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Definition

affiliate marketing

Affiliate marketing is a performance-based marketing strategy in which one company pays another for referred business. The main goal of affiliate marketing is for website owners to reach new markets.

This technique, used commonly in online marketing, involves revenue-sharing between website owners (i.e., online publishers or salespeople) and advertisers or merchants. In exchange for a share of the profits, the website owner places advertisements on the site either to help sell the merchant's products or to send potential customers to the merchant's website. Compensation is usually based on sales, clicks, registrations or a combination of these and other factors.

Affiliate marketing relies on first-party cookies that “remember” the link or ad on which a visitor to the site clicks, the time and date of the click, and what types of sites or content interest users. With affiliate marketing, no sales promotion is required.

Content quality is crucial in affiliate marketing. Using search engine optimization and researching the proper use of keywords can help convert website traffic to purchases and should be part of an affiliate marketing strategy. Additionally, affiliates need to continue posting fresh content to hold viewers’ attention.

Affiliate marketing takes a great deal of time and effort to establish. Choosing a popular, lucrative niche and fostering the right relationships is crucial. Although merchants can put their ads on many different websites -- some experts say more websites mean more exposure for merchants -- others maintain that when it comes to the number of partnerships, quality is more important than quantity.

A potential challenge can occur if an affiliate uses unsavory tactics to attract customers to a website or the site contains material that some might consider objectionable. Researching partners beforehand can help avoid this and other problems between partners such as an affiliate refusing to pay or moving or changing its site. Each party involved should try to ensure that the relationship is mutually beneficial.

Terms related to affiliate marketing include affiliate software, which companies use to create an affiliate program for their offerings; affiliate links, which track the progress of these programs; and affiliate ID, which is similar to an affiliate link and is used by some companies to track the progress of an affiliate program. 

This was last updated in June 2017

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