Affiliate programs are the means and tools by which online merchants earn profit. These programs are hosted by online merchants but marketed 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 does 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 launched their BuyWeb program. It was influenced by the idea that music oriented websites could list albums as well as review those that the users might be interested to purchase. These websites would also provide links to CDNOW web site where users could place their orders for the music CDs.

One of the better and much more commonly known examples of affiliate program use 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 done by using CPS or Cost per Sale as a compensation system. Almost 80% of all trades 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 visitor to the main host site has converted and makes a purchase.

Another new concept in the field 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 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 some merchants prefer to go through third party services. The third party services are usually preferred as they are unbiased 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 in support 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 by which you can find a relevant affiliate program. First and foremost is the affiliate program directories. These are a kind of handbook to pre-screened affiliate programs and include affiliate discussion forums, blogs and newbie tools. The next way is to use vast affiliate networks that provide the platform for hundreds of advertisers. This is generally a good way to start 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 offers direct affiliate programs, but you need to be knowledgeable enough to know which one would work the best 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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