Affiliate marketing is a performance-based partnership model in which brands reward strategic partners for delivering tangible business outcomes that directly impact sales, qualified leads and new customer acquisition.
The integration of artificial intelligence (AI) and strict regulatory oversight from bodies like the Federal Trade Commission (FTC) affects how brands can approach successful affiliate marketing.
The article will review affiliate marketing, explore the benefits of investing in this channel, provide a step-by-step strategic guide and deliver suggestions to help future-proof your strategy against the most significant emerging trends.
This post will cover:
What is affiliate marketing?
While every affiliate marketing programme has its own target audience, unique features and budget, most of them function in a similar manner. When a user purchases through an affiliate, the affiliate earns a reward for the brand they are promoting.
Affiliate marketing typically involves several parties that are often brought together.
The merchant (the brand)
The merchant is the architect of the programme. This can be any business — from a burgeoning Software-as-a-Service (SaaS) company to an established e-commerce retailer — with a product or service seeking scalable, low-risk growth channels. The merchant's role is twofold — first, to develop a compelling, high-quality product and second, to design an attractive affiliate programme with clear terms and competitive compensation that aligns with overarching business objectives.
The affiliate (the strategic partner)
Also known as the publisher or creator, the affiliate is the strategic partner responsible for marketing the merchant's product to their audience. The nature of this partner has evolved significantly.
The consumer
The consumer is the ultimate decision-maker in affiliate marketing. For the system to function ethically and effectively, the consumer must be made aware of the commercial relationship between the affiliate and the merchant. This is not just a best practice but a legal mandate; the Federal Trade Commission (FTC) requires clear and conspicuous disclosure of any material connection.
Networks and platforms
Affiliate networks and platforms are the marketplaces and technology providers that connect merchants and affiliates. They handle the mission-critical functions of the ecosystem including tracking user actions, attributing sales, managing payments and providing performance analytics.
Agencies
Agencies are companies that match brands to affiliates and monitor affiliate programmes. They are designed for brands who would like to take a hands-off approach to their affiliate marketing programme or those unable to manage the process in-house. Unlike online platforms with multiple brands and affiliates, agencies are composed of professionals who use their connections to provide brands with the right affiliates. They also negotiate favourable commissions and measure programme success.
These roles and the technology that support them indicate shifts in the affiliate marketing industry. Affiliate marketing has moved far beyond a simple collection of individual promoters. It requires dedicated resources, expert management and technology investment to deliver value for a business.
Affiliate marketing transactions
While programmes vary, the fundamental process of an affiliate transaction follows a clear, technology-driven path.
The user journey begins: A consumer interacts with an affiliate's content — such as a blog post, YouTube review or social media post — and clicks a unique affiliate link embedded within it.
Tracking and attribution: Upon clicking the link, a small file known as a tracking cookie (or another form of tracking identifier) is stored on the consumer's device. This identifier's purpose is to track the user's activity and attribute any subsequent purchase back to the referring affiliate.
The conversion: The consumer is redirected to the merchant's website. If they complete a purchase within a predefined "cookie window" (often 30, 60 or 90 days), the tracking identifier credits the sale to the affiliate who initiated the referral.
The payout: The transaction is recorded and verified by the affiliate network or the merchant's in-house platform. The affiliate then earns a commission based on the pre-agreed terms of the programme, with payments typically issued on a monthly or quarterly basis.
Affiliate programme commission models
The financial structure of an affiliate programme is a critical component in its success. Merchants can choose from several models to incentivise partners and align with specific business goals.
Standard models:
- Cost Per Sale (CPS) or Revenue Sharing: This is the most prevalent model in affiliate marketing. The affiliate earns a predetermined percentage of the total revenue from each sale they generate. Commission rates vary widely depending on the product, industry and price point — typically ranging from 5% for high-volume consumer goods to 50% or more for digital products and high-ticket services.
- Cost Per Action/Lead (CPA/CPL): In this model, the affiliate is compensated when a referred user completes a specific, non-purchase action. This could be signing up for a free trial, submitting a lead-generation form or subscribing to a newsletter. CPA models are particularly effective for businesses in service-based industries focused on lead generation.
- Cost Per Click (CPC): This model rewards affiliates for driving traffic to the merchant's site, with payment based on the number of clicks generated. It has become less common in pure affiliate marketing because it incentivises traffic over conversions and is more susceptible to fraudulent activity. It remains more prevalent in the broader world of display advertising.
Advanced commission models
Beyond standard structures, many affiliate programmes adopt advanced commission models to create stronger incentives and align with long‑term business goals.
- Recurring commissions: A highly attractive model, especially for SaaS and subscription-based businesses, this model rewards affiliates not only for the initial sale but for as long as the preferred customer remains a paying subscriber. It creates a powerful, long-term incentive for partners to promote products with high customer retention rates.
- Tiered commissions: This is a performance-based structure that rewards top-performing affiliates by increasing their commission rate as they achieve certain sales or revenue thresholds. This approach gamifies performance, creating a strong incentive for partners to grow their promotional efforts continuously.
