What Is Affiliate Marketing? How Links, Credit and Payouts Work

Affiliate marketing is a deal between a business and an outside publisher: the publisher promotes the business's product with a tracked link, and the business pays a commission only when that link produces a sale, a sign-up or another action both sides agreed on. The UK's Advertising Standards Authority calls it "a type of performance-based marketing", and that's the core of it: no result, no payment.

Whether you're a merchant weighing it against paid ads or a writer wondering how the money reaches you, the parts to understand are the same: who's involved, how a sale gets credited, and what you have to tell your audience.

Who's involved in an affiliate program

• The merchant (also called the advertiser or brand) sells the product, sets the commission and decides which actions count.
• The affiliate (also called the publisher or partner) is a blog, review site, newsletter, video channel, coupon site or app that sends its audience to the merchant.
• The affiliate network is optional. Many merchants use one to handle reporting and payments instead of running tracking themselves, and affiliates can join several merchants' programs in one place.
• The customer clicks the link and completes the purchase or sign-up that triggers the commission.

How an affiliate sale gets credited

An affiliate gets credit when a customer arrives through a link carrying that affiliate's ID and completes the agreed action inside the program's attribution window. The usual sequence:

1. The merchant issues a link with the affiliate's ID in it, or a promo code tied to that affiliate.
2. The customer clicks. The merchant's site or the network records the ID, usually in a cookie.
3. The attribution window starts. It's the time the click stays eligible for credit, and each program sets its own.
4. The customer converts by buying, signing up or filling in a form.
5. The merchant validates it. Depending on the program, returns, cancellations and invalid traffic are removed before anything is paid.
6. The affiliate is paid for the validated actions, on the program's schedule.

The affiliate ID is not the same thing as UTM tags. Google describes UTM parameters as tags you add "to identify the campaigns that refer traffic" in analytics; they help the merchant read its reports but don't, by themselves, decide who gets paid.

A worked example: Amazon Associates' 24-hour window

Amazon Associates, launched in July 1996, became the best-known program, and its published rules show how strict a window can be. Say you link to a backpack from your hiking blog and a reader clicks it on Monday at 9 a.m.:

• Anything the reader puts in their cart before 9 a.m. Tuesday can earn you a commission. Amazon credits items added "within 24 hours of their arrival at Amazon.com via your Associates link".
• If the reader adds the backpack Monday but checks out three weeks later, it still counts, as long as the order is placed before the cart expires, usually after 90 days.
• If the reader places an order, or comes back to Amazon through another Associate's link, your window closes. A new click on your link opens a fresh 24 hours.
• You're credited only once the customer has bought, received and paid for the item.

Other programs set their own windows and their own rules for who wins when two affiliates touch one sale, so a high rate with a short window can pay less than a lower rate with a long one.

How affiliates are paid

Most affiliate programs pay per sale, as a percentage of the order or a flat amount. Paying per lead or per click also exists, and the choice decides who carries the risk that a visitor never buys.

Pay per click is now rare in mature affiliate markets, partly because of click fraud.

Disclosure: what regulators ask for

US and UK regulators treat affiliate content as paid promotion, so you have to tell readers about it, clearly and close to the link.

• United States. The Federal Trade Commission's Endorsement Guides FAQ says affiliates should disclose the relationship "clearly and conspicuously" and that "the closer the disclosure is to your recommendation, the better." It warns that readers might not understand "affiliate link" on its own, gives "I get commissions for purchases made through links in this post" as an example, and says a "buy now" button or a hyperlinked "DISCLOSURE" label isn't enough.
• United Kingdom. The ASA says affiliates act as "a secondary advertiser", recommends a label such as "Ad", and has ruled that a standalone "*affiliate" label wasn't clear because the word isn't widely understood. It also says both the business and the affiliate are responsible under the advertising code.

Merchants carry part of the duty too. The FTC says advertisers "need to have reasonable programs in place to train and monitor members of their network". Programs add their own terms on top: Amazon's operating agreement requires the line "As an Amazon Associate I earn from qualifying purchases".

Where affiliate marketing works, and where it breaks

Affiliate marketing works best for a merchant whose margin can absorb a commission on every sale, and for a publisher whose audience already comes to them for recommendations. It breaks in two predictable places:

• Thin content. Google's spam policies name "thin affiliation": pages that copy the merchant's descriptions "without any original content or added value." The same policy says not every affiliate site is thin; reviews and comparisons that add something are fine.
• Credit theft. Cookie stuffing, adware that overwrites cookies, and affiliates bidding on the merchant's own brand name in search ads can divert commissions from the affiliates who earned them, or pay out on sales the merchant would have made anyway.

Affiliate marketing vs. referral, influencer and multi-level marketing

The neighboring terms differ in who promotes the product and what they're paid for.

The lines blur: an influencer can be paid through an affiliate link, and a referral program can use the same tracking software. Multi-level marketing is the one with legal risk. The FTC says a plan turns into a pyramid scheme when rewards are "unrelated to the sale of the product to ultimate users" and come from recruiting instead.

Common mistakes

• Comparing programs on commission rate alone. The window, the validation rules and how fast payouts arrive matter as much.
• Putting the disclosure in the footer. Both the FTC and the ASA want it where the reader sees the recommendation.
• Writing "affiliate link" and stopping there. Say plainly that you earn money when people buy.
• Recruiting affiliates and never checking on them. A merchant answers for what its affiliates claim about the product.