Certified Online Casinos Guide

By Joe Myers

Level: Jun 13th 2007
1. The history of Affiliate Marketing
Online affiliate marketing was invented in 1994 by cdnow.com and then in 1996 was pioneered by Amazon.com. Online affiliate marketing consists of "affiliate programs" which are also known as "associate programs" or "partner programs", and they are a simple way of getting revenue.

The merchant (a site that sales a product) receives traffic thanks to the affiliate programs. The affiliate program managers definitely increased the traffic and profit of a merchant. Affiliate programs are now the number one method of online marketing because of their productivity.

Affiliate program managers can be compensated by a merchant for sending traffic to his in four different ways: pay-per-impression, pay-per-click, pay-per-lead and pay-per-sale. A fifth method would be a combination of any of these methods.

2. Pay-Per-Impression / Cost-Per-Mil (CPM)
The affiliate receives a certain amount of money from the merchant for every 1000 impressions. An impression represents a page view or display of an ad, which can be a text ad, a banner image or rich media.

Because this type of compensation lacked productivity it was abandoned for a while, but in 2005 Google’s AdWords "site-targeting" feature revived it. Google’s service allows an advertiser to display AdSense ads on websites that run AdSense ads.

These types of sites have a small link entitled "Advertise on this site", and when the link is pressed it redirects to a page at Google AdWords where the feature is explained.

3. Pay-Per-Click (PPC) / Cost-Per-Click (CPC)
The affiliate receives a certain amount of money from the merchant every time the Advertiser's ad is clicked by a visitor. In this case it is not relevant how many times an ad is displayed. Like the pay-per-click method, this method had some problems and was abandoned by most of the merchants.

Goto.com, the PPC search engine kept it alive and in the meantime, the company became Overture.com and then it was bought by Yahoo! which renamed it to "Yahoo! Search Marketing."

AdWords, which is Google’s PPC service, was launched in 2000. Then in 2005 Ask.com launched its PPC service (Ask Sponsored Listings), and in 2006 MSN.com launched AdCenter. Other PPC services include: Miva/findwhat.com, ah-ha and 7Search.com.

4. Contextual Advertising
The launch of AdSense by Google in 2003 gave rebirth to the pay-per-click method. AdSense used contextual advertising, which means a search engine will scan a page to match the ads with the content of that page. Google’s “Content Network” gives their AdWord advertisers the option of not allowing their ads to be displayed on the AdSense website.

Google stated that through AdSense any website can make money if it inserts the proper ads to its content. AdSense will search for the ads of a page, and if high quality ads are inserted in it, the page has higher chances of getting more traffic.

Yahoo! Publisher Network is Yahoo’s version of AdSense and its beta version was launched in 2005. Microsoft’s beta version is expected to be launched in 2006.

5. Search Engine Marketing (SEM)
This type of marketing should not be considered as affiliate marketing, because they only share some technical details; otherwise they are completely different. At this type of marketing, the ads are displayed at the search engine search results pages, next to the free searches.

AdSense is also not an affiliate marketing method because it lacks a partnership between the advertiser and the publisher. They each do their job, the advertiser creates and pays for the ad, and the publisher displays the ad on his website.

Contextual advertising and PPC are a form of search engine marketing (SEM), and often people mistake them with search engine optimization (SEO). SEO means improving the ranking of a site in the free, and in the search engine search results pages, at the major search engines. This requires understanding of the complicated ranking algorithms used by the search engines.

6. Pay-Per-Call
The affiliate receives a certain number of money from the merchant based on the number of phone calls made by the possible customers after they have seen an ad. This method is new and it hasn’t reached its full potential yet.

This method can’t be included in one of the three major internet marketing methods: affiliate marketing, search engine marketing and search engine optimization, and is expected to become the fourth major internet marketing method.

In the late period affiliate marketing has changed by the fact that it is now based on the performance marketing, Pay-Per-Lead (CPA or CPL) and Pay-Per-Sale (CPS). In these methods the paid commission represents a percentage of the referred sales.

7. Pay-Per-Lead / Cost-Per-Action (CPA), Cost-Per-Lead (CPL)
The affiliate receives a certain amount of money from the merchant if the visitor does a certain action on the website: filling out a form, signing up for a newsletter or creating an account. Credit card providers, insurance services, DVD and video game rental services and loans and mortgages are the ones that use this service the most.

