Understanding The Benefits To An Online Affiliate Marketing Program

Some people still do not know the difference between the Internet and the World Wide Web, and think the terms are interchangeable. They are not. The Internet was around long before AOL flooded the world with branded floppies and CDs containing their software. It goes as far back as the 1960s when the Defense Advanced Research Projects Agency (DARPA), an agency of the U.S. Department of Defense in charge of developing new technology for the military, ventured into the new realm of computer networking.

It all started with ARPANET, which eventually evolved into the Internet, and a new software tool known as NLS, the first "hypertext" standard, and an ancestor of the Internet's "graphical user interface," commonly called the World Wide Web. In other words, the World Wide Web is the easy-to-navigate front end (or "layer") that makes the Internet available to regular folks and not just computer nerds or government agencies.

The background story is necessary for you to get a complete picture of the early development of the now-ubiquitous Web, and introduce the cast of important characters. Like it or not, it was pornography that drove the development of Web technologies and applications, with most informed observers agreeing with adult industry leaders that Cybererotica was either the first or among the first to create an affiliate marketing program. They were followed in short order by CDNow and its "BuyWeb" program, and Geffen Records.

Amazon.com began its "associate program" in 1996, allowing the placement of banners and text links on sites so visitors could "click through" to Amazon and buy the item (books at first). The site from which the buyer arrived at Amazon would earn a commission on any subsequent sale. Although not the very first merchant to have an affiliate program, Amazon did create the first widely known one, and it provided a model for many to follow.

Proof in the pudding

The growth of Amazon and other companies following this once-revolutionary model should attest to the ultimate benefit of an online affiliate marketing program – business growth and profits. In 1997, in fact, Amazon submitted a patent application for the "essential components" of its affiliate program, although several "e-tailers" beat them to the punch, including AutoWeb.com, KBkids.com and a few others.

In the early Internet days, "e-commerce" or "e-tailing" websites were thought of as ploys or gimmicks, but some of these sites eventually grew bigger than the original companies that created them. The most active areas for affiliate marketing today are the adult, gambling, financial, travel and mobile phone industries. They all benefit from the additional reach and exposure that is possible with affiliate marketing programs, and constant refinement of the tools – search optimization, creative uses for Google's AdSense, viral marketing methods ("word of mouse") – will indicate the direction that the leaders are taking.

Financial benefits and more

The ultimate benefit, as stated, is increased success. Technological advances continue to offer strategic thinkers new ways of establishing and maintaining close relationships with their affiliates since, after all, personal relationships with mutual trust are key. With the advent of such Web 2.0 services as blogging and interactive Web communities, the affiliate marketing world is becoming a more intimate, more trusting environment.

Because of the new levels of trust and the rise of "cyber communitarianism," it is increasingly difficult for fly-by-night firms to succeed for even a short while. Communication is instant, and there are watchdogs a-plenty scoping out Internet activity day and night, around the world. Very little happens in the affiliate marketing community that is not discussed and dissected in a thousand ways on a hundred sites.

The financial benefit of improved communication, of course, is a reduction in losses to unscrupulous marketers and more information being made available on active individuals and firms. Where information is freely available and actively disseminated – where the "light shines," so to speak – it is harder and harder for crooks to hide in shadows. The open and candid nature of the online affiliate marketing industry confers such additional benefits as reputation, referrals and, once again, trust.

Making money

The models and methods by which affiliate marketers earn their money are varied, and in constant flux on the implementation level owing to continuing technological progress. The numbers are always in flux, too, but it would not be particularly inaccurate to say that some 80 of 100 affiliate programs working today use some form of revenue sharing or cost per sale (CPS) for compensation. Another 18 or so use a cost per action (CPA) formula, while the remainder use such other methods as cost per click (CPC) and cost per mille/thousand (CPM).

The one or two percent of firms using the CPC and CPM methods are usually in the paid search and display advertising fields. CPC used to be more common, especially early on, but the large amount of fraud perpetrated by computer-savvy crooks nearly eliminated that methodology completely.

Bottom line

Finally, another powerful benefit of affiliate marketing has to do with what it isn't, rather than what it is – it isn't MLM (Multi-Level Marketing). In fact, most affiliate programs are "one tier" designs, with a few two-tier firms making up a small minority. When a program evolves into a "hierarchy" of sign-ups, prospects, sub-partners, uplines and downlines, these become a different animal entirely, namely, network marketing or MLM.

In the final analysis, you need to understand that, as far as online affiliate marketing, there will never be a final analysis. That is to say, things change quickly, with both strategies and tactics, so you need to stay abreast of the issues in the industry, new developments and improved techniques. As we have seen, however, the major benefits of an online affiliate marketing program are flexibility, variety, transparency, controllable and predictable costs, opportunities for building trust and the chance to build an effective community effort.