In the world of affiliate marketing, an advertiser can be a company selling a product like electronics, airline tickets, clothing or car parts, or an advertiser could also be an insurance company selling policies. The most important thing to remember is that you are an advertiser if you are ready to pay other people to help you sell and promote your business
Advertisers love affiliate marketing because it involves minimal risk. If a sufficient margin is built in as compensation for the affiliate, it becomes impossible to lose money. That’s because affiliates are generally only paid when a sale is completed (i.e., a lead is converted). Advertisers (or “merchants”) pay nothing for leads that don’t convert.
Compare this to a CPM-based advertising campaign, where an advertiser pays a fixed amount to get a fixed number of ad impressions. (E.g., they may pay $10,000 to have 1 million ads shown on a publisher site, or a $10 CPM.) That campaign may be unsuccessful however if the ad impressions don’t convert into clicks and/or eventual sales.
Under most affiliate marketing arrangements, advertisers only pay for converted leads. There is basically no way they can lose money or get a negative ROI with this marketing method. Each new sale generated may have a thin margin after the affiliate payment is made, but it’s possible to structure in such a way that eliminates the possibility of a loss.
Some merchants will pay for actions that do not involve the transfer of money (i.e., something besides a sale of a product or service). For example, many merchants pay affiliates for referred visitors that ultimately sign up for a newsletter or other free product.