Affiliate advertising program: the four decisions before launch, and the number that tells you it is working

An affiliate advertising program pays other people a commission for the sales they send you, which makes it the one advertising channel where the money leaves after the result rather than before it. That is genuinely attractive and it is not the same as free. The real cost sits in three places: the commission you pay on orders you would have won anyway, the tracking and dedupe work that decides whether the numbers mean anything, and the time spent recruiting partners and policing the ones who game it. Four decisions settle a program before launch. Whether you run it on a network or on your own software, what you pay commission on, the attribution rules including the cookie window and the exclusions, and who you will refuse. Get those four written down and the program is manageable. Skip them and you will be renegotiating with partners who were promised something else.

This page is the merchant side: designing, launching and running a program. For the publisher side, joining programs and earning from them, see how the cost per action model pays.

What you are actually buying, and the uncomfortable part

You are buying distribution from people who already have attention you do not: content sites that rank for your category, review sites, newsletters, comparison sites, creators and coupon destinations. In exchange you give away a share of revenue on tracked sales.

The uncomfortable part, and the thing worth settling in your own mind before launch, is that not all of those sales are new. A buyer who already knew your brand, searched for it, found a coupon site in the results and clicked through to you has cost you a commission on an order you had. Programs that look spectacular on attributed revenue and flat on total revenue are usually paying for interception. That is not a reason to avoid the channel. It is the reason the program needs rules, and the reason the review further down measures incremental revenue rather than attributed revenue.

Network or your own software

Route	What it gives you	What it costs	Suits
An affiliate network such as Impact, Awin, CJ, ShareASale or Rakuten Advertising	A marketplace of existing publishers, tracking, payment handling, tax paperwork and a dispute process	A setup fee plus an override on commissions, so your effective cost per order is higher than the commission alone	Getting to scale quickly, and anybody who does not want to pay partners one by one
Your own platform, such as PartnerStack, Post Affiliate Pro, Tapfiliate or a store app	Full control of terms, branding, data and the partner relationship	A monthly fee plus your own recruitment effort and your own payment runs	Brands with an existing audience to convert into partners, and software companies paying on subscriptions
A handful of direct deals, on invoices	Simplicity, and a close relationship with a few partners who matter	Your time, and tracking that somebody has to build and trust	Starting out, or a category with five publishers who own all the attention

The honest default for a first program is a network if your category already has publishers in it, and your own platform if your best partners will be your own customers. If it is your own platform, the affiliate program software has to cover recruiting, approvals and payouts rather than tracking alone, which is where a first shortlist usually goes wrong. Check one thing before signing either: who owns the partner relationship and the data if you leave.

The commission decision

Work it from gross margin, never from revenue. Your ceiling is a fraction of the margin on the order, after the cost of goods, payment fees, shipping and returns. A twenty per cent commission on a product carrying a twenty five per cent margin is a program that loses money on every sale it makes.

• Percentage of order value, or a flat fee per action. Percentage suits variable baskets. A flat fee suits lead generation, subscriptions and anything where order value barely moves.
• First order only, or recurring. Recurring commission on a subscription is the strongest offer you can make a partner, and it has to be modelled against lifetime value rather than first payment.
• New customers only, or everybody. Paying only on first time buyers is the cleanest answer to the interception problem, and it will narrow who wants to work with you. Say it in the terms rather than discovering it in a dispute.
• Tiers. A higher rate above a volume threshold costs nothing on the partners who never reach it and gives your best ones a reason to push.
• Exclusions, written explicitly. Returns and cancellations, gift cards, taxes and shipping, discounted or clearance lines, and orders placed with a stacked coupon the partner did not provide.

The rules to publish before the first partner joins

These are the program terms, and they are the whole of your protection. Every one of them exists because somebody skipped it.

• Brand bidding. Whether partners may bid on your brand name in paid search. Most programs prohibit it, because it means paying commission for a click you would have had for nothing, and because it raises your own cost per click.
• Trademark and domain use. No partner registering a domain containing your brand, no claiming to be your official site, no impersonating your support.
• Which traffic types are allowed. Content, email, social, paid search, coupon, cashback, retargeting, toolbars and extensions. Name each one as permitted or not, because the economics differ enormously.
• The cookie window. How long after a click a sale still counts. Shorter favours you, longer attracts partners, and the number has to appear in the terms and in the platform settings identically.
• The payment hold. Commission approved after the return window closes, not on order. This single clause prevents most of the clawback arguments.
• Disclosure. Partners must disclose the commercial relationship clearly. The requirement is theirs and the reputational damage is shared, so make it a condition rather than a suggestion.
• What gets somebody removed, and whether unpaid commission survives removal.

