There's a lot of buzz on the Internet about affiliate marketing and its potential to make a great deal of money for those who know how to do it right. Many affiliate marketing programs make claims that seem outlandish, and it is difficult to know which ones might be truthful without first understanding what affiliate marketing is and how it all works.

To put it very concisely, affiliate marketing is a way to promote an online business that pays the affiliate, or publisher, a set amount for every subscriber, customer, visitor, or sale resulting from the affiliate's work. Payment methods and amounts vary depending on the agreement. For example, the affiliate might be paid a few cents for every click on the ad they have posted, or they might receive a commission for sales made as a result of clicking on an advertisement on their site.

Affiliate marketing either began with Amazon or with CDnow, depending on whom you ask. One story says that Jeff Bezos, the founder of Amazon, was talking with a guest at a cocktail party who expressed interest in selling books on her own website. Bezos came up with the idea of placing links on her site that would lead to Amazon and paying the woman a commission for any sales that came from her site. This led to the establishment of Amazon's official affiliate program in July 1996.

Another story says that CDnow started an affiliate program of its own a full two years before Amazon. In November 1994 CDnow started its "buyweb" program, which used click-through purchasing on independent online retailers' sites.

Regardless of its start, affiliate marketing has grown immensely since its inception. Today, affiliates around the world earn an annual combined total of $6.5 billion dollars in commissions and fees. The most lucrative online sectors to be involved in are the gambling, retail, and adult industries. However, mobile phone, finance, and travel are believed to be the next up and coming sectors.

Although affiliate marketing is its own distinct field, it does overlap with other methods for Internet marketing. A good affiliate marketing program takes into account search engine optimization and may use search engine marketing (like Google's AdWords) or email marketing. However, the key to being an affiliate marketing program rather than another type of Internet marketing is the use of one site to bring traffic to another site.

One thing affiliate marketing most definitely is not is a multi-tiered program. A multi-tiered program involves one person signing up for a program and being paid a certain amount, then getting others to sign up under them. These people who sign up under the original subscriber will be paid a lesser amount for their sales while the original subscriber receives payment for the sales made by the person signed up under them. (Sounds a lot like a pyramid scheme, doesn't it?) At most, an affiliate marketing program will have two tiers, and even these are fairly rare.

Present-day affiliate programs are actually quite sophisticated and are garnering a lot of respect. They've become much more professional in nature over the years and are swiftly gaining in offline media (magazines, television, newspapers, etc.) advertising campaigns. The standards of a successful affiliate marketing campaign have really risen and much more is required of affiliate marketers than simply posting an advertisement.

Good affiliate marketers know the ins and outs of the business, and there are a lot of them. Fortunately, there are many resources available for learning more about affiliate marketing and how to be successful at it. In fact, an entire industry has sprung up around teaching others what to look for in a good affiliate program and how it all works. Look for educational materials that make reasonable claims and have received good reviews from independent sources.