What is Affiliate Marketing and Does It Work?

Definition of Affiliate Marketing and How It Can Help Your Home Business

Affiliate Marketing
Get paid to tell others about great products and services. Credit: Plume Creative | Getty Images

Definition of Affiliate Marketing?

At it's basic, affiliate marketing is when a company pays others, usually called affiliates, to promote the company's products or services. These companies pay the affiliates in a variety of ways, usually based on one or more of the following:

1) The affiliate makes a sale 

2) The affiliate generates a lead for the company (pay-per-lead or pay-per-action)

3) The affiliate's referral leads to some sort of action, such as signing up for the company's free trial (pay-per-action)

4) The affiliate meets a threshold of impressions (the number of times the ad has been shown on the site)

5) Someone clicks on the company's offer using the affiliate's link (pay-per-click)

The History of Affiliate Marketing

Compensation for referrals isn't a new concept, but it has expanded and become more common with the growth of the Internet. Amazon is credited with starting the first online affiliate marketing program. Starting in his garage, Jeff Bezos needed an affordable marketing strategy to sell books through his fledgling online bookstore. People talk about and recommend books. So he decided to start the Amazon Associates program and pay when people referred books to buyers.  The genius of the program is that it didn't cost Bezos anything upfront to market his books. A team of affiliates did all the marketing and he paid for that exposure AFTER a book was sold.

Other companies realized the power of affiliate marketing and began offering their own.

Today, you can become an affiliate for thousands of companies of all sizes. Affiliate networks, such as Commission Junction and LinkShare, make it easy to manage multiple affiliate programs in one spot. Smaller businesses can have their own programs through resources such as ClickBank and eJunkie.

How Can Affiliate Marketing Help Your Home Business?

There are two ways affiliate marketing can help your business.


1) Supplement your current home business. Affiliate marketing offers a great way to add an additional income stream to your existing business. There are millions of affiliate products and services, so the odds are there is something that is related to what you do. If you're a weight loss coach, you can promote fitness and diet products, earning a commission when your clients buy them. If you're a blogger, you can write reviews and other articles that include links to affiliate offers. 

It's important to choose affiliate programs carefully, because you're essentially recommending the product. You also want to make sure you understand how and when you're paid, how stats are kept, and any policies you need to abide by. For example, some programs don't allow you to buy pay-per-click advertising using certain keywords.

2) Start your own affiliate program. Imagine having a team of people promoting your products and services and you don't have to pay them anything until after they've made a sale. That is the power of affiliate marketing. Starting your own affiliate program isn't as hard as you might think. There are tons off affordable tools and resources to help. The most popular affiliate programs (ones that lots of people like to promote) have generous commission payments (i.e. pay 50% or more of the sale), offer marketing tips and tools (i.e. sample social media posts, articles, and more), and pay regularly.


Can You REALLY Make Money with Affiliate Marketing?


Yes. Absolutely. But whether you become an affiliate marketer or you start your own program, the money isn't automatic or without effort. Those who are knowledgeable about marketing and how to reach a target market, and offer quality products and services, are successful. Even better, they did it without having to create the product or deliver the service themselves. 

For businesses that start an affiliate program, the reach to your market can grow exponentially and fast, meaning lots of exposure for little financial outlay or effort. But again, you have to support the people who are promoting you and make sure you offer a great product or service they can feel good about promoting.



Updated June 2016 Leslie Truex