Tracking, and the two ways it breaks

• Browser based tracking degrades. Cookie restrictions, privacy settings and cross device journeys all lose clicks. Server to server tracking, where your checkout posts the conversion back with the partner identifier, is the version that survives and it needs a developer rather than a tag.
• Double counting across channels. Your affiliate platform claims the order, your paid search platform claims it too, and your analytics claims a third thing. Decide one source of truth, apply one conversion definition, and reconcile the affiliate platform against your order system monthly. Any partner invoice you cannot match to orders in your own system is a dispute waiting to happen.

Recruiting the first twenty partners

A program with no partners is software, and networks do not fill themselves. The first twenty come from five places, in this order of likely success.

• Your own customers. They already bought and can already describe the product. A line in the post purchase email converts more partners than any outreach campaign.
• Sites already ranking for your category queries. Search the terms you want to win and write to whoever is on the first page. They are already sending traffic to a competitor.
• Review and comparison sites in your category, where the terms are usually negotiated rather than taken from your standard sheet.
• Complementary products, where somebody sells the thing bought just before or just after yours.
• Creators already mentioning you unpaid. Search your own brand name on the platforms. Somebody is recommending you for nothing and would rather be paid.

Pay attention to the difference between a partner on commission and a creator on a fee. They are different arrangements with different paperwork, and the fee based version is covered in the influencer brief, payment and disclosure.

Fraud, and the monthly check that catches most of it

• Brand bidding in breach of the terms. Search your own brand name from a few locations once a month. This is the most common violation and the easiest to find.
• Cookie stuffing. Clicks recorded without anybody clicking anything, visible as an impossible ratio of clicks to sales from one partner.
• Coupon leakage. Codes meant for one partner appearing on every coupon site. Use unique codes and watch for them in the wild.
• Fake leads, on any program paying per form rather than per sale. Check the leads a partner sends by calling a sample.
• Concentration. Not fraud, but the same risk profile. If one partner is most of your program, you have a supplier, not a channel.

The five numbers to review every month

• Incremental revenue, not attributed revenue. The honest test is a holdout or a pause: switch the program off in one market or pause the coupon segment for a month, and watch total revenue rather than the dashboard.
• New customer share of affiliate orders. The number that tells you whether you are buying growth or paying for your own buyers.
• Commission plus network fees as a share of gross margin, by partner type. Coupon and content partners will look very different here.
• Return rate on affiliate orders against your site average. A partner whose orders come back at twice the rate is selling the product wrong.
• Partner concentration, the share of commission going to your top five.

Affiliate programs: what merchants ask

Is an affiliate program free to run?

No. You pay commission on tracked sales, a platform fee or network override, and the staff time to recruit and police partners. What is true is that the commission is paid after a sale, so the channel carries less upfront risk than media buying. Budget for the platform and the time, and treat the commission as a cost of goods rather than as marketing spend.

What commission rate should I offer?

Derive it rather than copy it. Take the gross margin on a typical order, decide what share of that margin you are willing to give away to acquire the order, and that is your ceiling. Then look at what competitors in your category publish, because partners compare. If your ceiling is far below the category norm, compete on something else: a longer cookie window, recurring commission, exclusive product access or a better rate for new customers only.

Network or in house software?

A network if your category already has active publishers and you want reach quickly, accepting the override on every sale. Your own platform if your partners will be customers, creators and businesses you recruit directly, where you are paying for software rather than for a marketplace. Many brands end up running both, with the network for reach and direct deals for the partners that matter.

Are coupon and cashback partners worth it?

They convert well and they convert people who were often already buying, so they are the segment to control rather than exclude outright. Common approaches are a lower rate for that traffic type, a new customer only rule, or excluding them from your brand terms. Decide before launch, because changing a partner's rate afterwards is the hardest conversation in the channel.

When can we judge whether a program is working?

Plan on a quarter to get tracking right and the first partners live, then read partner clicks and sales in your affiliate dashboard; when content partners rank for the pages they write about you depends on their sites and the competition. The channel compounds slowly, because a review page published this month keeps earning for years.

What about the paperwork for paying partners?

Payments to affiliates are business payments to other businesses and individuals, with reporting and withholding obligations that vary by country and by the partner's location. Settle that with your finance team before launch, or use a network that handles the payment and the paperwork, which is one of the clearest reasons to pay the override.

The recommendation nobody earns a commission on

An affiliate program is a bet that a recommendation from somebody else is worth more than an advertisement from you. That bet is sound, and there is now a version of it where no commission is available at all. When a buyer asks an assistant which product or supplier to choose in your category, the answer names a few and explains why, and it was assembled from reviews, comparison pages, forum threads and the kind of content your affiliates write. Your partners' pages are part of what builds that answer, which is a return on the program nobody puts in the commission model. It is also worth knowing which names come back today, because the content that earns you commissions and the content that gets you named are often the same pages. Measuring whether assistants name you sets out how to take that reading.