Affiliate marketing is an advertising model in which a company compensates other companies to generate leads or website traffic to the company to assist it in selling its goods and/or services. The third-party company earns commissions on sales generated by its marketing activities. The commissions can be a flat fee or percentage of sales.
Affiliate marketing has become a billion-dollar industry in the United States. The vast majority of affiliate marketing is conducted through the internet using websites. The return on investment on affiliate marketing is high because the company only pays when leads or traffic is converted to sales. The cost of advertising, if any, is paid by the affiliate.
Well-designed affiliate marketing programs can provide both an advertiser and affiliate with a substantial competitive advantage over their competitors.
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