KEY POINTS

  • Affiliate marketing — a performance-based tactic by which advertisers reward partners (affiliates) for each visitor or customer they refer — is one of the fastest-growing sources of revenue for online retailers. 
  • Growth in affiliate marketing is driven largely by two factors: adoption by mainstream media publishers and an increase in earned media via social networks. The shift to mobile underlies both these growth drivers. 
  • US affiliate marketing spending reached approximately $3.4 billion in 2014, up 106% from just $1.7 billion five years prior, according to Forrester and Rakuten. This year, spending is expected to reach nearly $4 billion. 
  • US retailers say that affiliate marketing programs are one of the most effective customer acquisition channels. In a 2014 Shop.org survey, 40% of US retailers cited affiliate programs as their leading customer acquisition channel, following only organic traffic to shopping sites and search marketing. 
  • Shoppers who frequently purchase on affiliate marketing sites are four times more likely to try a new brand than the average shopper, according to Forrester.
  • Customers who complete purchases via affiliate programs tend to be bargain-shoppers but end up spending more than the average consumer. Consumers who shop using affiliate links spend $7 more per purchase than the average shopper, according to Juniper Research. 
  • Consumers who visit multiple nonretail websites before making a purchase decision typically spend more than those who don't. Shoppers who visited four or more nonretail websites before making a purchase spent $1,712 online over a 12-month period, while those who didn't visit nonretail sites spent $1,226 over the same period, according to Forrester and Rakuten.

Introduction

Many people associate affiliate marketing with the selling of diet pills, teeth whiteners, and other controversial products. Although this darker side to performance-based marketing still exists, affiliate programs have moved to the mainstream, with major retailers and publishers now using them to drive sales of all sorts of products, from electronics to apparel.

What is affiliate marketing? The term means something slightly different to each party involved, but in the context of e-commerce, it is a form of performance-based marketing whereby a retail business rewards a partner or affiliate for each customer or visitor referred by the affiliate's own marketing efforts. 

Below is a list of metrics a retailer might use to determine rewards for an affiliate: 

  • CPC (cost [...]