate Marketing
As an ongoing way to create income opportunities, affiliate marketing has captured the imagination and attention of a number of entrepreneurs over the last decade. Here is some background on the development of affiliate marketing and how it continues to evolve today.
At its core, affiliate marketing is all about getting attention for a good or service by utilizing online resources that are managed by partners or affiliates. The most simplistic of all these methods is allowing advertising to be displayed on a web site that is the domain of the affiliate.
Typically, the advertisement will allow the prospective customer to click on and be redirected to a page or site where there is more information and the chance to order the good or service in question. In return for providing a doorway for that customer to discover the product of service, the affiliate is rewarded with compensation, usually via electronic transfer or check.
The concept of affiliate marketing is a natural outgrowth of the online marketing that sprang up in the early years of widespread Internet use. At first, online marketing was more of a business to business approach, since companies were the first to jump on the Internet bandwagon. Putting up a web site and sending emails out to solicit business was a cost-effective way to gather new business clients.
As Internet use began to spread into the home, a number of companies began to see that working with owners of personal web sites would be a great way to promote goods and services with very little in the way of investment in marketing resources.
The trick was to make the idea enticing to individuals, so they would be interested in allowing companies to advertise through their web sites. Out of this need to come up with a strategy that would appeal to a large body of people, the basics of affiliate marketing were developed, and still continue to shape the course of affiliate programs today.
The vast majority of affiliate programs provide compensation through revenue sharing. In some cases, revenue sharing is referred to as a cost per sale transaction. Essentially, the affiliate is earns either a fixed amount or a percentage of the purchase price when anyone locates and buys the good or service through the portal provided by the affiliate.
For example, a family web site that allowed businesses that produced infant care products to feature ads on the front page of the web site, complete with links, would pay the family for every sale that was made through that link.
Many affiliate programs require that the earnings reach a certain level before pay out takes place. Others will pay on a weekly, bi-weekly, or monthly basis, with no minimum amount of earnings required.
Another less popular means of generating revenue through an affiliate program is the cost per action method. This differs from the cost per sale method, in that cost per action simply requires that the prospective buyer see the ad on a web site and click on it to investigate for a minimum amount of time.
It does not have to end in a sale. As one can imagine, the amount of revenue generated from this sort of arrangement is much less than by a cost per sale revenue sharing plan.
With the cost per action world, the pay per click may be the format that most people recognize immediately. However, it is also the least popular method of affiliate marketing today.
While PPC began with a strong following, the method proved to be far too susceptible to fraudulent clicks, which resulted in little sales but a lot of money paid out by advertisers. Today's methods, which help to track addresses of the customers as well as require a minimum amount of browsing time, have cut down on the incidence of fraud a great deal.
Affiliate marketing today covers a wide range of products and services, from household items to telecommunications offerings. Any enterprising individual with some expertise in a given area could very well find an affiliate program that would generate some recurring income. All it takes is a look around the Internet.
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