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Misunderstood Terms in Affiliate Marketing

Affiliate marketing is one of the easiest ways to make money online. It doesn’t require you to create a product or brand. You just need your marketing skills and you are ready to go.

Affiliate marketing is easy. All it takes is finding a product that you would like to promote and then promoting it. There’s no need for a brand. There’s no need for a website. As long as you know how to market products online, you can become an affiliate marketer.

However, being an affiliate marketer is not as easy when you’re starting out. Aside from the fact that you need to learn the process yourself, you also need to familiarize yourself with the terms that are commonly used in its industry. It is easy to get lost in the terms used in affiliate marketing and find yourself misunderstanding some of them.

Today, I’ll introduce some of the most common terms used in affiliate marketing and explain what they really mean. Hopefully, this will become your mini-guide so that you can easily understand how affiliate marketing works. Because it is in understanding the terms that you get to understand the whole process.

1. Affiliate marketing

A form of marketing where ‘affiliates’ are paid a commission based on sales. Affiliates may ‘sign up’ at the product’s website and be given permission to promote the product. The processing of applications can depend on the affiliate’s ability to sell (whether or not the affiliate has a website, a selling track record or works in the same industry) or it can be approved right away. Affiliate marketing is a great way to get products to sell without creating the product yourself. Instead, you leverage existing products by selling them and just get a portion of the sale.  How did the product owner know that you are the one who did the promotion? They assign unique IDs to their affiliates. This way, they’ll know the affiliate that brought in the sale and reward them accordingly.

2. Affiliate program

Product owners create affiliate programs in order to encourage other people to promote their products. It is a win-win situation. Affiliates will get a product to sell without creating it while product owners get to sell products without promoting it. In the affiliate program, the specifics of the payout system is discussed. This is where the percentage of commission sales are decided. Also, an affiliate software is used to keep track of all affiliates. As I have told you earlier, every affiliate is assigned a unique ID so that product owners can track who made a sale. An affiliate tracking software helps you do that.

3. Affiliate network

However, running an affiliate program in-house is only effective if you have the budget. After all, having an affiliate program is hard work. Not only do you need to launch the program and properly recruit affiliates, but you also need to code a program that can effectively track all affiliate IDs. If you do decide to use an affiliate tracking software, you will have to pay for its license or renew its license on a regular basis. All of that is just hard work.

But what if you can just plug in a product and recruit affiliates right away? Wouldn’t it be easier for you (the product owner) and your affiliates? Fortunately, there are now some so-called affiliate networks that can help you.

What’s an affiliate network? An affiliate network connects affiliates or publishers with advertisers or product owners. It is like the Google of affiliate products. A product owner just need to list his product online and then let affiliates find him because of his product title or niche. From here, affiliates can decide on whether to promote his product to their target market. It is that easy.

Affiliate networks take the need for a custom affiliate program out of the equation. All you need to do is list your product and you are ready to go. From here, you may be wondering why they do this. Well, they make money by taking a really small portion of the sales. So if the product owner and affiliate makes money, so does the affiliate network. Pretty neat, huh?

Some examples of affiliate networks are Clickbank and Shareasale.  If you visit these sites, you’ll see a database of affiliate products for just about any niche.

4. Advertiser

I kept on referring to the original product seller as the product owner. However, they are not called that way in the language of affiliate marketing. In fact, they are called advertisers. Advertisers can refer to anyone with a product or service that fulfills the need of their customers. That’s it.

Since advertisers have the products or the services, they want to make more sales. It is through affiliates that they get an army of people to promote their products.

5. Affiliate

I have been referring to affiliates since the start of this article. Affiliates are the people who promote the products or services of the advertisers. This can be an individual, a website owner, a media buyer or an ad network. An individual affiliate just sells products on social media and other means while a website owner promote the product to his target market. A media buyer, on the other hand, promotes products through buying ads on PPC networks and others while an ad network serves the ads in different publisher websites in order to make a sale. Affiliates are often called as partners or publishers. While others call them the simple term of ‘marketers’.

6. Offer

You learned in the earlier terms that affiliate marketing needs a product or service that affiliates can promote. This product or service is the offer. This can pertain to the product or service itself or it can refer to the entire affiliate program (including its payout model and other details). There are times when offers are also called campaigns.

7. Lead

A lead is a person that has the potential to become a customer. They are sometimes called prospects.

8. Traffic

A website without traffic is useless. Traffic can refer to the people who visit your website. If we are to break it down into more specific terms, it can refer to hits, page views or uniques. Hits is how many times a website is visited. Pageviews is how many views a certain page has. And uniques pertain to visits from a unique IP address – This means that the person viewing has not viewed the website before. The most important metric for advertisers are uniques. But more than the amount of traffic, they are more concerned about leads and how to convert them into buyers.

