Affiliate marketing is a performance-based form of advertising in which a business pays independent partners, called affiliates, a commission for each sale, sign-up or lead they bring in. Affiliates promote the business through websites, social media, email lists, videos or comparison tools, using tracking links or codes that record which customers they referred. The business pays only when a defined result happens, rather than paying for advertising space up front.
The model is widely used in online retail, travel, software, financial products, gambling and crypto. It is distinct from a corporate affiliate, which is a company linked by ownership, and from multi-level marketing, where participants earn from recruiting others into a sales network. Advertising and consumer protection rules require affiliates to disclose their financial interest.
Affiliate marketing in plain terms
Imagine a friend who loves a local bike shop and keeps sending people there. One day the shop owner says: "Every time someone you send buys a bike, I will give you $20." Your friend is now an affiliate. The shop only pays when a sale happens, and your friend has a reason to keep recommending it.
Online, the recommendation becomes a special link or code. When a reader clicks a link in a review and buys something, the shop's system sees where the customer came from and credits the reviewer. The catch is that the reviewer is now being paid, which is why honest affiliates say so clearly.
How affiliate marketing works
A typical programme involves four parties: the merchant or advertiser, the affiliate or publisher, the customer, and often an affiliate network that handles tracking and payments. The basic flow is:
- Joining. The affiliate signs up to the merchant's programme or a network and agrees to its terms.
- Tracking. The affiliate receives unique links, codes or IDs, usually tracked by cookies or server-side records.
- Referral. A customer clicks through and completes an action, such as a purchase or account opening.
- Attribution and payout. The system credits the affiliate, applies the agreed rate and pays out after any cancellation or refund period.
Amazon's Associates programme, launched in 1996, helped popularise the model and remains one of the largest.
Payout models
- Cost per sale. A percentage of the order value or a fixed sum for each purchase.
- Cost per lead or acquisition. A fee for each sign-up, verified account or first deposit, common in finance, gambling and crypto.
- Revenue share. A share of the revenue a referred customer generates over time, such as a cut of trading fees on an exchange.
- Hybrid. An upfront fee combined with a smaller ongoing share.
Merchants compare affiliate payouts with their customer acquisition cost from other channels to decide how much they can afford to pay.
Affiliate marketing in finance and crypto
Banks, brokers, card issuers and cryptocurrency exchanges use affiliates heavily, often paying revenue share on trading fees for the lifetime of a referred account. Comparison sites earn commissions when readers open accounts or take out loans, and many crypto influencers and key opinion leaders promote exchanges and tokens through referral codes. This has made financial affiliate marketing a focus for regulators, because a promoter's income can depend on persuading people to take on risky products. In the UK, cryptoasset promotions have been brought within the Financial Conduct Authority's financial promotions rules since October 2023, which affects what affiliates can publish to UK audiences.
Regulation and disclosure
Most jurisdictions require clear disclosure of affiliate relationships. In the United States, the Federal Trade Commission's Endorsement Guides, revised in 2023, say that a material connection such as a commission must be disclosed clearly and close to the recommendation. Financial regulators add rules on fair and balanced promotions, risk warnings and, in some places, who may promote investments at all. Affiliates also handle personal data through tracking, bringing data privacy law into play. In gambling and crypto, operators are often held responsible for their affiliates' conduct, and some have been fined for promotions published by partners.
Risks and criticism
Affiliate incentives can distort recommendations: a "best exchange" list may rank providers by commission rather than quality. Fraud is another problem, including fake leads, cookie stuffing and self-referrals designed to collect payouts. In crypto, affiliate links have been used to promote fraudulent platforms and pump-and-dump schemes, and some schemes disguise recruitment-based returns as affiliate commissions, a pattern associated with pyramid schemes. Readers can protect themselves by checking disclosures, comparing independent sources and treating paid promotions with caution, especially when the promoter is aggressive about a shilled token.