Pros and consMerchants like affiliate marketing because in most cases, it uses a "pay for performance" model, meaning that the merchant does not incur a marketing expense unless results are accrued (excluding any initial setup cost). Some businesses owe much of their success to this marketing technique, a notable example being Amazon.com. Unlike display advertising, however, affiliate marketing is not easily scalable.
Some merchants run their own affiliate programs (In House) while others use third party services provided by intermediaries to track traffic or sales that are referred from affiliates. (see outsourced program management) Merchants can choose from two different types of affiliate management solutions, standalone software or hosted services typically called affiliate networks.
Affiliate management and program management outsourcingMain article: Affiliate manager
Successful affiliate programs require a lot of maintenance and work. The number of affiliate programs just a few years back was much smaller than it is today. Having an affiliate program that is successful is not as easy anymore. The days when programs could generate considerable revenue for the merchant even if they were poorly or not at all managed ("auto-drive") are over (with the exception of some verticals).
Those uncontrolled programs did aid (and continue to do so today) rogue affiliates, who use spamming, trademark infringement, false advertising, "cookie cutting", typosquatting and other unethical methods that caused affiliate marketing to get a bad reputation.
The increase of number of internet businesses in combination with the increased number of people that trust the current technology enough to do shopping and business online caused and still causes a further maturing of affiliate marketing. The opportunities to generate considerable amount of profit in combination with a much more crowded marketplace filled with about equal quality and sized competitors made it harder for merchants to get noticed, but at the same time the rewards if you get noticed much larger.
Recently, the internet advertising industry has become more advanced. Online media has in some areas been rising to the sophistication of offline media, in which advertising has been largely professional and competitive for many years already. The requirements to be successful are much higher than they were in the past. Those requirements are becoming often too much of a burden for the merchant to do it successfully in-house. More and more merchants are looking for alternative options which they find in relatively new outsourced (affiliate) program management or OPM companies that were often founded by veteran affiliate managers and network program managers.
The OPM are doing this highly specialized job of affiliate program management for the merchant as a service agency very much like Ad agencies are doing the job to promote a brand or product in the offline world today.
Types of affiliate websitesAffiliate sites are often categorized by merchants (advertisers) and affiliate networks. There are no industry-wide accepted standards for the categorization. The following list is very generic but commonly understood and used by affiliate marketers.
-Search affiliates that utilize pay per click search engines to promote the advertisers offers (search arbitrage)
-Comparison shopping sites and directories
-Loyalty sites, typically characterized by providing a reward system for purchases via points back, cash back or charitable donations
-Coupon and rebate sites that focus on sales promotions
-Content and niche sites, including product review sites
-Personal websites (these type of sites were the reason for the birth of affiliate marketing, but are today almost reduced to complete irrelevance compared to the other types of affiliate sites)
-Blogs and RSS feeds
-Email list affiliates (owners of large opt-in email list(s))
-Registration path or Co-Registration affiliates who include offers from other companies during a registration process on their own website.
-Shopping directories that list merchants by categories without providing coupons, price comparison and other features based on information that frequently change and require ongoing updates.
-CPA networks are top tier affiliates that expose offers from advertiser they are affiliated with to their own network of affiliates (not to confuse with 2nd tier)
Publisher recruitmentAffiliate networks that have already a number of advertisers usually also have a large number of publishers. This large pool of publishers could be potentially recruited. There is also an increased chance that publishers in the network apply to the program by themselves, without the need for any recruitment efforts by the advertiser.
Relevant sites that attract the same audiences as the advertiser is trying to attract, but are not competing with the advertiser are potential affiliate partners as well. Even vendors or existing customers could be recruited as affiliate, if it makes sense and does not violate any laws or regulations.
Almost any website could be recruited as affiliate publisher although high traffic websites are more likely interested in (for them) low risk CPM or medium risk CPC deals rather than higher risk CPA or revenue share deals.