Previous Article WWWiz Home Next Article


Affiliate Programs: Changing the Face of E-Commerce

by Brian Schraff

Because of space constraints, this article provides a very brief overview of affiliate programs. For more information, visit some of the links provided in this article or visit to find books on the subject.

What Are Affiliate Programs and Why Are They So Popular? launched the first affiliate program in 1997, and since then, affiliate programs have been changing the face of e-commerce. According to Jupiter Communications, by 2002, 25 percent of the expected $37.5 billion in Internet retail sales (excluding autos) will have originated on affiliate sites. So what are affiliate programs?

Affiliate programs are partnerships between merchants and affiliates. In order to understand the concept, we must first define merchants and affiliates.

An affiliate is a Web site producer that agrees to place merchant links on its Web site for the purpose of selling a merchant's goods and/or services. In return, the affiliate earns money for either directing visitors to the merchant's site and/or directing a visitor who then executes the desired response on the merchant's site, that is, makes a purchase, fills out a credit application, etc. These affiliates are Web site owners whose Web content and mission may complement a merchant's products or services.

A merchant is an online retailer who partners with affiliates to increase sales and/or traffic on its site. In some instances, the merchant may not sell products or services at all. A merchant could also be a search engine or portal, for example, that benefits from affiliate relationships by adding unique visitors to its site.

The merchant and affiliate form a strategic online sales relationship . Most often the affiliate simply adds a banner or text with specially coded links. These coded links, called tags, track visitors as they link to the merchant's site and navigate through it.

These types of programs benefit both the merchant and the affiliate; the merchant benefits by having a greater reach to potential customers and the affiliate benefits by adding content to its site and by earning income for promoting the merchant's products and services.

Let's examine why these programs are so attractive to both merchants and affiliates.

From the merchant's perspective, an affiliate program extends the merchant's audience reach. The merchant's affiliate sales channel can represent thousands of sites promoting its products and brand. The more affiliates in the merchant's program, the more opportunities are created for increased revenue. The customer acquisition cost of using an affiliate program is minimal compared to other online and off-line traffic-building programs, such as banner ads, and advertisements in traditional print and broadcast media.

These programs are also beneficial to the merchant because the merchant's products and services are displayed on content sites that shoppers typically visit. Consequently buyers have the opportunity to purchase goods and services within their normal browsing patterns. Ideally, the merchants' affiliate partners sell products within the relevant content on their Web sites; for example, the affiliate links to a CD merchant on the portion of its site related to music.

The affiliate benefits as well. The affiliate site markets a product or service on behalf of the merchant and, in return, receives a commission or percentage, typically on each sale. Joining a merchant's affiliate program adds a new source of revenue and increases the value of the site to visitors by expanding content. There's no business risk to the Web site producer for joining an affiliate program. An affiliate program allows Web producers to earn referral revenue simply by including special links on their Web pages. Visitors are tracked through a unique URL that is assigned to the affiliate. By connecting with leading online merchants, Web site producers make their sites more interesting, which increases traffic by encouraging more return visits. In short, by partnering with leading Internet merchants, Web site producers can leverage these relationships to boost traffic to their sites, enhance visitors' experiences, and increase revenue. Some merchants even offer to pro! vide a reciprocal link, if appro priate, to their sites.

For both the merchant and the Web site producer, affiliate programs expand each other's marketing opportunities, while adding value and credibility to each other's sites. Affiliates have the power to use credibility to recommend partner solutions. Referrals from a trusted third party source lead to transferred credibility and trust in a new site. Contextual links designed by an affiliate site can be the most effective referral. For example, a medical information site (the affiliate) includes content on its site about a new over-the-counter medication. The affiliate places a text link in "advertorial" format (an ad that looks like an article) referring the visitor to a merchant site that sells the medication. Not only is this a powerful referral source for the merchant, but the affiliate is adding value to its own site by not only providing information about the medication, but directing the visitor to an easy way to purchase it.

Common Types of Affiliate Compensation

There are several ways in which merchants pay their affiliates. Commissions vary, as do the quality of affiliate programs. These are the most common types of affiliate compensation methods:

Click-through: Not all programs require a purchase for the affiliate to earn income. Some programs pay just for directing a visitor to the merchant site. These are known as click-through or pay-per-click programs.

Bounty (also referred to as pay-per-lead): The merchant pays a commission when an authorized affiliate refers a customer to the merchant's site, and that customer fills out a form or performs another action that allows the merchant to follow up on the sales process.

Pay-per-sale (also referred to as e-commerce commission): The merchant pays a commission when an authorized affiliate refers a visitor to the merchant's site and that visitor buys a product or service. The commission amount may be a percentage of the sale or a per-sale fee. The purchase may occur when the visitor is at the site or it may occur at a later time.

Two-tier revenue: Affiliates earn ongoing residual income by recruiting affiliates to an affiliate network through a two-tier program. Affiliates may receive income for each new affiliate they refer to the network, plus a percentage of those affiliates' earnings per visit or over a pre-set time period.

