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Affiliate programs are the ways and instruments by which online merchants earn profit. These programs are hosted by online merchants but promoted by web publishers. Affiliate network is the conglomeration of web publishers and online merchants. The merchants pay a portion of their profit to the website publisher when an end user does a certain action or executes a transaction that leads to income for the online merchant.

The concept of affiliate programs was launched in November 1994 by CDNOW when they launched their BuyWeb service. It was based on the idea that music oriented websites could list albums as well as evaluate those that the users might be looking to purchase. These websites would also provide links to CDNOW web page where users could place their purchases for the music CDs.

One of the better and more commonly known examples of affiliate program use is the website Amazon. Amazon started their affiliate program in July 1996. The associates could put a link or banner on their websites and if the purchase was made the associate was paid. Remuneration for affiliate programs is done by using Cost per Sale or CPS as a compensation method. Almost 80% of all trades are done using this. More or less 19 % use Cost per Action or CPA. In these methods the affiliate or the advertiser must ensure that the visitor to the main host site has converted and makes an order.

A new concept in the field of affiliate program network is the multi-tier system. It includes distributing commission using hierarchical referral network of enrollees and sub partners. At most two tier programs exist but almost all of the affiliate programs are still single tier. Some web merchants use in house affiliate programs using well-known software while a few merchants choose to go through third party services. The third party services are usually preferred as they are impartial in judging traffic and sales. Based upon the choice of service used payment is done by merchants themselves or by a third party or affiliate networks in support of the merchant.

Now coming to the most interesting aspect of affiliate programs. How to choose an affiliate program for a target web site? There are essentially three ways by which you can find a related affiliate program. First and the foremost is the affiliate program directories. These are a kind of handbook to pre-screened affiliate programs and comprises of affiliate discussion boards, blogs and newbie tools. The next way is to use large affiliate networks that offer the system for thousands of advertisers. This is generally a good way to start to get the hang of things. Third and the most economical way is to make use of the target website itself. Predominantly target websites have a link titled affiliate program that offers direct affiliate programs, but you have to be experienced enough to know which one would work the right for you.

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