What Is an Affiliate Network?
What Are Affiliate Networks?
Before exploring what an affiliate payment is, it is first important for us to understand what an affiliate and an affiliate network are. To keep it brief, an affiliate is a website publisher. They have the real estate on their websites that merchants or advertisers need for their advertisements.
An affiliate program is a middle-man for affiliates (publishers) and merchants that make it simple for affiliates to discover and partake in strategies that work well for their own website. By doing so, it is mutually beneficial for both parties since it allows websites to generate income and it also helps the merchant expand its reach to a new audience.
There are currently two main models of payment that affiliate networks tend to offer:
- Revenue Share Model: This is where a publisher takes a certain share of the revenue that the merchant generates as their price for putting the ad up on their site.
- Fee For Action: With this model, publishers would get paid for every visitor who completes a particular set of actions on the merchant’s website. Examples would be taking actions like registering for a mailing list or newsletter, participating in a raffle or survey, purchasing a product or service, etc.
Affiliate networks are usually free for publishers to participate in, however, it’s not the same case for merchants. The typical affiliate network will have an initiation fee, followed by a monthly charge for use of their tools and services. It’s also not uncommon for affiliate networks to take a small share of any payments made to an affiliate site.
The easy answer is that affiliate payments are the payments that an affiliate network needs to payout (oftentimes, these are mass payouts), to publishers participating in the network. When dealing with affiliate payments, an affiliate network is going to come across a number of logistical, operational, and knowledge-based challenges.
- Optimizing various forms of payment for the global nature of an affiliate network. This means covering everything from wire transfers, ACH, international ACH, PayPal, check, e-check, Western Union, and so forth.
- Having the appropriate infrastructure to provide an intrinsically international affiliate base with payment in their local currency no matter where they are in the world. There are also many affiliates that like to receive payment in both USD and their own local currency.
- In order to even have the capability to make payments to an affiliate, the affiliate network will have to receive all of the information and documentation deemed necessary to successfully make a payment. In many cases, making a single wire transfer can be cumbersome, let alone making hundreds or even thousands of them every pay period.
- Fulfilling all tax requirements, which include receiving and maintaining all paperwork related to taxes such as W-9s and invoices. Also, any necessary paperwork or additional banking information required from countries outside of the US. It is also necessary to withhold payment from any parties that fail to comply with the tax requirements relative to their local government as it relates to the affiliate network.
- Scanning for and complying with OFAC, AML, anti-narcotics, and anti-terrorism regulatory practices. This is something that mass payers need to be very conscious of as it is possible, and quite common, to inadvertently pay black-listed entities, and thus risk legal and regulatory action from the government. Because of this, it is important for affiliate networks to scan their affiliates against the main blacklist databases prior to sending out payments.
Avoiding Risk and Fraud
There are also a number of risk management and fraud prevention procedures that need to be practiced when dealing with affiliate payments. It’s no secret that where there’s money to be made, fraud will peak its ugly head. In the world of affiliate networks, fraudulent activity can cost the industry hundreds of millions of dollars annually. This is a very real problem that should not be scoffed at, so it’s important that affiliate networks ensure that they have the infrastructure, know-how, and tools to minimize or fully negate making payments to fraudsters.
Sophisticated mass payout focused companies such as Tipalti have the tools and capability to detect, track, and tag suspicious activities as well as the fraudsters themselves. It has become widely believed that affiliate networks making affiliate payments should focus on the business of connecting advertisers with publishers, while mass payout specialists should handle the logistics and operation of successfully executing mass payments on a global scale.
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