Affiliate marketing is a method of promoting web
businesses in which an affiliate is rewarded for every visitor, subscriber,
customer, and/or sale provided through his/her efforts. Compensation or
commission may be made based on a certain value for each exposure (CPM), visit
(Pay per click), registrant or new customer (Pay per lead), sale (usually a
percentage, Pay per sale or revenue share), or any combination of them.
Merchants like affiliate marketing because it is a "pay for performance model",
meaning the merchant does not incur a marketing expense unless results are
realized. Some businesses owe much of their growth and success to this marketing
technique, especially small and midsize businesses. However, unlike display
advertising, affiliate marketing is not easily scalable.
Some merchants run their own affiliate programs while others use third party
services provided by intermediaries to track traffic or sales that are referred
from affiliates. (see outsourced program management) Merchants can choose from
different types of affiliate management solutions including: standalone
software, hosted services, shopping carts with affiliate features, and third
party affiliate networks.
Affiliate marketing has grown quickly since its inception. The e-commerce
website, viewed as a marketing toy in the early days of the web, became an
integrated part of the overall business plan and in some cases grew to a bigger
business than the existing offline business. According to one report, total
sales generated through affiliate networks in 2006 was £2.16 billion in the UK
alone. The estimates were £1.35 billion in sales in 2005. [1] MarketingSherpa's
research team roughly estimates affiliates worldwide will earn $6.5 billion in
bounty and commissions in 2006. This includes retail, personal finance, gaming
and gambling, travel, telecom, 'Net marketing' education offers, subscription
sites, and other lead generation, but it does not include contextual ad networks
such as Google AdSense. [2]
Currently the most active sectors for affiliate marketing are the adult,
gambling and retail sectors[citation needed]. The three sectors expected to
experience the greatest growth are the mobile phone, finance and travel
sectors[citation needed]. Hot on the heels of these are the entertainment
(particularly gaming) and internet-related services (particularly broadband)
sectors. Also several of the affiliate solution providers expect to see
increased interest from B2B marketers and advertisers in using affiliate
marketing as part of their mix[citation needed]. Of course, this is constantly
subject to change.
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