How Do Affiliate Programs Work?

You've heard the story before. Some local "dot-com" startup company sells out for millions of dollars and the 25-year-old wiz kid owner waltzes off into the sunset with a mansion and a new Mercedes. I'm not saying it hasn't happened, but it certainly hasn't happened to me. We're not talking about get-rich-quick schemes here. We're talking about a way to generate a steady monthly income through genuine hard work, a little ingenuity, and an Internet phenomenon called Affiliate Programs.

The Referral System
The concept is really quite simple. Everything is based on a paid referral system. Visitors come to your website, you introduce them to a product or service from a third-party vendor through a banner or text link, and if your referral decides to buy, you get paid a commission. While it sounds simple, there are a few important details to know before you begin. Let's look at an example.

Case Study
Mary is interested in scrapbooking, so she sets up a web site called Scraptips.com to share some of her ideas with others who are interested in the same thing. She begins to build up a loyal following of people who visit her site frequently for weekly tips and ideas. She signs up as an affiliate with a merchant called Scrapbook Supplies Online, and places their small banner link on her site. For each of her site visitors who clicks on the banner and visits the merchant, Mary receives $.10 per click (click-throughs) for introducing that person to the merchant services. In addition, she might receive 10% of any purchases (sales/leads) that person might make. Everyone wins.

Counting the Clicks
Right now you're probably wondering who keeps track of all these clicks and how you eventually get paid. That's where web services like Commission Junction and BeFree come in. They make the whole process simple by doing all the tracking through your personal affiliate i.d. and then send you one check at the end of the month for all your commissions. Or, you use your affiliate's tracking software to keep track of the sales and clicks. That's how the whole thing works. But at $.10 a click, can a small web site really make any money? That depends on a few important factors.

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