What is affiliate marketing? How do you define it, and how does it work? I’ve answered these questions (in details) in this video:

Beyond it, however, you may read it all in textual form below.

Definition

Affiliate marketing is a way for a business to partner with independent marketers who will promote its products (or services) and get compensated on performance basis.

I’ve intentionally packed a number of key notions in this short but loaded definition.

Let’s break it all down into more digestible pieces — for the whole definition to make sense to you.

Main Players

Speaking of the key participants of affiliate marketing relationships, there’s a business that has a product or a service, and there’s a marketer who has access to the business’ target audience and can help this company promote their product or service. The business would start an affiliate program, while the marketers would be able to join it and start promoting the business to their audience(s). To support each affiliate program there has to be a tracking technology in place and an affiliate manager behind the wheel, but the two central parties in focus are still the business (sometimes called a “merchant”, sometimes an “advertiser”) and the independent marketer (most frequently call an “affiliate” but sometimes referred to as a “publisher”).

Key Concepts

Now, let’s turn to four concepts which lie at the heart of affiliate marketing.

1. Performance Basis

Whether you’ve heard of it or not, performance basis is the cornerstone concept of affiliate marketing.

So much so that affiliate marketing is also being frequently called “performance marketing” and rightfully so.

What it means that the business will compensate the marketer on performance only, or only when they drive the desired action (be it a sale, a subscription, a download… whatever it is that the business is looking to generate through this relationship).

2. Element of Independence

One couldn’t overemphasize the element of independence enough. It is important to understand that affiliates are actually “independent marketers”. They are the ones who chose which affiliate marketing programs to join, and which to drop, how much time and effort to put into each relationship, how to prioritize them, and so on. While there are ways for businesses to entice affiliates, there’s virtually no way to make them do anything that they themselves don’t want to do. They are not employees. They are truly independent marketers.

3. Partnership Component

Additionally, there’s a framework of partnership. Within this framework, affiliate marketing programs are run on two things:

• Relationships between brands and independent affiliates
• Collaboration with them (on content creation, synchronized marketing effort, and much more)

I’ve intentionally put “independence” above “partnership”. This is because recognition of affiliates’ independence truly puts the partnership element into perspective. Both of the “main players” are are now equal, and there’s no place for top-down approach, but partnership and nothing else.

4. Universality

Finally, it is important to understand that “affiliate marketing” is not a “marketing channel”, as many try to portray it. In my above definition, I’ve called it “a way for businesses to partner with independent marketers” and this is because it, actually, embraces all sorts of marketing channels. A paid search marketer can become an affiliate, and a social media marketer can, and so can an emailer, and even a physical newspaper or a radio station. Types of affiliates are a subject of a separate conversation, but here it is important to understand and appreciate the universality of affiliate marketing: it works cross-channel. As long as the performance can be tracked (and attributed to the referring affiliate), it doesn’t matter what channel of marketing they are using.

Now back to my definition:

Affiliate marketing is a way for a business to partner with independent marketers who will promote its products (or services) and get compensated on performance basis.

It’s always good to have something explained to you (both in visual and textual form), but — realizing that you may still have questions — I leave the “Comments” area (under this post) to you. If you have any questions about affiliate marketing and how it works, don’t be shy — post them below. I promise: every question will be answered to the best of my ability.