Internet Based Marketing Practice Brought About By Affiliate Marketing Efforts

Affiliate marketing is an Internet-based marketing practice in which a business rewards one or more affiliates for each visitor or customer brought about by the affiliate's marketing efforts. It is also the name of the industry where a number of different types of companies and individuals are performing this form of Internet marketing. It includes affiliate networks, affiliate management companies, and in-house affiliate managers, specialized third party vendors, and various types of affiliates or publishers who would promote the products and services of their partners.

The strategy includes overlap with other Internet marketing methods to some degree, because affiliates often use regular advertising methods including organic search engine optimization, paid search engine marketing, e-mail marketing, and in some sense display advertising. Certain affiliates sometimes use less orthodox techniques, such as publishing reviews of products or services offered by a partner. Affiliate marketing-using one website to drive traffic to another-is a form of online marketing, which is frequently overlooked by advertisers.

The concept of revenue sharing predates affiliate marketing and the Internet. Affiliate marketing has grown quickly since its inception. The e-commerce website, viewed as a marketing toy in the early days of the Internet, became an integrated part of the overall business plan and in some cases grew to a bigger business than the existing offline business. Currently the most active sectors for affiliate marketing are the adult, gambling, and retail industries. The three sectors expected to experience the greatest growth are the mobile phone, finance, and travel sectors. Also several of the affiliate solution providers expect to see increased interest from business-to-business marketers and advertisers in using affiliate marketing as part of their mix.

Websites and services based on Web 2.0 concepts like blogging and interactive online communities, have impacted the affiliate marketing world as well. The new media allowed merchants to become closer to their affiliates and improved the communication between them. Eighty percent of affiliate programs today use revenue sharing or cost per sale  as a compensation method, nineteen percent use cost per action , and the remaining programs use other methods such as cost per click or cost per mille. Less than one percent of traditional affiliate marketing programs today use cost per click and cost per mille. 

Cost per click was more common in the early days of affiliate marketing, but has diminished in use over time due to click fraud issues very similar to the click fraud issues modern search engines are facing today. Advertising programs such as Google AdSense are not considered in the statistic pertaining to diminished use of cost per click, as it is uncertain if contextual advertising can be considered affiliate marketing. Affiliate marketing is also called "performance marketing", in reference to how sales employees are typically being compensated. Affiliates are not employed by the advertiser whose products or services they promote, but the compensation models applied to affiliate marketing are very similar to the ones used for people in the advertisers' internal sales department. The sales team of the advertiser, however, does have the control and influence up to the point where the prospect signs the contract or completes the purchase. Some advertisers offer multi-tier programs that distribute commission into a hierarchical referral network of sign-ups and sub-partners. Merchants favor affiliate marketing because in most cases it uses a "pay for performance" model, meaning that the merchant does not incur a marketing expense unless results are accrued. Payouts to affiliates or publishers are either made by the networks on behalf of the merchant, by the network, consolidated across all merchants where the publisher has a relationship with and earned commissions or directly by the merchant itself.