How do affiliate networks make money?

[Affiliate income with PPC]

Affiliate marketing has become one of the most popular ways for businesses to drive sales, and for individuals to earn money online. If you’re familiar with affiliate marketing, you probably know how it works: businesses (merchants) partner with affiliates (marketers) who promote their products or services in exchange for a commission on sales or leads. But one of the often-overlooked players in this equation is the affiliate network. So, how do affiliate networks make money?
In this blog post, we’ll dive into the role of affiliate networks and explore the various ways they generate revenue.

What is an Affiliate Network?​

Before we explore how affiliate networks make money, let’s quickly define what they do.
An affiliate network acts as an intermediary between affiliates (those promoting products) and merchants (those selling products). These networks provide a platform where businesses can find and recruit affiliates, and where affiliates can find products or services to promote.
Affiliate networks handle the logistics of affiliate marketing, including:

• Tracking conversions (sales, leads, etc.)
• Managing payments (to affiliates)
• Providing marketing tools (banners, links, etc.)
• Ensuring compliance with the terms of the affiliate agreements

Examples of popular affiliate networks include 7Search PPC Affiliate Network, ShareASale, CJ Affiliate, Rakuten Advertising, and Amazon Associates.

How Do Affiliate Networks Make Money?​

Affiliate networks typically generate revenue by acting as a middleman in the affiliate marketing process. They earn their income by charging a fee to either the merchant, the affiliate, or both. Here are the main ways affiliate networks make money:

Commission on Sales (Revenue Share)​

One of the most common ways affiliate networks make money is by taking a commission on each sale or lead generated through their network. This commission is a percentage of the sale price or a fixed amount per lead.
Here’s how it works:

• A merchant offers their product on an affiliate network.
• An affiliate promotes that product and generates a sale or lead.
• The affiliate network collects the sale price from the merchant.
• The affiliate network then pays the affiliate a portion of that sale (usually around 50-70%) and keeps the remaining percentage as their fee.

The exact percentage varies depending on the agreement between the network and the merchant. However, this revenue-sharing model is a major way affiliate networks earn money.

Setup Fees or Subscription Fees (For Merchants)​

Some affiliate networks charge setup fees or monthly subscription fees to merchants who want to join the network and start working with affiliates. These fees are typically one-time charges or recurring payments.
For example:

• Setup fees: A merchant may need to pay a one-time fee to list their products on the network.
• Subscription fees: Merchants may pay a monthly or annual fee to have ongoing access to the network and its affiliates.

These fees are charged regardless of how many sales the merchant generates, making them a steady source of income for affiliate networks.

Transaction Fees (For Every Sale or Lead)​

Another way affiliate networks make money is by charging transaction fees for every sale or lead generated through their platform.
For example, an affiliate network might charge a fee of 5-10% of each sale, regardless of the size of the transaction. This fee is deducted from the merchant’s payment to the affiliate network, and it ensures that the affiliate network gets paid for the work of tracking, reporting, and processing the sale.
While this is similar to a commission-based model, it’s often a more consistent and predictable way for networks to generate income, as they can apply a set fee to each sale rather than a fluctuating commission percentage.

Affiliate Fees​

While less common, some affiliate networks may charge affiliates a fee to join or access premium opportunities within the network. These could be:

• Sign-up fees: Some networks charge affiliates an upfront fee to join the program or access certain offers.
• Access to higher-paying offers: Networks may also charge affiliates to access specific, higher-paying affiliate programs or premium campaigns with top merchants.

Affiliate fees are less common but can provide a source of income for the network, especially if it has a strong, exclusive set of merchants or high-earning products to promote.

Cost Per Acquisition (CPA) Model​

Some affiliate networks use the Cost Per Acquisition (CPA) model, where the network charges merchants a fixed amount for each acquisition (sale, lead, or customer) they generate through the affiliate program.
For example, if a merchant agrees to pay $50 for each new customer acquired through the network, the affiliate network takes a cut of that $50 as their fee. The remainder goes to the affiliate who drove the sale. This is often used for lead generation campaigns or when a business wants to acquire new customers.

Ad Placement and Promotions​

In addition to commissions and fees, affiliate networks may also make money through ad placements or promotional features. For example:

• Featured Listings: Merchants may pay an affiliate network to have their products featured at the top of the network’s marketplace or in special promotional slots.
• Banner Ads and Sponsored Content: Affiliate networks might earn money by selling space for banner ads, sponsored content, or product placements within their network, either on their website or within the affiliate program dashboard.

These types of promotional activities provide a dual benefit: they generate additional revenue for the affiliate network while increasing visibility for the merchant's products.

Data and Analytics Services​

Affiliate networks often collect a wealth of data about consumer behavior, sales trends, and affiliate performance. Some networks may sell premium analytics services or insights based on this data to merchants or affiliates who are looking to optimize their performance. This could involve advanced reporting tools or custom analytics for larger merchants who want to fine-tune their marketing strategies.