Affiliate programs are the means and tools by which online merchants earn profit. These programs are hosted by online merchants but advertised by web publishers. Affiliate network is a group of web publishers and online merchants. The merchants pay a part of their profit to the website publisher when an end user performs a particular action or completes a transaction that leads to income for the online merchant.

The idea of affiliate programs was launched in November 1994 by CDNOW when they introduced their BuyWeb program. It was based on the idea that music oriented websites could list albums and review those that the users might be interested to purchase. These websites would also provide links to CDNOW web site where users could set their orders for the music CDs.

One of the better and more commonly known examples of affiliate program usage is the website Amazon. Amazon launched their affiliate program in July 1996. The associates could place a link or banner on their websites and if the purchase was made the associate was paid. Commissions for affiliate programs is made by using CPS or Cost per Sale as a compensation method. Almost 80% of all transactions are done using this. About 19 % use CPA or Cost Per Action. In these methods the affiliate or the advertiser must make sure that the customer to the main host site has converted and makes a purchase.

A new concept in the world of affiliate program network is the multi-tier program. It involves distributing commission using hierarchical referral network of enrollees and sub associates. At most two tier systems exist but most of the affiliate programs are still single tier. Some web merchants use in house affiliate programs using popular software while some merchants prefer to go through third party services. The third party services are usually preferred as they are unbiased in evaluating traffic and sales. Depending upon the choice of service used payment is done by merchants themselves or by a third party or affiliate networks on behalf of the merchant.

Now coming to the most intriguing part of affiliate programs. How to choose an affiliate program for a target web site? There are basically three ways wherein you can find a relevant affiliate program. First and the foremost is the affiliate program directories. These are a kind of guide to pre-screened affiliate programs and include affiliate discussion forums, blogs and beginner tools. The next way is to use vast affiliate networks that give the platform for thousands of advertisers. This is generally a good way to begin to get the hang of things. Third and the most cost effective way is to use the target website itself. Predominantly target websites contain a link titled affiliate program that gives direct affiliate programs, but you need to be experienced enough to know which one would work out the best for you.

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