Affiliate programs are the ways and tools wherein online merchants generate profit. These programs are hosted by online merchants but marketed by web publishers. Affiliate network is a group of web publishers and online merchants. The merchants pay a portion of their profit to the website publisher if an end user does a certain action or completes a transaction that brings about profit for the online merchant.

The idea of affiliate programs was launched in November 1994 by CDNOW when they introduced their BuyWeb service. It was based on the idea that music related websites could list albums and also evaluate those that the users might be interested to buy. These websites would also offer links to CDNOW web site where users could set their purchases for the music CDs.

One of the better and more frequently known examples of affiliate program use is the website Amazon. Amazon started their affiliate program in July 1996. The associates could place a link or advertisement on their websites and if the purchase was made the associate got paid. Commissions for affiliate programs is made by using Cost per Sale or CPS as a compensation method. Nearly 80% of all trades are done using this. More or less 19 % use CPA or Cost Per Action. In these ways the associate or the advertiser must make sure that the customer to the main host site has converted and makes an order.

A new idea in the field of affiliate program network is the multi-tier system. It involves distributing commission by means of hierarchical referral network of sign ups and sub associates. At most two tier systems exist but almost all of the affiliate programs are still single tier. A number of web merchants use in house affiliate programs using well known software while a few merchants prefer to go through third party providers. The third party services are generally preferred as they are unbiased in evaluating traffic and sales. Based upon the choice of service used payment is done by suppliers themselves or by a third party or affiliate networks in support of the merchant.

Now coming to the most interesting part of affiliate programs. How to select an affiliate program for a target website? There are basically three ways wherein you can find a related affiliate program. First and the foremost is the affiliate program directories. These are a sort of handbook to pre-screened affiliate programs and comprises of affiliate discussion forums, blogs and newbie tools. The second way is to use vast affiliate networks that give the program for thousands of advertisers. This is normally a good way to start to get the hang of things. Third and the most economical way is to use the target website themselves. Generally target websites contain a link titled affiliate program that gives direct affiliate programs, but you have to be experienced enough to understand which one would work the right for you.

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