Affiliate marketing is a web-based marketing practice in which a business rewards one or more affiliates for each visitor or customer brought about by the affiliate's marketing efforts. Affiliate marketing is also the name of the industry where a number of different types of companies and individuals are performing this form of internet marketing, including affiliate networks, affiliate management companies and in-house affiliate managers, specialized 3rd party vendors, and various types of affiliates/publishers who promote the products and services of their partners.

Affiliate marketing overlaps with other internet marketing methods to some degree, because affiliates often use regular advertising methods. Those methods include organic search engine optimization, paid search engine marketing, email marketing and in some sense display advertising. On the other hand, affiliates sometimes use less orthodox techniques like publishing reviews of products or services offered by a partner.

Affiliate marketing — using one site to drive traffic to another — is a form of online marketing, which is frequently overlooked by advertisers. While search engines, e-mail and RSS capture much of the attention of online retailers, affiliate marketing carries a much lower profile. Still, affiliates continue to play a significant role in e-retailers' marketing strategies.

Web 2.0

The rise of blogging, interactive online communities and other new technologies, web sites and services based on the concepts that are now called Web 2.0 have impacted the affiliate marketing world as well. The new media allowed merchants to get closer to their affiliates and improved communication between each other.[9][10] New developments have made it harder for unscrupulous affiliates to make money. Emerging black sheep are detected and made known to the affiliate marketing community with much greater speed and efficiency.

CPM/CPC versus CPA/CPS (performance marketing)

Some advertisers offer multi-tier programs that distribute commission into a hierarchical referral network of sign-ups and sub-partners. In practical terms: publisher "A" signs up to the program with an advertiser and gets rewarded for the agreed activity conducted by a referred visitor. If publisher "A" attracts other publishers ("B", "C", etc.) to sign up for the same program using her sign-up code all future activities by the joining publishers "B" and "C" will result in additional, lower commission for publisher "A".

Snowballing, this system rewards a chain of hierarchical publishers who may or may not know of each others' existence, yet generate income for the higher level signup. This sort of structure has been successfully implemented by a company called Quixtar.com, a division of Alticor, the parent company of Amway. Quixtar has implemented a network marketing structure to implement its marketing program for major corporations such as Barnes & Noble, Office Depot, Sony Music and hundreds more.

Two-tier programs exist in the minority of affiliate programs; most are simply one-tier. Referral programs beyond 2-tier are multi-level marketing (MLM) or network marketing.

Even though Quixtar compensation plan is network marketing & wouldn't be considered 'affiliate marketing', the big company partners are considered and call themselves affiliates. Therefore, you may argue that the Quixtar company is the affiliate marketer for its partner corporation.

Affiliate management and program management outsourcing

Successful affiliate programs require a lot of maintenance and work. The number of affiliate programs just a few years back was much smaller than it is today. Having an affiliate program that is successful is not as easy anymore. The days when programs could generate considerable revenue for the merchant even if they were poorly or not at all managed ("auto-drive") are over (with the exception of some verticals).

Those uncontrolled programs did aid (and continue to do so today) rogue affiliates, who use spamming,[15] trademark infringement, false advertising, "cookie cutting", typosquatting[16] and other unethical methods that caused affiliate marketing to get a bad reputation. The increase of number of internet businesses in combination with the increased number of people that trust the current technology enough to do shopping and business online caused and still causes a further maturing of affiliate marketing. The opportunities to generate considerable amount of profit in combination with a much more crowded marketplace filled with about equal quality and sized competitors made it harder for merchants to get noticed, but at the same time the rewards if you get noticed much larger.

Recently, the internet advertising industry has become more advanced. Online media has in some areas been rising to the sophistication of offline media, in which advertising has been largely professional and competitive for many years already. The requirements to be successful are much higher than they were in the past. Those requirements are becoming often too much of a burden for the merchant to do it successfully in-house. More and more merchants are looking for alternative options which they find in relatively new outsourced (affiliate) program management or OPM companies that were often founded by veteran affiliate managers and network program managers

The OPM are doing this highly specialized job of affiliate program management for the merchant as a service agency very much like Ad agencies are doing the job to promote a brand or product in the offline world today

Types of affiliate websites

Affiliate sites are often categorized by merchants (advertisers) and affiliate networks. There are no industry-wide accepted standards for the categorization. The following list is very generic but commonly understood and used by affiliate marketers.

• Search affiliates that utilize pay per click search engines to promote the advertisers offers (search arbitrage)
• Comparison shopping sites and directories
• Loyalty sites, typically characterized by providing a reward system for purchases via points back, cash back or charitable donations
• Coupon and rebate sites that focus on sales promotions
• Content and niche sites, including product review sites
• Personal websites (these type of sites were the reason for the birth of affiliate marketing, but are today almost reduced to complete irrelevance compared to the other types of affiliate sites)
• Blogs and RSS feeds
• Email list affiliates (owners of large opt-in email list(s))
• Registration path or Co-Registration affiliates who include offers from other companies during a registration process on their own website.
• Shopping directories that list merchants by categories without providing coupons, price comparison and other features based on information that frequently change and require ongoing updates.
• CPA networks are top tier affiliates that expose offers from advertiser they are affiliated with to their own network of affiliates (not to confuse with 2nd tier)