What is Affiliate Marketing?
There is several variations of affiliate marketing. I describe them by using some concrete examples. In all forms, the basic premise is that you are generating either "sales" or "leads" to your affiliates.
The first variation is that you have a good website and got decent traffic. So you want you make some money from this traffic. You join say Amazon's affiliate program and become an "Amazon Affiliate" (well, Amazon use the term "Associates" rather than "Affiliate"). So you become an Amazon Associate with a login and password where you can log into Associate Central where you can go through some wizard that will generate some ad code. When you copy and paste those ad codes on your website, it will display ads of Amazon products. If an visitor to your site clicks on that ad and subsequently buys a product on Amazon, you get a commission (or a percentage of that sale) -- certain restrictions apply of course (you have to read the fine print of the Associate agreement).
There are many online retailers that have affiliate programs like Amazon. And there is affiliate networks such as Commission Junction manages that affiliate payout of many affiliates. So you can join Commission Junction and then promote products of the various retailers who have partnered with Commission Junction to manage their affiliate program.
You write ads and pay to search engines (such as Google) to distribute those ads in their "sponsored listings" on the right hand-column of their search results page or in the various websites that has Google ads on them. This is known as Paid Search Marketing because you pay (Google or search engines) whenever a visitor clicks on your ads. Google's Paid Search Marketing program is known as AdWords.
The ads take visitor to a "landing site" that you have created which then introduces your visitors to your affiliates' products. You get a "commission" from the affiliate if that visitor then purchases the product. You make money when that commission is larger than what you have to pay for the ads. You have to balance the cost you pay for search engines to put up your
ads versus the commission that you would get if the ad works.
For some affiliates, instead of paying you when visitor purchase a product, some affiliate program pay you when you only when you get a visitors to fill out a form for more information. This is known as "lead generation".
"Direct-to-merchant PPC" where PPC stands for "Pay Per Click" advertisment is when you pay for search engine ads that takes the visitor directly to your affiliate merchant instead of to your own website. Many affiliate merchants do not allow this and you have to read the affiliate agreements carefully before doing this.
For example, Amazon Associates do not allow this practice as described in their Paid Search Marketing FAQ. It is okay to put search engine ads that direct visitor to your website where you have links to the affiliate merchant. But it is not okay to put search engine ads that direct visitor directly to the merchant's site. In other words, you can not have ads in Google Adwords that direct visitor to Amazon.
Make Your Mark with Affiliate Marketing - by sitepoint.
