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Affiliate Program Glossary


SUMMARY: The jargon you need to keep your head above water in the fast-moving affiliate industry.

Affiliate

Person or organization which earns money from their website by placing advertising (text, banners, pop-ups etc.) on it that generate actions that have been defined as commissionable by merchants (payment per click, per lead or per sale).

Autoresponder

An autoresponder is a piece of software that automatically replies to an email message by sending a pre-composed reply that can be structured to include images, text, PDF files etc. Many autoresponders can be set up to send multiple follow-up messages at pre-defined intervals, or in response to certain actions such as a recipient clicking on a link within a prior message. The more sophisticated autoresponders are also able to respond to triggers (such as keywords) within the initial email, and to select from the most appropriate reply. Autoresponders can be used for tasks as simple as sending a confirmation email when someone signs up for a newsletter or sends feedback via a form, or as complex as sending a series of targeted email marketing messages at pre-determined intervals. The most advanced autoresponders incorporate additional functionality such as the ability to track responses (clicks on links within the message being sent, email responses to the automated mailing etc.) GetResponse is an excellent example of an advanced autoresponder service.

Banner (ad)

A banner or banner ad is a graphical advertisement, typically 468 pixels wide by 60 pixels tall (although many other standard and less standard banner sizes exist.) Banner ads used to be virtually synonymous with Web advertising, and indeed they remain the single most popular form of advertising carried by websites. This despite the fact that the response rate for banner advertisements has dropped precipitously from the lofty highs of double-digit percentage clickthroughs in the "early days" of Web advertising to fractions of a percent today. While most websites still make use of banner ad inventory, many other types of advertising such as text ads and ads embedded within the content of a page show much better clickthrough rates. Banner ads should therefore be considered just one small part of an affiliate program's total arsenal of marketing resources (i.e beware of programs that offer only to let you "put up a banner on your site" without offering alternative types of advertising creative to work with.)

CPC

CPC stands for cost per click(through) and refers to the cost incurred in getting one person to click on an advertisement (banner, text or other form of advertising) and going to the site referenced by the link. The term CPC arises in a number of contexts in both web advertising and affiliate circles. An affiliate program that pays on a CPC basis will pay a small amount for each clickthrough (essentially, each visitor) delivered to the target site via an affiliate link. Some search engines offer advertising paid for on a per-click basis - these are called Pay Per Click search engines.

CPM

CPM stands for cost per thousand (think of the Roman numeral "M", which means "thousand") and is usually used as a measure of the cost of displaying 1,000 advertisements of any kind (banners, text ads or any other form of ad that can be tracked). For example, a CPM rate of $10 for banner ads means that it will cost $10 to purchase 1,000 banner ad impressions. CPM is also a useful metric to use when normalizing the revenue potential of two affiliate programs with completely different commissions and conversion rates; by calculating the value of each affiliate program on a notional CPM basis (in this specific case, income per 1,000 ad impressions) it is possible to quantify which of two affiliate programs is the more profitable for a given site or page. Affiliate programs themselves rarely pay a straight CPM amount (except in the case of extremely low-paying "filler" campaigns where the affiliate network is seeking to purchase large amounts of ad inventory in bulk.)

CTR

CTR stands for click-through ratio or click-through rate, and refers to the number of ad impressions required to generate a click-through (i.e. to "persuade" a visitor to click on the link referenced by the ad), expressed as a percentage. In other words, if it takes 20 ad impressions to generate one click-through, this represents a CTR of 5%.

EPC

EPC stands for [average] earnings per (100) clicks. EPC metrics have been touted by many affiliate networks as a method of gauging the relative performance of different affiliate programs and of different ad creatives within each affiliate program. Beware: Some affiliate networks, such as Commission Junction, define EPC as "average earnings per HUNDRED clicks" whereas other affiliate networks, such as FineClicks, define EPC as "average earning per ONE click." It is therefore essential to be sure which definition of EPC is being used in any particular situation, since one EPC measurement scale is 100x the other EPC measurement scale - even though they're both confusingly referred to as "EPC"! EPC can be calculated by dividing the commission earned by the number of clicks required to generate that commission (and then multiplying by 100 if the larger EPC factor is desired). While EPCs can occasionally be a useful measure of a program's likely performance, you still need to do the math each time.

FAQ

FAQ stands for frequently asked questions. A FAQ is usually used by a website to pre-empt the most likely questions that site visitors may have by listing up common questions and answers. FAQs can informally be divided into two groups: the "informative FAQ", which focuses on problem-solving and providing information (e.g. "How can I configure my affiliate links to track visitors from multiple websites?"), and the "marketing-speak FAQ", which focuses on the questions the company wishes people would ask (e.g. "How will your product save me both time and money?") but which are of no practical use, and serve only to frustrate the reader. When setting up your own site's FAQ, don't give in to the siren-call of the marketing-speak FAQ!

