Have you heard of affiliate marketing but don’t know exactly what it is? Affiliate marketing is a way of promoting business on-line through affiliate programs and advertising that pay the affiliate (or ad publisher) a type of commission based on the amount of business their website brings the merchant company.

Affiliate marketing is also known as a form of revenue-sharing or commission-based advertising. Often, though, the term “affiliate marketing,” is often associated with network marketing or multi-level marketing. Because of the negative feeling of the multi-level marketing industry, many companies prefer to use the term “performance marketing” instead.

Affiliate marketing can be considered the most cost effective type of marketing out there in today’s e-commerce industry. It is an incredibly efficient way of doing business. Because of this, many companies (especially those that started in the early days of e-commerce) owe their success to the affiliate marketing system. Amazon.com is a good example of success within the affiliate marketing industry. It is now normal for companies who do business on the net to include affiliate marketing in many of their marketing and advertising plans.

Affiliated marketing has three types of compensation plans that are associated with it. The first type is known as cost-per-click (CPC) or cost-per-mil (CPM.) With this method, the affiliate earns money from the merchant on the basis of how many clicks the advertising on his site generates. He can also earn just by having the advertisement published on his website. Because of click fraud and other questionable tactics, however, CPC is no longer the most common form of affiliate marketing system used.

Other ways that companies now use is the cost-per-action (CPA) or cost-per-sale (CPS) method. The cost-per-action method is based on how much interest the advertising on the affiliate’s website generates that causes the clicker to actually buy something or register at the advertised site.

The cost-per-sale system is based strictly on the amount of sales made from the ad on the affiliate’s website. In other words, the affiliate is only paid if the clicker actually purchases something. The advertisement is linked back to the merchant and is tracked by code imbedded within the ad’s html coding.

Although it sounds complicated, the affiliate does not even have to know to create the html coding. This is typically done on the merchant’s end and the code is supplied to the affiliate. The affiliate simply puts the code onto his website for it to create the link. The code can form a box ad, a column advertisement, a banner, or sometimes even come in the form of pop-up ads.