This is a common question asked by many web developers and webmasters interested in earning more revenue from their website. An affiliate program is a referral-based marketing strategy, also known as "Revenue Sharing". It is the latest and greatest Internet marketing technique that makes it possible for web sites to share traffic and increase their sales.
Advertising sites (Merchants) offer commission to Affiliate sites (Affiliates) in return for referring visitors and a specific action occurring.
Affiliate Program Marketing is virtually FREE. You don't pay for banner placement, impressions or advertising - you only pay for results. If an affiliate drives visitors to your site, but produces
no sales, you owe him nothing.

Let's illustrate how an affiliate program functions
by using an example.

For instance, a company such as AOL has an affiliate program for their webmaster products at WebSite.com. WebSite.com offers tools that aid webmaster in tracking visitors and promoting their website.

A webmaster visit's a company's website that offers an affiliate program. If they feel their service is complimentary and useful they may elect to join that company's affiliate program. For instance, if you have a website for learning HTML code, WebSite.com might interest you as the products appeal to web developers – the same people visiting your site.

The webmaster will fill out an online form to join the affiliate program or email the company for more details. The company will in turn send the webmaster a special code that he or she may link to their website with. This special code allows the company, such as AOL, to track sales from a particular affiliate.

The webmaster will place banners, buttons, and/or text links on their website to the company's site. For example, you might have this banner for Website.com on your site:
If a user click's on this banner and buys a product from WebSite.com, you will receive a pre-determined referral fee, e.g. 10% of sale.

Let's say in our example that a user bought a product from the site. The webmaster's account will be credited with the purchase. After a certain period of time or when a dollar value of "referral" fees is obtained, the sponsor/company will issue payment to the affiliate for their sales leads.

What are 2-tier Affiliate programs?

Affiliate program structure where affiliates earn commissions on their conversions as well as conversions of webmasters they refer to the program.
The first tier of a two tier program is the same as for a regular affiliate program. The only difference is that an Affiliate A will get additional compensation based on commissions generated by an Affiliate B. Sometimes compensation will be written in shorthand as follows tier1/tier2 (ex. 10%/5%).
It is important to read the fine print to determine if the second tier compensation is a straight percentage (ex.% of revenue generated by "B") or a percentage of a percentage (ex.% of earnings generated by "B").


Did you know that affiliate programs will account for 20% of the 53 billion dollars in revenue generated online by the next year? Read more…