- Hybrid models: Many programs now combine multiple payment structures to create a more balanced compensation plan. For example, a programme might offer a flat fee for each qualified lead (CPL) plus a percentage of the final sale (CPS). This approach provides a more stable income stream for affiliates while rewarding them for their influence across the entire customer funnel.
Steps to create an affiliate marketing strategy.
Launching a successful affiliate programme requires more than just finding partners and providing them with a link. It demands a methodical, strategic approach that encompasses product readiness, programme design, partner recruitment and ongoing management.
Step 1: Identify product, niche and market
Before recruiting affiliates, the groundwork must be laid.
Perfect your product: A successful programme is built on the foundation of a strong product or service. You cannot expect partners to sell a subpar offering effectively. It is essential to gather feedback from existing customers, conduct thorough competitor research and refine your brand messaging to articulate your unique selling proposition (USP) clearly.
Define your niche: Broad markets are highly competitive. Success often lies in identifying and dominating a specific niche. For example, instead of competing in the broad "beauty" industry, a brand might focus on "vegan skincare for sensitive skin". A well-defined niche allows you to attract the most relevant affiliates and connect with a highly targeted audience.
Identify your target audience: Leverage performance tracking tools to develop a deep understanding of your existing customers' demographics, interests and online behaviour. This data is invaluable for identifying affiliate partners whose audiences have the greatest overlap with your ideal customer profile.
Step 2: Choosing Your management model
Once the strategy is defined, a brand must decide how the programme will be managed. There are three primary models:
- In-House programme: Managing the programme entirely in-house offers maximum control over partner relationships and programme strategy. However, this approach requires significant investment in both technology (affiliate tracking software) and personnel. A dedicated team with expertise in partner recruitment, performance analysis, compliance and relationship management are essential.
- Affiliate networks: Joining an established affiliate network provides the technological infrastructure for tracking, reporting and payment processing. These networks also feature a marketplace where brands can discover and recruit potential partners. This model serves as an excellent middle ground for businesses that have the internal resources to manage strategy and relationships but prefer to outsource the technology stack.
- Specialised agencies: For brands seeking a full-service, hands-off approach, partnering with a specialised affiliate management agency is the ideal solution. These agencies leverage their industry expertise, existing partner connections and management experience to build, manage and optimise the programme for ROI. Case studies demonstrate that expert agency management can deliver substantial revenue growth — from 50% to 200% in a matter of months — and impressive returns on investment, often between 5x and 10x.
Step 3: Recruiting high-value partners
The quality of your affiliate partners will directly determine the success of your programme. A rigorous vetting process is crucial.
The vetting process: Evaluate potential partners on more than just their traffic numbers or follower counts. Key criteria include:
- Audience alignment: The affiliate's audience must align with your target customer profile. A mismatch, such as a music-focused influencer promoting handmade bath soaps — will be ineffective and may dilute brand perception.
- Content quality and professionalism: Scrutinise the partner's digital assets. Their website, blog and social media channels should be professional, well-designed and engaging. Avoid partnering with "spammy" or low-quality platforms that could tarnish your brand's reputation.
- Authenticity and trust: The most valuable partners are those who have cultivated genuine trust with their audience. Prioritise creators who are selective about their endorsements and only recommend products they genuinely believe in. The most successful affiliates are often those who have personally used and can speak from experience about your product.
Step 4: Scaling affiliate marketing
Launching the programme is only the beginning. Ongoing management and optimisation are essential for sustained growth.
- Maintain open communication: Treat your affiliates as true partners. Maintain regular communication channels to answer their questions, provide them with necessary marketing assets (like banners, product images and promotional copy) and give them advance notice of upcoming sales or product launches.
- Track performance and optimise: Continuously monitor your programme's performance data. Identify your top-performing affiliates and create incentive programs to reward them, such as tiered commissions, performance bonuses or exclusive access to new products. At the same time, re-evaluate partnerships with consistently underperforming affiliates.
- Ensure timely payments: Nothing damages a programme's reputation faster than late or inaccurate payments. Establish a reliable and punctual payment process to maintain strong relationships and foster trust within the affiliate community.
The most effective affiliate programmes are ultimately run by managers who can balance the ‘soft skills’ of building authentic relationships with the ‘hard skills’ of rigorous data analysis. The research repeatedly emphasises the need to build trust with partners through clear communication and fair treatment. Simultaneously, success is impossible without a deep understanding of the data, including tracking ROI, monitoring conversion rates and analysing customer lifetime value to inform commission structures.
This duality is at the heart of modern affiliate management. The rise of AI can automate much of the data analysis. Still, the human manager remains indispensable for interpreting those insights, fostering creative collaborations and building the genuine partnerships that drive authentic promotion. Businesses should therefore seek to hire or train affiliate managers who are hybrids — part community manager, part data analyst.
Affiliate marketing trends in 2025.
Affiliate marketing continues to evolve through technological advancements, shifts in consumer behaviour and a new regulatory environment. To maintain a competitive edge, businesses must not only understand these trends but also proactively adapt their strategies.