9. Conversion

When someone visits your website, they become your website traffic. Specifically, they become a lead because they have the potential to buy from your website. When the lead becomes a buyer – the event is called a conversion. This is where the lead is converted into a buyer.

In affiliate marketing, conversions are paid by advertisers. When they make a sale, they give a commission to the affiliate.

But conversions are not limited to a sale. Sometimes, it can be an action such as a subscription, app installation or others. Still, advertisers pay for these types of conversions.

10. Conversion rate

You can compute the conversion rate by dividing the number of sales over the number of leads and multiply that by 100. If you treat conversion as an action, you can also compute that by dividing the number of leads that took action over the total number of leads. Again, multiply that by 100 and you’ll get the conversion rate.

Your conversion rate is your metric on the likelihood of making your next sale. So if you have a conversion rate of 20%, you can expect to get 20 sales from 100 leads.

11. Click-through rate

Measurements are not limited to sales. There are times where you want to measure your clicks as well. This is predicting how much traffic you need in order to get one click. You can do this by dividing the number of clicks you got in your link divided by the total number of traffic (This can be pageviews, hits or uniques. It all depends on you). Then, multiply that by 100 and you’ll get the percentage.

Why do you need to know your click-through rate? Well, some affiliate programs pay for clicks instead of sales. In this model, you’ll want to have a higher click through rate so that you get paid more.

12. Cost per click (CPC)

As I have told you earlier, some advertisers will pay you for clicks. In this instance, you should maximize your clickthrough rate. But how can you know how much you’ll get for each click? This is where CPC or cost per click comes in. CPC is the amount that your advertiser is willing to pay for every click you generate.

13. Cost per action (CPA)

In other affiliate programs, they will not pay you for clicks. They will pay you for the actions done by your customers. This can mean signing up, filling a form, installing an app or others. Like CPC, CPA is just the cost that your advertiser is willing to pay for every action the traffic made on your offer.

14. Offer URL

One of the things that you’ll notice when you become an affiliate marketer is the unique URL that is given to you. This URL usually contains your affiliate ID and that’s the reason why it can sometimes contain some really weird characters.

However, this is not the offer URL. The offer URL is the page that you’ll get to when you click your affiliate URL. This is the URL of the website of the advertiser and is the place where prospects can buy the product or service being promoted. Another term for Offer URL is landing page.

15. Tracking link

Remember that URL that contains your unique affiliate ID? It has a name too. It is called a tracking link. What this does is that it helps affiliates get paid for their hard work. With a tracking link, another affiliate will not get the money that should be for another affiliate. The ID will track the last person who promoted the product and compensate them for it.

16. Earnings per Click (EPC)

There is a confusion about this term. For people in the US, it doesn’t just stand for earnings per click but earnings per 100 clicks. But regardless of what it is called, it can be computed by simply dividing your total sales over total clicks. That’s it. This tells you how much money you can make for every click you get.

17. Affiliate manager

As you may have learned earlier, running your own affiliate program is not easy. For this, you’ll need an affiliate manager. This person will take care of all the tasks such as creating offers, launching the affiliate program, searching for JV partners, holding affiliate contests and recruiting new affiliates. They are sometimes called ‘affiliate program manager’ or ‘affiliate marketing manager’.

18. Link Cloaking

Link cloaking used to be a really negative blackhat term. However, that is not the case in affiliate marketing. You see, affiliate URLs are ugly and crazy long. To prevent links from looking like spam, most affiliates cloak them by shortening them. This allows them to have shorter and neater looking links that are worth promoting. Plus, they are also able to track link clicks because some link shortening websites allow this.

So there you have it. Although I was not able to cover every term in the affiliate marketing handbook (for that will take a longer article), I think that this is enough to get you started in your journey. You just need to learn the basics and you have learned almost all of the basic terms in this article. I hope that this has helped you and I hope that you would often refer to this when you feel lost. If you encounter an affiliate marketing term that you don’t understand, feel free to ask me below. I’ll reply. 🙂
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5 Response to "Misunderstood Terms in Affiliate Marketing"

  1. Comment From affiliate marketing

    Affiliate marketing is commonly confused with referral marketing, as both forms of marketing use third parties to drive sales to the retailer. However, both are distinct forms of marketing and the main difference between them is that affiliate marketing relies purely on financial motivations to drive sales while referral marketing relies on trust and personal relationships to drive sales.

  2. Comment From Timothy Shannon

    This is a great glossary. Many times all these terms can be so confusing. Thanks for the breakdown.

  3. Comment From Kelly Greer

    I have had success with many of the lower cost networks while also running my own affiliate program from my site. In my opinion, this is the way to go.

  4. Comment From Priya

    These are some cofusing terms in affiliate marketing. This blog gives clear idea.

  5. Comment From Kirti

    Hi Robert,
    You have simplified the concept of Affiliate marketing In your Post , It is helpful for bloggers and website owners who are looking forward to make easy money from their blogs/Website

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