Hit

The "hit" is perhaps the most abused term in web traffic measurement. A "hit" is recorded every time a web browser makes a request for a single item of information, such as the HTML code underlying a web page, or the graphics on that page. A hit is recorded for every such element on a page, so for instance 31 hits will be generated by loading a page with 30 graphics on it ONCE (HTML + 30 graphical elements = 31 hits) Hits are a useless measure for anything beyond making the traffic to a website "sound impressive" (e.g. "Our new site got a million hits last month!" - what's not stated is that each page might have 100 graphics on it, meaning that only 10,000 pages were actually served.) See hits and misses for an in-depth look at the various ways of measuring traffic to a site.

Merchant

Company or organization on the pay-side of an affiliate relationship. While merchants are typically ecommerce sites, which compensate affiliates for bringing in customers, other types of sites can also be thought of as "merchants" from an affiliate program viewpoint. For instance, a company that pays a bounty for each new subscriber to its free newsletter is an "affiliate merchant", even though they're not (directly) selling a product.

Opt-in

Opt-in is a consent-based method of subscribing people to a newsletter or mailing list. In other words, people must actively "choose" to join the mailing list by for instance inputting their email address into a signup form. Double opt-in is a stronger form of opt-in, whereby a confirmation action is required to activate a subscription, typically by means of an activation link embedded in a welcome message sent to the subscriber's email address. Many mailing list hosting companies and affiliate merchants require that the mailing lists they work with be double opt-in to avoid any possible spam issues. The action of building an opt-in mailing list is commonly referred to as permission marketing. See also: Opt-out.

Opt-out

The flipside to opt-in, opt-out is a non-consensual method of subscribing people to a mailing list. The fundamental difference between an opt-in and an opt-out mailing list is that a person has to say "I'd like to JOIN this list" to get on an opt-in mailing list, but they are included on an opt-out mailing list without their consent, and have to say "I'd like to LEAVE this list" in order to get taken off it. The dividing line between opt-out and outright spam is a flexible one, and the two are interchangeable in many peoples' minds. Opt-out relationships can range from the benign but misguided ("These people have bought our product, so therefore they want to get our newsletter...") to the underhand ("This user checked off an interest in "Entertainment" when they signed up for our newsletter, so that gives us full permission to sell their email address a hundred times to a hundred different people building entertainment-related email lists.) Commercially, you're always going to be better off in the medium-to-long term establishing permission-based (i.e. opt-in) relationships.

Pyramid scheme

A scam (illegal in most countries) that takes multi-level-marketing to an ignoble conclusion by relying on the "greater fool" principle. In a pyramid scheme, the originators of the scheme rely on the income generated by the recruiting of new members (the "greater fools") by existing members to compensate the people higher up. Since these kinds of schemes are always predicated on exponential growth, the supply of fools is quickly used up and most people involved end up losing their shirts - often sooner rather than later! Pyramid schemes have never been an accepted form of affiliate marketing, and this entry is included here purely as a warning.

Second-page click

A method of tracking and rewarding actions taken in a CPC affiliate program whereby a payment is only made for visitors that arrive at a target site AND take further action. In other words, an affiliate program operating on a second-page click basis would only pay a bounty for clicks made by visitors on the target page i.e. the page hosted on the merchant site. Typically, the number of second-page clicks can be from 10%-50% of the number of visitors sent to the page on which the clicks are tracked, meaning that revenue expectations should be adjusted accordingly.

Two-tier program

A two-tier affiliate program rewards affiliates on two levels, for two different types of action. The first tier represents the "standard" merchant-affiliate relationship, i.e. the affiliate is paid for generating an action such as a lead or sale. The second tier provides for a way to incentivize affiliates into bringing more affiliates on board. Typically, this second tier reward takes the form of an ongoing percentage of the earnings of affiliates that sign up "under" the original affiliate that introduced them to the program. The preponderance of the commission in a two-tier program is generally paid in the first tier (e.g. a 20% commission rate, and a 5% commission on the earnings of recruited affiliates.) Two-tier programs can sometimes be seen to walk a fine line between a straight affiliate relationship (whereby affiliates get paid for generating a sale or lead) and a multi-level-marketing relationship (where affiliates can expect to derive the bulk of their income from the actions of those under them, rather than from sales to end customers.)

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