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What are affiliate programs?

Affiliate programs offer website publishers an easy way to monetize their sites by placing links to other websites selling products or services.

When a user follows a link to the third party site and buys one of their products, the referring site earns a commission - usually a percentage of the sale price, though it could also be a fixed amount. The advantage to the merchant is that they only pay for clicks that lead to a purchase. In the traditional advertising model, they pay for clicks regardless of whether they lead to conversions or not.

Many big sites offer affiliate programs. They sometimes go by other names - for example, Amazon calls its affiliates "associates". To join the affiliate program of a site, look for a link to the application page somewhere along its footer or navigation panel - usually it will be just a small text link. Most sites will want to check out your website and verify that it meets certain standards. When they accept you into your program, you can begin placing links to them on your site.

The merchant should offer various tools to help you build links to their site. It is usually a good idea to use these tools as they guarantee that you have formatted the links correctly and will be obtaining credit for sales generated through them. If you decide to create the links yourself, be careful - you could misspell your identifier and end up crediting someone else!

An example of a tool is one used to create a banner to the clothing department of a store. Another could be used to create a text link to particular product. Other tools might be used to create code that you insert on your page causing certain terms to be automatically linked to pages on the merchant's site based on your site's subject matter and content. As well as link building tools, merchants will also provide statistics of links clicked, purchases and so on, so that you can best decide how to optimize your site.

Such tools offer an easy way to create links to the merchant site, but the link building process can be cumbersome and time consuming, as well as hard to tailor to suit the needs of your site. Some merchants offer XML web services and APIs to enable developers to integrate merchant content into their site more deeply and automate certain tasks. As an example, with Amazon web services you can build an Amazon shopping cart straight into your site, which will link up with a user's shopping cart on Amazon.

Not all merchants have the technical means or desire to host and maintain their own affiliate management software. Such merchants can outsource this service to a company that specializes in it. Two of the better known companies that do this are Commission Junction and LinkShare. From the point of view of the publisher, if you sign up to several affiliate programs run by one of these companies, you have the benefit of a single interface and tools to manage your accounts and review your statistics.

It may seem confusing at first how your referrals to other websites can generate money. One question is "how do they know where their clicks come from?" Usually, your links to a merchant site identify themselves with an ID embedded in the URL. The merchant site takes note of this ID and adds a cookie containing it to the user's computer. The cookie will expire within a defined time limit; for some programs this is up to a few months. So, even if the user lands on a merchant's page, then surfs to another part of their site, or switches off their computer before revisiting the site, the merchant can still identify you from the cookie and give you proper credit when the user makes a purchase.