This method offers a high commission and because of this it is very popular among PPC affiliates without a permanent website or an established user base. Some affiliates have a single page optimized for various PPC campaigns, with different offers from the advertisers. They can be compared with an in-house search engine marketing team.

The PPC affiliates are both loved and hated by the advertisers. They are loved because the PPC affiliates can cover many keywords and phrases, and they are hated because many times the affiliate’s ads outrank the advertiser’s ones.

If you want to create a commercial site that would sell various products, and if you intend to use the CPA method for it, make sure you check the quality of the referred leads, otherwise your program would be vulnerable to fraud.

8. Pay-Per-Sale / Cost-Per-Sale (CPS)
The affiliate receives from the merchant a percentage of the sale that happened when the customer visited the advertiser’s site by pressing a link from the affiliate’s site. This is one of the most popular models of advertising.

Some tips for the merchants that want to open an affiliate program using the CPS model:

Don’t pay commission on a sale that has caused you to lose money. The affiliate programs will bring you new customers but you will also have to pay the affiliates for a returning customer. For example you have a site which sells sports equipment; John bought 50 football helmets from you last year, and now he wants to buy 50 more.

He now searches for "football helmets" on a search engine and various sites appear. John recognizes the name of your website and he decides to buy once again from you. You will have to pay the affiliate that has referred John to your site once again.

Nowadays the online shoppers are very demanding, and because of this the most successful affiliates are the comparison shopping sites, coupon sites, cash-back shopping and charity sites because the people visit them before making an online purchase.

It is far more difficult to gain the trust of a client of you have an online business. Let’s go back to John, now if your site would have not be listed among the other sites, he would have made the purchase from another site, but since your site was there he decided to buy from buy because he trusts you.

Even if your prices would be higher, he would still buy from you. In an “offline” competition it is more convenient for a client to stick with a merchant because the shops are not close to each other. Online, they are just one click away and that is why is very difficult to keep the customers.

9. Pay-Per-Lead or Pay-Per-Sale
Affiliate programs make the difference when it comes to winning or losing money. If you have just started an online business and you want to gain new clients use the CPA method and pay a commission for every new customer referred by an affiliate.

Don’t get greedy when it comes to paying the affiliates, because if they are not satisfied with the money you are paying them, they can go to the competition at any time. You can set the method and the commissions you pay. You can mix the compensation model, but the best thing for you would be to find out what compensation model your competition uses.

The CPS is the most common compensation model and it is used by two-thirds of affiliate programs. The advantage is that you have to pay the affiliates for actual results, such as sales or sign-ups, and not for click through or banner impressions which could mean nothing.

10. Affiliate Networks
Affiliate networks make the job easier when it comes to driving traffic to your website, because they provide the infrastructure for the merchant to track all traffic and referrals to the website.

The networks will also search for websites that are willing to promote your products, and usually they do this in a day. Usually the networks charge a fee of 20-30% of the commission you pay to the affiliates. If an affiliate receives $10 for a commission you will have to pay $2 or $3 to the affiliate networks.

11. Solutions and Software for the In-House Affiliate Programs
Maybe you would like to run affiliate programs in-house just to get read of the network fees. One option would be to develop the necessary software and tools yourself, but that might be a difficult task.

There are numerous software programs that deal with this problem and they can be found online. Be careful though because not each of these programs work.

12. Outsourcing - Outsourced (Affiliate) Program Management (OPM/APM)
The difficult task is not to start and get your program running, but what follows afterwards. The times have changed; no longer can an affiliate make lots of money for an affiliate program without some effort being required.

Nowadays affiliate programs require a lot of attention; you need to choose the best affiliates and you need to keep the great affiliates that you already have. You must invest lots of time and effort into your program if you want it to work.

If you think you can’t manage the program by yourself, let the program management (OPM) do it for you. There are many great OPM services you can find online.

13. Conclusion
Affiliate marketing is the most cost-effective and efficient way to promote your products and services on the Internet, and that is proven by the thousands of people who operate affiliate programs.

The affiliate marketing has a fast return on investment, and for many the revenue resulted from affiliate programs make up a considerable percentage of total online revenue.

14. Affiliate Marketing Resources
You can find many articles related to this topic here:
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