How Affiliate Marketing Works

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How Affiliate Marketing Works

Within this example a 'advertiser' is an online advertiser with a transactional website where you can buy products or services. An 'affiliate' is an online publisher or partner who has access to traffic.

Publishers are traditionally website owners who can send traffic, via links to your site. They do this on the basis that any sales generated from this traffic will earn them an agreed commission. This reward model is commonly known as Cost Per Action (CPA) and is more transparent and accountable than the older Cost Per Click (CPC) model.

There are many different publisher types to work with and these relationships are facilitated by an advertiser joining the network and using the promotional tools available- these are owned by the publishers. In every case the publisher takes the risk of sending you traffic at no cost to you as you only have to reward them if their traffic completes a purchase- therefore, advertisers only pay out on results.

A consumer visits a publisher's website (for example a shopping portal or directory)

The customer finds a product (or retailer) and clicks the link to be taken to the advertiser's site to review or purchase the product (this click-through stores a network cookie on their PC).*

The customer completes the sale online. Tracking software records the key purchase data such as sale amount, IP, date and time, etc and reports this to Awin. The customer journey has now concluded.

The advertiser is able to allow a period of 'grace' to consider the sale complete and pays commission due to the publisher for sales generated.

The value of publisher marketing

In 2014 online spending in the UK exceeded £100 billion for the first time – reaching £104 billion. This was up by 14% on the previous year. E-Retail now accounts for an estimated 24% of the total retail market*

Adgild Hop, Head of Retail Consulting at Cap Gemini commented “2014 has been an important milestone for the online retail sector, with the £100 billion mark being exceeded for the first time. When we consider that almost £1 in every £4 is now spent online, and that a large proportion of the other £3 is influenced by some form of digital interaction, it becomes very clear that retailers need to continue to embrace the opportunity that e-retail poses.”

Affiliate marketing saw some impressive results. The third IAB Performance marketing study in conjunction with PWC uncovered that 4,000 advertisers spent £1.1 billion across 12,000 publishers in 2014. This was an 8% increase in spend on 2013 figures and a 95% increase from 2008.

The channel has shown a strong return on investment with a £15 return for every £1 spent on average. In light of these statistics it is clear that affiliate marketing should form part of an integrated and successful digital marketing strategy.

  • The IMRG Capgemini e-Retail Sales Index 2014

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