[sixtofour]

"Andrew: What you were doing was, you were buying ads online and running affiliate advertising against them. The profit was the revenue that you were making from the affiliate programs, what they were paying you every time they got a new order or lead, minus what you were paying for your ads, right."

For the hard-of-money-making, what does this mean, how does it work functionally (black box inputs and outputs), and why is it profitable?

[blhack]

Basically it's just being better at advertising for ['amazon','okcupid','ebay','zappos','etc.'] than they are.

I know that for a while, netflix was paying something like $40 or $20 or something really high for their trial membership signups.

So what affiliates will do is buy space advertising for netflix or whoever, hoping that the people that see their ads will sign up for the product.

As long as their cost to get somebody to sign up for netflix is less than what the affiliate is paying out, they make money.

Say my overall cost to get somebody to click my ad and sign up for netflix is..$16. If netflix pays me $20 for that, I make $4 every time.

Repeat that enough times, and you're making enormous amounts of money.

[_delirium]

You join an affiliate program that pays you some commission per lead or sale, like Amazon's that pays you 4%+ (depending on volume) per item sold, or many of the things on places like Commission Junction, which include things like 1% of airfare sold. Then you buy ads which point to your affiliate link; if your affiliate payouts are greater than the cost of the ads, on average, you make the difference.

Some affiliate programs (like Amazon) don't allow this. Others are happy to allow it because it sort of outsources the work of figuring out how much to pay for ads. Instead of a company having to decide what to pay for e.g. Google AdWords, they just decide what percentage royalties they want to pay out for leads, and let third parties figure out how to bid on AdWords in a way that doesn't exceed that cost.

[AndrewWarner]

I think what you're asking is "how do affiliate programs work." Is that right?

Here's an overly basic explanation that could help: You send a user to a web site. The user buys or fills out a form. You get paid a commission.

[pan69]

No. I don't think that's being asked here.

Normally with affiliate links, or how most people understand it (at least I do), is to place these links on YOUR website.

This seems to go in a slightly different direction where you place and ad for some else on a third party website. However, it's not a real ad, it's a third party affiliate link (your affiliate link). Very clever.