Affiliate marketing is one of the best ways to earn revenue and generate income from your website on the Internet. It works well for people who don't even have any products to sell! All you have to do is refer other websites that sell products, and you can make money on that. Affiliate marketing is an inexpensive way in which webmasters can make money by directing traffic to an online merchant's website. If this leads to actual sales in the online merchant's website, then the webmaster is paid a fixed amount or a percentage based commission.

Affiliate marketing helps in generating more targeted leads, contributes in increasing traffic which eventually leads to greater sales. All in all it increases online exposure of the merchant site which in turn helps the affiliate.

So basically, in layman's term, what is affiliate marketing? It is basically a process, in which you use your website to refer other websites, i.e., you become their affiliate. In the online world, affiliate marketing works due to the technology involved. The referrals you send to the website you are affiliated can be tracked by online merchants through a special link. And if something is actually purchased through the referral, then you are adequately compensated by it.

Ads of merchant websites are placed on your site when you become their affiliate. A tracking code or number is assigned to you. This is known as the affiliate ID. This is a unique number meant only for you. This ID has to be included in the link that you create from an ad in your website that redirects to the merchant site.

Most merchants allow links to their page in the form of text, images, text ads, banners or a combination of all of these. Some even supply you with advanced forms of linking such as search boxes, virtual stores, storefronts, and data feeds etc.
Affiliate programs can be categorized into three types:

PPC or Pay-Per-Click ? Here, a fixed amount is earned by the affiliate every time a potential customer clicks on the merchant site's link from the affiliate site.

PPL or Pay-Per-Lead ? In this, the affiliate is paid even when referrals do not necessarily become customers, but just join a program, request information or fill up questionnaires on the merchant website.

PPS or Pay-Per-Sale ? The affiliate earns every time the merchant website earns through the sale made to referrals from the affiliate website. The payment is either a fixed amount monthly or commission basis.
There are lots of advantages and benefits of affiliate marketing.

? It does not take a huge capital to join an affiliate program. All you need to set up is a website. You can join the affiliate program for free.
? You will get a passive form of income 24x7.
? You can mange the work yourself without the need to hire employees. This means that you do not have to spend extra capital on employees.
? There is absolutely no need for product shipping, order processing or inventory. So you save up on all this.
? You do not need a merchant account in order to become an affiliate.
? In fact, there are hardly any risks involved with affiliate marketing. And at the same time it gives you the potential to earn a large amount of money!

Let's look at the ways you can get started on affiliate marketing.

? The first step would be identification of merchants who deal in similar products as yours and who offer affiliate marketing programs. You should sign up for these programs. Signing up for continuity programs is a great option too. Here, payments are on a monthly basis on referring someone.
? Instead of becoming affiliate to a particular website, you could join an affiliate network that is similar to your industry. These networks are basically amalgamations of hundreds of merchants in one network. Therefore, it is easier to manage links as well as join the programs.
? You can create a website to put up product reviews. You could link these reviews to the affiliate websites.
? Merchant affiliate marketing tools can be used to create links to specific sites or products. These links can they be placed on your social networking sites, email newsletter, your website etc.
? One important thing that you must keep in mind is that you should not try to spam social networking sites such as Facebook and Twitter. It is a better option to post an affiliate link only once in a while.

Affiliate marketing is a great way to earn money online, especially if you want to start a home internet business. It works for all the people involved, the consumers, internet marketers, online merchants and of course you. So go ahead and join an affiliate program, and let the money begin to roll in!