Affiliate marketing is considered one of the most trusted, tried-and-true ways to increase on-line sales. Affiliate marketing is a marketing and advertising technique that is basically a revenue-share type of system. This is where an affiliate receives a commission from a merchant based on the amount of sales generated, or subscriptions sold, through advertising on the affiliate’s website.

Affiliate marketing began only four years ago after the launch of the World Wide Web. Many successful e-commerce sites have benefited from this simple, yet effective, method of advertising. Among those are amazon.com and CD-Now. Google’s Adsense is a form of affiliate marketing, but really is considered to be more like contextual advertising.

Affiliate marketing offers three types of programs that pay the affiliate (or advertiser). The first is the pay-per-click method. Payment is made when a user, or a referral to the merchant, actually clicks on an advertisement offered on the affiliate’s website. The other two methods are the pay-per-action and pay-per-sale types of programs. These are very similar in that the affiliate receives payment in either a fixed amount or a commission-based system. The amount received is based on the sales or subscriptions that the ads or referrals from the affiliate’s website have generated.

The pay-per-action and pay-per-sale methods are generally preferred by merchants. These methods help to avoid many fraudsters taking advantage of the pay-per-click system. People who use fraudulent methods can set up sites with forced clicks, pop-ups, adware, spam, false advertising or many other ‘black hat’ (or shady) techniques.

Affiliate marketing is not strictly limited to advertisements on websites. This type of marketing can also be used in e-mails, blogs, RRS feeds, or in content and niche sites. It is also used in loyalty sites (this is where a reward system is in place via a cash-back or points back system), comparison sites and shopping directories, as well as other forms.

Affiliate marketing offers an extremely low cost and highly effective method of marketing. This form of advertising presents little or no risk for either the affiliate or the merchant involved. The only risk for the merchant is in the pay-per-click method where they may have to pay out to the affiliate each time someone clicks on the ad, regardless of whether a sale is not made or not. There is no risk involved for the pay-per-action or pay-per-sale method because no money is paid on either side until an actual sale or subscription is completed.