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Affiliate programs are a part of a type of performance-based marketing known as affiliate marketing, in which an advertiser rewards an affiliate for each customer referred to the advertiser's site.

There are four main players involved in the affiliate marketing industry: the advertiser, the network, the publisher, and the customer. The advertiser is the retailer, also known as the merchant or the brand. The network is the online business that maintains offers from the advertisers and also takes care of payments and other tasks associated with the affiliate program. Some advertisers maintain their own affiliate programs. The publisher is the affiliate, who is usually paid a percentage of each sale made to a customer referred to an advertiser through the program. The customer, of course, is the person who purchases the product or service.

It might help to think of it this way. Before the Internet, magazine distributors would sponsored fundraising schemes for schools, churches, or youth groups, where children went door-to-door selling subscriptions to these magazines, and their neighbors and extended family would purchase subscriptions. The magazine distributors didn't publish the magazines but were acting as the middlemen, for which they received a percentage of each sale.

When this type of transaction is conducted online, it is referred to as an affiliate program. The publishers are the advertisers, the distributors are the network, the organizations taking part in the fundraising drives are the affiliates, and the people who subscribe to the magazines are the customers. It's the same business model, only adapted for the Internet.

The online affiliate marketing industry has grown more complex, however, including affiliate management agencies, super-affiliates, and third-party vendors. To some extent, affiliate marketing overlaps with other types of online marketing programs, as affiliates may use advertising methods that may include paid search engine marketing, organic search engine optimization, display advertising, and email marketing. Some affiliates publish product reviews that include links to where the product may be purchased, which contain their affiliate code.

As with nearly everything else on the Internet, the affiliate marketing industry has faced challenges and changes over the years. Once, it was common for affiliates to set up virtual stores, with very little content other than links to products sold by advertisers, Today, such sites are unlikely to show up in the search engine results pages. Nevertheless, as an industry, affiliate marketing remains viable. Blogs and online forums are often monetized through affiliate programs, and contextual ads bring customers to advertisers.

Approximately eighty percent of affiliate programs use revenue sharing or a pay-per-sale method to compensate affiliates, while most of the remainder use cost-per-action, and about one percent of them use cost-per-click, cost-per-mille, or some other method. Cost-per-mille compensates an affiliate when their advertisement is displayed to a site visitor, while cost-per-click pays when a site visitor clicks on the link, whether or not a transaction is made.

When a purchase has to be made in order for the affiliate to collect, the affiliate is motivated to convert the site visitor into becoming a customer, or at least to send targeted traffic to the advertiser.

Multi-tier affiliate programs are a form of multi-level marketing in which one publisher recruits other publishers to sign up for a program using his sign-up code, after which all future activities performed by the second-level publishes result in the payment of a commission to the first publisher.

The dark side of affiliate marketing includes affiliates who may use spamming, false advertising, trademark infringement, adware, or other unethical means to generate affiliate sales.

The advantage in affiliate marketing for advertisers is that using a pay-for-performance model, the advertiser doesn't pay unless he makes a sale.

Many advertisers are particular about the affiliates that they recruit or accept into their affiliate program. Almost any website could potentially be recruited as an affiliate publisher, but advertisers are particularly interested in high-traffic sites and sites that are relevant to the products they are selling, as long as they are not competing with the advertiser.

At this point, there are no industry standards for training or certification in the affiliate marketing industry. While there are training courses and seminars that offer certificates, such certificates are not broadly accepted or demanded across the industry. Most affiliates have learned the trade through trial and error, sometimes supplemented by online forums, podcasts, informational websites, and tips found on affiliate network sites.



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