What is affiliate marketing?

Affiliate marketing has quickly become one of the most popular and the most effective ways to advertise on the Internet. The premise of affiliate marketing is very simple.
Affiliate marketing is a “pay for performance model” in which an affiliate webmaster is rewarded for every visitor, subscriber, customer, or sale provided through his efforts. The affiliate earns a commission based on a certain value for each exposure (CPM), visit (Pay per click), new customer (Pay per lead), sale (Pay per sale or Revenue Share Percentage). So, basically, an affiliate webmaster works on promoting a product or a service from the affiliate programs of his choice. The affiliate webmaster usually uses text links, banner ads, articles and other promotion methods on his own website in order to send traffic to the website he is promoting.
A company, let’s say eBay, goes to another web site and asks them to place a banner or link to eBay on their site. Every time a user clicks on that eBay banner and visits the site, the owner of the original site (the webmaster) gets a commission. In this particular example, the affiliate has been paid on a “Pay per click” basis. It’s as simple as that.
The history of affiliate marketing goes back to approximately 1994 with the trailblazing music website www.CDNow.com. They were, as far as most people know, the first site to pay other sites for directing Internet traffic to them. Internet giant Amazon.com soon caught on and became the site most associated with affiliate marketing. Today, the practice of affiliate marketing is used by essentially every major web site in the world.

Why affiliate marketing?

One of the reasons that affiliate marketing has proven to be so popular is that it is completely based on performance. In most cases, the company doing the advertising doesn’t pay a single penny to the site that is carrying their ad unless there is evidence that Internet traffic has been driven to the advertising site. There are, however, other ways of doing affiliate marketing.
Some advertising sites have paid the site hosting their link based not on the number of times an original IP visits through the link, but on the number of times the banner ad was “seen.” This method presents a whole host of problems since things like hit counts can be forged and there is no way to insure that just because someone visited a web page that had your logo on it that they even saw it or if they did, that they even knew what it was.
Other methods of affiliate marketing include paying only when a link is followed AND some kind of transaction takes place. This can be tough on the site hosting the link because the attention span of the average Internet user isn’t long enough in most cases to follow a link and then either complete a purchase, or fill out a form of some kind. The conventional method simply pays a host a commission for every time an original IP is directed to their site.
In a matter of only a few years, affiliate marketing has become one of the most cost effective ways to drive traffic to a site. Since, in most cases, both the advertiser and the host profit from the set up, there is no reason to believe that affiliate marketing won’t be a dominant advertising method well into the future.