Affiliate Marketing

Affiliate Marketing is probably the most inexpensive  way to grow up your business, with an accurate outset it can bring an exponential business growth. The goal of affiliate marketing is directed toward long-term and mutual beneficial partnerships between advertisers/merchants and affiliates/publishers. Affiliate marketing is using one or more websites to drive traffic to another, it is a form of  on line marketing. It has as concept the  empowering other business websites and Internet users to market your business to a new user base.  The principle of Affiliate Marketing is simple, visitors click on affiliate's ad and purchase at merchant.
Amazon was the  merchant to offer an affiliate program, which was the first to become widely known. When visitors clicked from the associates website through, to Amazon and purchased a book, the associate received a commission.
Affiliates are on line marketers who are paid on a performance basis. Affiliate marketing is also called "performance marketing", in reference to how sales employees are typically being compensated.  The basic aim of an affiliate is to send targeted traffic  to a particular merchant’s web site. There are many different ways an affiliate markets an merchant's offer, it can vary from types of action that can be rewarded and also from the ways of tracking the whole process.

Compensation Methods

Any type of website can be promoted trough Affiliate Marketing, it just requires an agreement upon the action that that will result an affiliate's earning commission.
Revenue share or CPS (Cost Per Sale)  is a  predominant compensation method, being an ideal commission structure for both the merchant and the affiliate – the more sales, the more revenue generated for the merchant, and the more commission for the affiliate. The affiliate earns a percentage for sales. The easiest way of implementing this method is when a sale can be performed instantly on the affiliates' website, it doesn't require any extra software monitoring in order to track the actions. As a merchant you can also structure the commissions to stimulate the affiliates' performance, the more sales are performed by the affiliates, the higher will be the commission.
CPA (Cost Per Action) is a fixed commission when a particular action is performed. It can be  signing up for a newsletter, downloading a newsletter, downloading a software application.
CPL (Cost Per Lead) is a fixed commission  for a lead (potential sale). CPL is performed  usually when there is a need to convert a lead into an off line sale, which means that the merchant is completing the conversion process. This model is typically used by insurance companies, banking institutions, sites that offer trial periods for particular software. Affiliates prefer this model because they are not in control of the off line conversion process.  It is the merchant's job to complete the transaction usually having the conversion targets.
CPC (Cost Per Click) it has a very small quota in the affiliate marketing as the CPM  (Cost Per Mile) does. The merchant pays a fixed amount for each click (each thousand clicks in the CPM case) through their website. Affiliates are awarded commissions for every click  through, to the merchant website. It is primarily a way of driving large volumes of traffic, usually when it is about a new website.

Tracking information

As the affiliates send traffic to merchants through the unique URL links they often  use their own tracking software  to ensure a similar monitoring on both sides  from  the actions performed. These links are usually a set of cookies on the customer's computer, which allow the software to track the sales, they keep  information like referring URL and affiliate, date and time sale, a unique order of the sale, the amounts of sales and commissions. The tracking software is vital for affiliates and merchants, even if there is no action completed, they can collect information like impressions(views), clicks, conversions, which helps their campaign's optimization. As affiliates are investing into marketing merchants it helps  to determine the success of a campaign or how best to optimize it.
Because the cookies are the source of extracting data, they have to be set a lifetime. The domain owner determines how long a cookie should last so in case of the affiliate marketing it is determined by the merchant. Affiliates tend to prefer longer cookie period, which increases the probability of being rewarded. Affiliates can also miss commissions, with cookies deletion, or when an user clicks on a banner of the affiliates' website checking out the services/products, but after finding it from a Google PPC advert.

Types of affiliate websites

Search affiliates that implement PPC search engines to promote advertisers' offers it is one of the most successful affiliate marketers. These affiliates seek to find the highest earnings per clicks(EPC) for the lowest cost per click(CPC) (arbitrage search).
Content and niche sites usually product view sites are usually created on one topic, containing a variety of tips specifications about the products promoted.
Shopping directories that list merchants by categories without providing coupons, price comparison, or other features based on information that changes frequently, thus requiring continual updates
Email lists –  affiliates with large opt-in-mail lists usually implement email marketing
Loyalty sites, typically characterized by providing a reward system for purchases via points back
Personal websites
Web logs, Video blogs – sites describing/commenting products/services or containing   video content which allows viewers to click on and purchase products related to the video's subject.

Affiliate Networks

Affiliate Networks are third parties connecting merchant with affiliates/publishers. Affiliate networks that already have several advertisers typically also have a large pool of publishers. Most merchants opt to use an affiliate network to provide most of the technical solutions required for an affiliate program. Affiliate networks support both merchants and affiliates, they provide tracking reports and solutions to the both sides, they have many affiliates and merchants being an ideal source of affiliates. Affiliate networks  usually charge nothing the affiliates to join, and the merchants a set up fee ( usually for tracking solutions) and a monthly management fee, depending on the level of support offered to the merchant or a percentage of the commission earned by the affiliate.

Affiliate Marketing Benefits

Merchants favor affiliate marketing because in most cases it uses a "pay for performance" model, meaning that the merchant does not incur a marketing expense unless results are accrued (excluding any initial setup cost), unlike display advertising. It can bring exponential growth if more affiliates are enrolled. A notable example of success being Amazonian.