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

The concept of affiliate programs was launched in November 1994 by CDNOW when they launched their BuyWeb program. It was influenced by the idea that music oriented websites could list albums as well as evaluate those that the users might be interested to purchase. These websites would also provide links to CDNOW web page where users could place their orders for the music CDs.

One of the better and much more commonly known examples of affiliate program usage is the website Amazon. Amazon started 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. Remuneration for affiliate programs is done by using CPS or Cost per Sale as a compensation system. Almost 80% of all transactions are done using this. More or less 19 % use CPA or Cost Per Action. In these methods the affiliate or the advertiser must ensure that the visitor to the main host site has converted and makes a purchase.

Another new concept in the world of affiliate program network is the multi-tier system. It involves distributing commission using hierarchical referral network of enrollees and sub partners. At most two tier programs exist but most of the affiliate programs are always single tier. Some web merchants use in house affiliate programs using well-known software while a few merchants prefer to go through third party services. The third party services are usually preferred as they are impartial in judging traffic and sales. Depending upon the selection 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 interesting part of affiliate programs. How to choose an affiliate program for a target web site? There are essentially three ways by which you can find a relevant affiliate program. First and foremost is the affiliate program directories. These are a kind of guide to pre-screened affiliate programs and comprises of affiliate discussion forums, blogs and beginner tools. The next way is to use large affiliate networks that provide the platform for lots of advertisers. This is generally a good way to begin to get the hang of things. Third and the most economical way is to use the target website itself. Predominantly target websites have a link titled affiliate program that offers direct affiliate programs, but you need to be knowledgeable enough to know which one would work out the right for you.

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An affiliate network is essentially an intermediate between publishers and merchant affiliate programs. Affiliate networks help publishers or affiliates as they are commonly known, to easily find out the affiliate programs that will generate more traffic and hence more revenue for their websites.

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