Affiliate programs are the ways and instruments wherein online merchants generate 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 portion of their earnings to the website publisher when an end user performs a certain action or executes a transaction that brings about profit for the online merchant.

The concept of affiliate programs was launched in November 1994 by CDNOW when they introduced their BuyWeb service. It was influenced by the idea that music oriented websites could list albums and evaluate those that the users might be looking to buy. These websites would also offer links to CDNOW web page where users could set their purchases 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 put a link or advertisement on their websites and if the purchase was made the associate got paid. Remuneration for affiliate programs is made by using Cost per Sale or CPS as a compensation system. Almost 80% of all transactions are done using this. More or less 19 % use Cost per Action or CPA. In these ways the associate or the advertiser must ensure that the customer to the main host site has converted and makes an order.

Another new concept in the world of affiliate program network is the multi-tier system. It includes distributing commission by means of hierarchical referral network of sign ups and sub partners. At most two tier systems exist but almost all of the affiliate programs are always single tier. Some web merchants use in house affiliate programs using popular software while a few merchants choose to go through third party providers. The third party services are generally preferred as they are impartial in evaluating traffic and sales. Based 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 aspect of affiliate programs. How to select an affiliate program for a target website? There are essentially three ways wherein you can find a related 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 boards, blogs and novice tools. The second way is to use large affiliate networks that offer the program for hundreds of advertisers. This is generally a good way to begin to get the hang of things. Third and the most economical way is to make use of the target website themselves. Generally target websites have a link titled affiliate program that gives direct affiliate programs, but you have to be knowledgeable enough to know which one would work out the right for you.

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