How Do Affiliate Programs Work?
Learn everything you need to know about the inner workings of affiliate programs, how to join them and what’s in it for you.
The core of affiliate marketing consists of a close relationship between advertisers (also known as “merchants”) and affiliates.
This same relationship is governed by a thorough set of rules and details: the affiliate program.
Affiliates help advertisers sell more of their products or services. In exchange, advertisers pay them back either a percentage or a fixed amount—what is known as a commission.
Here’s the main ways affiliates get paid with online marketing:
- Pay per sale (PPS): when a user directly purchases something using an affiliate’s link.
- Pay per lead (PPL): when a user successfully enters his or her email in a form. Single opt-in is when no email verification is required and double opt-in requires the user to verify their email with a hyperlink found in the message.
- RevShare: instead of a fixed amount per sale, the affiliate gets X%. This can either be one shot or recurring. Example: 20% of all monthly users’ spending.
A brief history of affiliate programs
To this day, many think Amazon pioneered affiliate programs on the Internet. While close to the truth, it slightly misses the mark and doesn’t give credit where it’s due.
The idea of online affiliate marketing comes from American florist William J. Tobin, who launched his e-commerce store PC Flowers, Inc on the Prodigy Network in 1989.
A “true” affiliate program saw the light of day several years later, in 1994. Online store CDNow had put into place a brilliant customer-acquisition strategy called the BuyWeb program. It allowed affiliates to join an affiliate program and paste links on their web pages in order to get a commission (in this case a percentage) for each successful sale.
Only in 1996—almost a decade after William J. Tobin laid out the concept of online affiliate marketing—did Amazon enter the game with its Associates program. While not the first merchant to create an affiliate program, Amazon largely contributed to their proliferation, acting as a role model for future generations.
The year 1998 introduced us to Commission Junction (now CJ Affiliate), the very first affiliate network. They act as an intermediary between affiliates and merchant affiliate programs. Instead of having to scour the web for valuable affiliate programs, publishers get to choose from a large selection all under the same roof.
Affiliate Programs Vs. Referral Programs: What’s the Difference?
You will soon realize there are two types of programs available to online marketers like you: affiliate programs like we just disclosed and referral programs.
The former is a bit more about affiliates open to generating income through affiliate-based custom links on blogs, websites or email marketing. It’s purely mercantile in nature. Some affiliates even get cherry-picked by advertisers themselves because they fit their branding. We see a lot of that with influencers on social media.
For their part, referral programs rely a lot on word of mouth to garner goodwill and achieve widespread adoption. Usually, advertisers will reward affiliates—often their most dedicated users—not with money but additional storage or other perks. This is more a community-driven approach with slim pickings for profit-driven affiliates.
One of the most famous success stories about referral marketing and growth hacking comes from the freemium cloud storage platform Dropbox.
After their advertising efforts fell short of expectations, Dropbox implemented a “Rеfеr a Friеnd” (referral) system in 2010.
Much more effective than ads which had negative return on investment (ROI), the referral program was a decisive factor into Dropbox’s monster growth, culminating into 2.8 million invites by April 2010. Today, the business is worth billions and has 12.7 million paying users, all of which was achieved over the course of a decade (give or take) and little advertising costs.
How do I join an affiliate program?
In most cases, offers are linked to an affiliate network. Which means you would need to join the network first before you can start to promote.
As long as you have a website and/or good traffic, getting approved by an affiliate network or for an affiliate program is a rather fast process.
Amazon, the world’s most visited e-commerce store, has a pretty simple sign up process you can find out more about here.
With CrakRevenue, the sign up process has been updated in recent months and is pretty straightforward. You can check it out yourself here. We even allow future affiliates to register using Google!
As for the offers, it truly depends. Some of them require a manual check by an affiliate manager to make sure you meet all of the advertiser’s requirements. He or she will make sure the brand is in good hands with your traffic and/or promotion methods.
Joining an affiliate program is fast and easy, but do keep in mind it comes with responsibilities, just like any other business.
Here’s a few examples:
- Don’t commit fraud. Might seem obvious, but with Virtual Private Networks (VPNs) and how easy credit cards can be bought, lots of affiliates are unfortunately drawn to tactics that will get them banned sooner rather than later.
- Don’t use — or rely entirely on — blackhat marketing. Affiliate programs and networks have very advanced tools to distinguish legit sources from less than desirable ones. We know. Concentrate on long-term gains rather than being tempted by the dark side and its short-term benefits.
- Do your taxes. Even if you’re not a registered business, you will need to pay a self-employment (SE) tax. The last thing you want is for the IRS or any other government agency to come after you. In the US, affiliates need to pay 15.3% of their net income for the Self-Employed Contributions Act (SECA) tax. How do you determine if you need to file an income tax return? In the US, the threshold is set at $400 of your net annual income. Affiliates might have to pay estimated tax quarterly, based on their projectected gross income. If all of that sounds complicated, it’s because it is and you should plan accordingly.
Why should I join an affiliate program or an affiliate network?
Because affiliate programs and networks alike offer you a unique opportunity to make money online.
They also provide affiliate marketers with detailed stats monitoring and advanced tools to help them boost their sales. Some examples of this are smartlinks, banner generators and native ads.
When you become an affiliate, partner or associate, it also (usually) means you get access to guides, tutorials and dedicated support.
Other than obvious monetary considerations, the experience and knowledge you will earn along the way are pretty much priceless. Of course, getting to know fellow affiliates or even managers go a long way, too.
You’d be surprised how much a single contact within the industry could change your life for the better if you simply offered a glimpse of talent or motivation!
Where Does a CPA Network like CrakRevenue Fall, Then?
A cost per action (CPA) network is a specific type of affiliate network that follows a performance marketing business model.
In this case, payable action triggers for affiliates include clicks, leads and sales. Affiliate marketing, on the other hand, is all about the sales. So you can see why it’s easier to make money with CPA marketing as a simple email inputting can be worth a couple dollars.
CPA networks regroup many different affiliate programs and often have their own referral programs. Such is the case for CrakRevenue, where affiliates get paid 5% on any and all commissions generated by fellow affiliates who registered under them. You can read more about our program here.
Affiliate programs connect advertisers to affiliates so they can promote products or services to potential customers.
Affiliate networks host a wide selection of different offers to pick from. Joining them is easy, as long as you are committed and have legitimate sources of traffic and/or promotion methods
The key takeaway is that affiliate programs have a long history and continue to be a real source of income for thousands of online marketers all around the world.