Affiliate Marketing Strategy May Add Extra Income

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Affiliate marketing has been a popular online subject because of its potential to generate big revenue for anyone who masters it.

But few people actually master it. Part of the challenge lies in the fact that millions are trying it.

For newcomers, an affiliate marketing strategy is a way to generate revenue for a Web site publisher by marketing the products and services of other companies.

If a site visitor clicks on a text link or banner add, goes to that company Web site and makes a purchase, the originating Web site gets a commission on the sale.

A website publisher signs up for an affiliate marketing program with any number of companies that specialize in it. The affiliate marketing companies represent the advertisers who provided the links and banners.

When the publisher puts those ads on his or her site, they include a tracking code. It allows the publisher, the affiliate marketing company and the advertiser to track the number of visits and purchases and give proper credit to the publisher.

3 Numbers Measure Success

Three numbers in particular measure success. First is the ad impression, second is the number of clicks on the impressions and third is the purchase.

Publishers calculate two rates from these metrics. They are the click-through rate and the conversion rate (also known as the conversion ratio). The click-through rate is the number of clicks divided by the number of impressions.

The conversion rate is the number of purchases divided by the number of clicks. There are no known published averages for either rate.

One major affiliate marketing company quoted an average click rate of 1.9 percent and an average conversion rate of 3.2 percent.

That means out of every 1,000 impressions of a link or banner, 19 people would click on it and 0.6 would make a purchase. The average purchase was about $47.50.

Commissions vary from one product or service to another. A 10 percent commission on that average would generate $2.85 for the publisher ($47.50 x 0.6 people).

That translates into a CPM or cost per thousand impressions from the links or banners of $2.85. A publisher should consider how that compares to banner advertising.

It is worth mentioning that click and conversion rates vary widely from one site, product or service to another.

Is Affiliate Marketing Worth Doing?

Affiliate marketing requires time and effort to deliver results, but the results may not be worth the time and effort.

A website publisher might try it as an experiment with a beginning and end in mind. If the CPMs are not as good as regular advertising after three months, a publisher should revise the effort or get out of it altogether. Some sites do well while many do no.

Affiliate marketing has its place on some websites with highly targeted audiences. It works best as a secondary income stream to complement banner ads and other revenue sources.