An affiliate program refers to the modern, web based equivalent of an old concept. In the past businesses have paid other groups or businesses ‘finder’s fees’ for recommending their service. Web based affiliates work on this principle.
Company A will ask that company B has an advertisement for their website (site A) included on their website, site B. So when people viewing site B see the advertisement for site A and go on it, company B earns money from company A as reward for providing them with customers.
With online business this payment is commonly done based on the amount of times that an advertisement is clicked on by customers. When the user clicks an advertisement banner and is redirected to the advertised site, it is recorded and an agreed amount of money is given to the site hosting the advert, per click. Many sites are very open about this and will state that the following advertisements are affiliates and that to show support for their site, please click the advertisement at least once, providing them with the funds to continue running the site. The great benefit of this method is that the advertiser only pays for each actual customer referred to them, minimising money spent on ineffective advertising.
Clicking is not the only method used. Sometimes payment is by referral, the customer being more formally referred to the affiliate company by a method such as placing a box on a form suggesting that the user accepts mail from the affiliate. Also, it is common for the advertiser to pay their affiliates per sale, giving them a percentage of the sales made from the customers that they refer.
Some companies provide the affiliate connections between businesses as their sole trade. They will seek out companies that can benefit from advertising with each other and for a tariff, provide the connection.
Affiliate groups have come under fire from internet users for using ‘spam’. This is blanketing the web user with advertisements, through email, pop up windows etc, to get them to click the advertisements. However this is not practised by the majority of affiliate programs, who are content to simply provide a modest banner linking to the site that is paying for the advertisement, often quite helpful to customers.