What is Affiliate Marketing and how it works: Complete guide

Affiliate Marketing: A Comprehensive Guide

Affiliate marketing is an online business model that enables marketers to earn commissions by promoting other people’s or companies’ products or services (mainly e-commerce). It’s a performance-based system, where affiliates are paid (or should be) only when they generate a sale, lead, or another desired action according to a precise and contractual click attribution model. Typically, the last click is used, meaning payment is made if the conversion is generated from a visit immediately preceding the completion of the conversion. However, other models are increasingly being used to reduce waste in validations (but we’ll see more about this later).

Platforms Used in Europe

In Italy, some of the most famous affiliate marketing platforms include:

• TradeTracker: TradeTracker is an international affiliate platform born in the Netherlands, strong in Italy, connecting advertisers and affiliates, offering a wide range of promotional campaigns in various sectors, including fashion, technology, travel, and more.
• Awin (formerly Zanox): Awin is one of the world’s largest affiliate networks and offers many opportunities for European affiliates and advertisers. It has a wide selection of brands and products to promote.
• Rakuten Advertising: Rakuten Advertising offers a variety of affiliate offers in Europe, with popular brands in sectors such as fashion, electronics, travel, and more.
• Tradedoubler: Tradedoubler is a European affiliate network with a long history in the industry. It offers partnership opportunities with companies across Europe and has advanced tools for publishers.
• Webgains: Webgains is another affiliate platform that operates more limitedly in Italy but strong in Europe, offering a variety of promotional campaigns for different sectors and product categories.
• Effiliation: Effiliation is a French affiliate marketing platform that connects advertisers and affiliates, including Italians. However, it is mainly used in France. It offers a wide range of promotional campaigns and advanced reporting tools

How Does Affiliate Marketing Work?

Affiliate Registration

To get started, individuals or companies interested in becoming affiliates (commonly called Publishers) register with an affiliate platform or directly with the seller. Once registered, they receive a unique affiliate link to use in their promotional activities.

Promotion of Products or Services

Affiliates promote the seller’s products or services using their affiliate link. This promotion can take place through various channels, including websites, blogs, social media, email marketing, and more.

Traffic Generation

Affiliates work to generate traffic to the seller’s website using their marketing and promotion strategies. This may include creating relevant and high-quality content, search engine optimization (SEO), paid advertising, and more.

Conversion into Sales or Leads

When a user clicks on the affiliate link and takes a desired action, such as making a purchase or filling out a form, the affiliate earns a commission. This commission may be based on a percentage of the sales generated or a fixed fee for each lead or action taken.

Tracking and Reporting

Affiliate platforms provide tools to track conversions and monitor the performance of affiliate campaigns. Affiliates can access detailed reports to evaluate the effectiveness of their promotional activities and make any necessary optimizations.

Commission Payments

Depending on the agreements made, commissions earned by affiliates are paid periodically, usually monthly or quarterly, through agreed-upon payment methods.

Advantages of Affiliate Marketing for Affiliates/Marketers:

• Low Financial Risk: Affiliates do not have to invest in inventory or products and are not responsible for customer service or transaction management.
• Flexibility and Freedom: Affiliates can work remotely and manage their own time and marketing strategies.
• Unlimited Earning Potential: Affiliates’ earnings depend on their ability to generate traffic and conversions, offering unlimited earning potential.
• Diverse Earning Opportunities: Affiliates can promote a wide range of products and services in different sectors, offering many earning opportunities.

Advantages of Affiliate Marketing for Merchants:

• Content Creation: Affiliates produce content on our behalf, generating referrals.
• Fixed Costs: The merchant decides in advance how much to spend for a sale. And payment is made only for sales made through this acquisition channel.
• Top-of-the-Funnel Focus: The aim of every action is always the final conversion, but encouraging affiliates to publish content produces brand awareness and thus enlarges the TOFU (Top of the Funnel) and intercepts the attention of users online.
• Traffic Volumes: It generates traffic volumes, reaching people who would hardly have been reached with their own communication strategy.
• Multichannel Approach: The ways to implement a campaign are limitless. Different channels can be combined, from content sites to social media to hybrid models.

Data Validation

Data validation is crucial for affiliate marketing applications for several reasons:

• Statistical Accuracy: Data validation ensures that information regarding sales, commissions, and other metrics is accurate and reliable. This is essential for assessing the effectiveness of marketing campaigns and making informed decisions.
• Fraud Prevention: Data validation helps identify and prevent fraud and fraudulent activities. By ensuring that transactions are legitimate and that commissions are assigned correctly, the risk of financial losses and damage to the reputation of the affiliate program is reduced.
• Regulatory Compliance: In many industries, there are strict regulations and norms that require the accuracy and integrity of data. Data validation ensures that the affiliate marketing application complies with these regulations and avoids legal sanctions.
• Affiliate Credibility: By ensuring data correctness, affiliate confidence in the affiliate program is increased. Affiliates are more likely to collaborate with programs that provide accurate and transparent data, contributing to the overall success of the program.
• Error Elimination: Some assignments are incorrect and the result of technical errors. Transactions generated by communication errors or not correctly traceable must be eliminated.
• Non-Compliant Assignments Elimination: Assignments are made with agreements often based on last-click conversions while, too often, platforms assign every transaction that has had even a single interaction with the publisher. By contract, these do not necessarily have to be paid if demonstrable with robust first-party systems, for example.

In summary, data validation is important to ensure the accuracy, reliability, and transparency of information in the context of affiliate marketing, helping to improve the overall performance of the program and build trust relationships with affiliates.

How to Properly Validate Transactions Charged by Affiliate Marketing Platforms

To validate the data provided before billing, proprietary data must be available, usually with a reliable and properly configured web analytics system.

Constant Monitoring of Data

Regular monitoring of key metrics such as clicks, impressions, conversions, and commissions is essential. The advice is to use analytical tools provided by the affiliate platform and integrate third-party software for deeper, systematic, and periodic control.

Comparing Data

Compare affiliate platform data with other reliable sources, such as Google Analytics 4 or internal data from your website, to verify consistency and accuracy of information.

Today, having a server-side tracking solution allows you to have the most complete and therefore correct data for tracking compared to client-based solutions; creating ad hoc reporting on Google Analytics 4 can allow you to have the information to make timely and effective comparisons and assign validations to individual transactions quickly and effectively.

Verify Commissions

Do not forget to verify that the recorded commissions are correct and match the rates agreed with the affiliate platform.

In conclusion, affiliate marketing is a profitable and flexible business model that offers benefits to both affiliates and sellers. With the right strategy and dedication, it can become a significant source of online income. However, it must be constantly monitored to pay what is rightfully due to publishers: letting platforms go autonomously can lead to an explosion of costs with charges for leads and conversions that are not due. For this reason, it is necessary to implement spending control systems.