How Does an Affiliate Earn Money?

There are four basic actions in which affiliates are paid when they send their visitors to a
merchant's website.

1. The visitor buys something from the advertiser (pay per sale).
2. The visitor completes a lead form (pay per lead).
3. The visitor downloads, installs, or uses some product or service (pay peraction).
4. The visitor clicks on a link and visits the merchant's website (pay per click).
5. Below are detailed explanations of each action:

Pay Per Sale:

Pay per sale is the most common type of affiliate program on the web. With pay per sale
you refer visitors to a merchant that sells products or services. You earn a commission
when that visitor buys something from the merchant. In most cases you earn a percentage
of the sale, but in some instances you may be given a flat dollar amount.

Most merchants that sell products online pay their affiliates a percentage of sales.
Merchants that fall into this category include, Home Depot®, REI®, Dell® Computers,
and most big e-tailers on the Internet.

Most of the merchants that pay their affiliates a flat dollar amount sell services.
Merchants who sell web hosting, online dating, and other online services tend to
compensate their affiliates with a flat dollar amount, rather than a percentage of the sale.

Advantages of Earning a Percentage of Sales
• You can earn a ton of cash on big ticket items.
(Example: You refer a customer who buys a $2,500 computer).
• You can earn a ton of cash when your visitors buy multiple items at once.
(Example: You refer a customer who buys a pair of shoes, matching purse and
jacket).
• Some merchants will pay their affiliates commissions on repeat purchases.
Disadvantages of Earning a Percentage of Sales
• Your visitor may buy a small ticket item.
(Example: The customer you referred buys a pair of socks, and never returns to
purchase anything else).
• Your visitor may return the merchandise, which could result in your commission
being reversed.
(Example: The shirt your visitor bought last week just doesn't fit right. They
return it, and your commission is reversed).

Pay Per Lead:

Pay per lead merchants are some of the most desirable merchants to promote. With pay
per lead you are compensated when your visitor completes an online lead form. Popular
pay per lead programs include merchants in the insurance, mortgage, and service
businesses.

Merchants will only pay affiliates for qualified and legitimate leads. For example, if you
send a California insurance company a lead from New York where the company cannot
provide insurance, that is an unqualified lead, and chances are you will not be
compensated for it. Another no-brainer is that merchants won't pay their affiliates for
leads with fake or incomplete data. A lead without a phone number or e-mail address is
no good to a merchant.

Conversion rates on pay per lead programs tend to be higher than pay per sale programs
because the visitor isn't buying anything; they're simply completing an online form. It's
much easier to get visitors to fill out a form than to buy something online. However, the
payout for a lead may be less than the payout for a good pay per sale program.
Advantages of Pay Per Lead Programs
• The conversion rate for pay per lead programs can be better than pay per sale.
• You can earn big commissions in industries like mortgage loans and insurance.

Disadvantages of Pay Per Lead Programs
• The commissions can be less than pay per sale programs.
• Some of the leads you send from your website may not be qualified.

Pay Per Action:

Pay per action programs pay their affiliates when their visitors download, install, or use
some product or service. Many of the merchants in this space are software companies or
web service companies that want customers to try their products or services.

Advantages of Pay Per Action Programs

• Your visitors don't have to buy anything. In most cases they just have to try some
software or web service.
Disadvantages of Pay Per Action Programs
• A visitor you refer may not meet the minimum software or hardware requirements
to install the software.

Pay Per Click:

Pay per click affiliate programs are almost non-existent now. Once a good idea, too many
affiliates defrauded merchants by clicking on their own affiliate links, or by creating
"click-bots" (software applications) that would automatically click on their links. The
cost and time involved with monitoring the fraud had become cost-prohibitive for many
merchants.

Advantages of Pay Per Click Programs

• Good conversion rates - The user simply clicks a link and visits the merchant's
• website.
• If you have a lot of traffic, you could make a lot of money.
• Disadvantages of Pay Per Click Programs
• Merchants that offer this type of affiliate program are few and far between.
• The payout per click can be very small.

An Important Note about Pay Per Click Programs

While many advertisers with affiliate programs are moving away from this payout model,
there are some popular contextual advertising networks such as Google AdSense, and the
Yahoo Publisher Network that are thriving under the Pay Per Click model. Contextual Ad
networks are outside the scope of this book, and will not be covered.
For more on pay per click (contextual ad networks) programs visit:
Google AdSense - https://www.google.com/adsense/
Yahoo Publisher Network - http://publisher.yahoo.com/
Kontera - http://www.kontera.com/
AdBrite – http://www.adbrite.com/
Chitika - https://chitika.com/
If you want to learn how to make more money with contextual advertising on your
website I recommend the following products:
Joel Comm’s Instant AdSense Templates
http://joelcomm.quityourdayjob.com
Michael Cheney’s AdSense Videos
http://michaelcheney.quityourdayjob.com