Some affiliate programs may offer compensation that combines one or more types of these payment methods. For example, a leading automotive destination site that provides visitors with a wide range of information on new and used autos, insurance and financing, pays on a bounty basis and also offers a two-tier income opportunity. The auto merchant pays $1.20 per insurance quote, $3.00 per new car price quote and $2.50 per financing quote. Since the visitors do not need to actually make a purchase for the affiliate to earn a commission, this can result in a high ratio of conversions, especially for auto-related Web sites. Additionally, the site offers two-tier income, paying 10 percent commissions to affiliates on sales generated by new affiliates they refer to the program.

As a Merchant, How Do I Start an Affiliate Program?

One of the most popular methods for merchants is to sign up with an established affiliate network, such as BeFree or Commission Junction. These programs have several hundred thousand to several million affiliates already in their networks and they provide marketing services to promote a merchant's affiliate program to those affiliates. They also handle the program infrastructure, such as check writing, affiliate support, outbound marketing, server technologies, etc. Most of these networks require that merchants sign an exclusivity agreement, so merchants should review all of their options before choosing to sign up with an affiliate network.

Affiliate networks provide merchants with easy tracking and reporting. By logging onto the merchant's "member area" on the affiliate network's Web site, the merchant can view automated, up-to-the-minute transaction and performance reports, activity summaries, account balances and more.

Affiliate networks also keep track of commissions and issue affiliate payments automatically, eliminating paperwork for the merchant. Transaction and activity reports are generally sent to the merchant on a monthly basis.

These networks attract large numbers of affiliates by offering a consolidated, easy-to-join revenue-sharing network. Merchant sites are connected to a network of thousands of pre-screened affiliates. Merchants can choose which affiliates in the network can join their affiliate programs.

The quality of the affiliate is as important as the quantity in increasing traffic and sales. In order to build a successful affiliate program, merchants should be selective in choosing affiliate partners. They should target the best affiliates—those that offer the most relevant content.

In order to attract those prime affiliates, merchants must make the whole process as simple as possible. Affiliate programs should be easy to join. Merchants should also make it easy for their affiliates to stay up to date on the program by communicating with affiliates through an online newsletter or other communications tools.

Affiliates will constantly measure a merchant's site and affiliate program against other affiliate programs. It naturally follows that rewarding affiliates well (and revising affiliate compensation to keep it attractive) is one of the most important factors in running a successful program.

As a Web Site Producer, How Do I Join an Affiliate Program?

Web site producers can join affiliate programs on an individual basis or by joining a network. Both methods offer third-party tracking of referral data, ensuring unbiased reporting.

Signing up with individual affiliate programs can be tedious and time consuming; however, it is the better method for a Web site producer who already has good traffic and wants to be more selective in choosing affiliate programs that most closely match its site's audience. For these Web site producers, there are free resources on the Internet to help locate affiliate programs. lists over 500 affiliate programs and provides rankings and recommendations. A similar resource,, is also an excellent guide for finding affiliate programs.

A more streamlined process is to sign up with one of the affiliate networks. Then there's only a single application form to gain access to all merchants in the network. There are no exclusivity requirements for affiliates. Consequently Web site producers may sign up with more than one affiliate network. This gives affiliates the option to work with both one-tier sites in networks such as BeFree, as well as two-tier sites in networks such as Commission Junction. These networks offer third-party tracking of referral action data for unbiased, accurate reporting, as well as payouts.

Generally the affiliate is provided with a tracking number (often called a site tag) to be included in a link on the affiliate's site. When the affiliate's visitors visit those sites from the link on the affiliate's site, the affiliate is credited with the lead and a commission is paid by the network. Often the affiliate is given a separate Web site, such as, with which to check leads and commissions.

Whether signing up as an affiliate on an individual basis or through an affiliate network, Web site producers should choose their merchant partners wisely. A common mistake made by many Web site producers is to join several affiliate programs, clutter the site with too many banner ads and expect the money to come rolling in. Web site producers should choose merchant partners that offer products and services that are relevant to their visitors.

Choosing merchant partners should also be based on the following criteria: the merchant offers a good product or service that's in high demand and will sell easily, the merchant has a strong brand that your visitors will recognize, the merchant pays its affiliates high commissions, the merchant has an accurate tracking system, and most of all, the merchant is reputable.


A well-run revenue-sharing affiliate program provides tremendous value to online merchants. The real key to success is to copy what is already working and put it into action. The most successful affiliate programs on the Web today target and attract affiliates whose content is relevant to the merchant's products and services, communicate regularly with their affiliates and reward their affiliates handsomely.

For affiliates, the key to affiliate program success is to select high-quality programs that match the site's content (or create a site with good content to match the theme of the affiliate programs), then promote those affiliate programs using search engines, email, discussion lists, newsgroups and links from other sites, and by providing relevant content that will keep visitors returning.


Brian Schraff is president of Schraff Group. The agency has a 21-year history in Orange County and provides integrated marketing communications to local, Silicon Valley and out-of-state technology clients. The interactive services group handles clients across a broad range of industries.


Copyright (C) 1998 WWWiz Corporation - All Rights Reserved
Phone: 714.848.9600 FAX: 714.375.2493
WWWiz Web site developed and maintained by
GRAFX Digital Studio

Previous Article Next Article
WWWiz Home