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Affiliates, Merchants and Affiliate Networks

What is an Affiliate?

An affiliate is a person who runs a website that earns commission from larger companies (merchants) who supply the affiliate with links and banners to place on the affiliates website

How does an Affiliate earn money?

The affiliate can earn the commission in various ways. The main 2 ways are PPC (Pay per click) and CPA (Cost per aquisition)

PPC - Pay Per Click

Pay per click advertising is when the affiliate lists a link or a number of links to a merchant (or advertiser). This can be through an affiliate network or simply through an affiliate program at the merchants site.

When a user clicks on a related link which takes them to the advertisers website, the affiliate earns a set amount of money. It does not matter if the user does not take the sale or the signup any further with the advertising company. This means the affiliate cannot lose out but usually gets a small amount of money.

If the affiliate website is busy and receives lots of good quality traffic, then potentially they could earn a lot of money per day from pay per click advertising.

CPA

Cost per aquisition is completely different to pay per click. The affiliate does not get paid by the advertiser until the user actually makes a purchase through the merchants website or signs up for a service.

The amount of money seems higher for the affiliate on a CPA basis but needs to be carefully compared to how the affiliates website would perform on a PPC basis.

Example.

The user takes out a car insurance policy with the advertiser. The merchant will pay the affiliate anything from £10 to £70 for just one customer taking out a policy.

This sounds very good but you may need 200 customers or users clicking on 1 link just to get a commission payment.

You have to weigh up the difference between PPC and CPA at this point. 200 users through a PPC website at £0.30 pence per click is £60 commission. While 200 users through a CPA website could be zero, or a minimum of £15 and a maximum of £70

Affiliate Network

A middle-man called the Affiliate Nework deals with the affiliates and the car insurance companies (merchants). They supply the tools for the affiliate to display adverts for the car insurance companies on their own website. When users click on these adverts the affiliate website can potentially earn money through PPC or CPA. This is paid by the car insurance company website to the Affiliate Network who take a commission for supplying the tools to display the companies adverts. The affiliate network then in turn pays the affiliate.

View the UK Car Insurance Guide