Affiliate Program

An affiliate can be defined as somebody who receives a commission for initiating a sale. Affiliates add links to their websites in order to promote an advertiser or sponsor’s business. In return, the sponsor pays a commission on sales that are caused by the affiliate. Many companies have formal affiliate programs.

Affiliate programs can be very beneficial for both affiliates and companies setting them up. Affiliate programs are effective because the sponsor only has to pay based on results. With regular advertising, money is expended for ad impressions. If the ads are not effective, then the merchant loses out. On the other hand, a merchant who sets up an affiliate program does not have to expend any money, unless sales are generated by the affiliates.

Many large companies have affiliate programs. A good example is Amazon.com. They run a very successful affiliate program that allows affiliates to earn a commission on books sold. The amount of commission that is paid varies widely. Some affiliate programs pay a commission as high as 50% of the sales value, while others pay as little as 3%. It really depends on the industry and the margins enjoyed by businesses. Obviously, companies in higher margin industries, such as publishing, can afford to set up affiliate programs with higher commissions than players in other industries such as computer retail outlets.