Trend 1: AI automation meets intelligence
Artificial intelligence is no longer a futuristic concept in marketing — it is a practical and powerful tool that is fundamentally changing how affiliate programmes are managed and optimised. Brands are leveraging AI to achieve unprecedented levels of efficiency and performance. Key applications include:
- Enhanced audience targeting: AI algorithms can analyse vast datasets of user behaviour, purchase history and browsing patterns to identify high-intent customers with remarkable precision. This allows for the creation of hyper-personalised campaigns that deliver the right message to the right person at the right time, significantly boosting conversion rates.
- Automated content creation: Generative AI tools like ChatGPT, Jasper and Claude can assist both brands and their affiliates by creating draught blog posts, social media copy, email newsletters and ad variations. This streamlines the content production process, freeing up human marketers to focus on strategy and creativity.
- Predictive analytics: By analysing historical data and market signals, AI can forecast emerging trends, predict which products are likely to become popular and even identify which potential affiliate partners have the highest probability of success.
- Advanced fraud detection: AI is crucial for protecting marketing budgets and maintaining data integrity. Machine learning algorithms can identify anomalous patterns in real-time — such as fraudulent clicks, bot traffic or unusual conversion rates — and flag them for review, preventing waste and ensuring that commissions are paid only for legitimate sales.
Trend 2: Micro influencers and short-form videos have increased
The lines between "affiliate" and "influencer" have blurred. Today, the most effective partners are often content creators who have cultivated deep, authentic relationships with a dedicated niche audience. Two key developments define this shift:
- The rise of the micro-influencer: There has been a significant strategic shift away from mega-influencers with millions of followers towards micro-influencers (typically 10,000 to 100,000 followers). In 2024, 44% of B2C marketers reported finding the most success with this group, compared to only 25% with macro-influencers and only 7% with mega-influencers. The reason is clear — micro-influencers often boast higher engagement rates and are perceived by their audiences as more relatable and trustworthy.
- The dominance of short-form video: Short-form video has become a premier channel for affiliate marketing. Platforms such as TikTok, Instagram Reels and YouTube Shorts are ideal for showcasing products in engaging and authentic ways, driving high levels of user interaction and conversions.
Trend 3: New FTC guidelines
The Federal Trade Commission (FTC) is enforcing updated and strict guidelines for endorsements, with a focus on making disclosures "clear, conspicuous and "difficult to miss". For brands and affiliates, understanding and adhering to these rules is non-negotiable.
Key regulatory changes:
- Broadened definition of endorsement: The FTC now considers any form of promotional message — including affiliate links, brand tags in social media posts or the sharing of a unique discount code — to be an endorsement that requires disclosure.
- Placement is critical: Disclosures such as #ad, #sponsored or a clear statement like "I earn a commission on sales from this link" must be placed prominently. In text-based content like social media captions, the disclosure must appear at the beginning — before any "See More" or truncation link. It cannot be buried within a long list of other hashtags. For video content, a verbal disclosure and/or a clear text overlay is required within the first few seconds of the video.
- Joint liability: This is a crucial change for brands. Under the new guidelines, both the brand and the creator share legal responsibility for any failure to disclose the material connection. Brands can be held liable and face penalties if their affiliate partners fail to comply with the rules.
- The implication is clear: brands must move from passive hope to proactive management of compliance. This requires educating affiliate partners on the new rules, updating contracts and programme terms to explicitly mandate adherence and implementing a review process to ensure all promotional content meets these strict legal standards. In the modern affiliate landscape, transparency is not just a best practice; it’s both a legal and strategic cornerstone.
Enhance affiliate marketing to drive growth for your business.
Affiliate marketing has decisively evolved from a simple, low-risk tactic into a sophisticated, data-driven and indispensable growth channel for businesses of all sizes. The evidence is clear: when executed strategically, affiliate marketing delivers exceptional ROI, expands brand reach into targeted new markets and builds a powerful engine for content creation and social proof.
Success is not guaranteed by simply launching a programme. It must be earned through meticulous strategic planning, the adoption of cutting-edge technology and, most importantly, the cultivation of authentic, trust-based partnerships.
The path forward for businesses seeking to harness the full potential of this channel rests on three foundational pillars:
- Embrace technology: Proactively leverage AI to automate, analyse and optimise your programme. Simultaneously, adopt modern, privacy-compliant tracking solutions like server-to-server (S2S) tracking to future-proof your attribution capabilities.
- Prioritise authentic partnerships: Move beyond purely transactional relationships. The future of affiliate marketing lies in the creator economy. Focus on building a community of genuine brand advocates who have real influence and trust with their audiences.
- Commit to unwavering transparency: Adhere strictly to the latest FTC guidelines for disclosure. This is not only a matter of legal compliance but is also essential for building long-term consumer trust and protecting your brand's reputation.
Building a high-performance affiliate programme requires a deep understanding of the customer journey, powerful data analytics and the ability to deliver personalised experiences at scale. Adobe Commerce provides the robust foundation needed to track performance, manage complex programmes and integrate your affiliate strategy into a cohesive digital marketing ecosystem, empowering you to turn partnerships into a primary engine for growth.
Schedule your free demo today to see how Adobe Commerce can help you build and scale a world-class affiliate programme.
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