This article is part of the Affiliate Marketing Guide Book.

If you are completely new to affiliate marketing, let’s look at the definition from two perspectives; mine and wikipedia.

My definition of Affiliate Marketing: In so many words… Affiliate marketing is an opportunity for you to change your life and start making money online. Affiliate marketing allows anyone with the willingness to learn and  the gift of dedication, a limitless potential for success and financial freedom. You (as an affiliate) earn a commission on all referred leads to a web site (merchant). This commission can be the result of a a lead acquisition, a click or a sale.

Now, the definition of Affiliate Marketing from Wikipedia: Affiliate Marketing is an Internet-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. It is an application of crowdsourcing. Examples include rewards sites, where users are rewarded with cash or gifts, for the completion of an offer, and the referral of others to the site. The industry has four core players: the merchant (also known as ‘retailer’ or ‘brand’), the network, the publisher (also known as ‘the affiliate’) and the customer. The market has grown in complexity to warrant a secondary tier of players, including affiliate management agencies, super-affiliates and specialized third parties vendors.

The Benefits of Affiliate Marketing
Imagine the opportunity of being able to run your own business without the necessities of having a office business, a product to sell or even having to hire staff. With affiliate marketing, none of those “old world” business tactics are necessary. When your business is affiliate marketing, you are your business. Thousands, if not millions of brand name companies around the world are now embracing affiliate marketing and opening up their business to individuals and companies online to promote their product. In several cases, the branding is already done for you, you just need to create the ad campaigns and drive traffic to their web sites. After making a referral, you earn a commission on every lead/sale without ever having to handle customer orders, credit card processing or even handle product. Best of all, an “affiliate marketing” business can be run from anywhere in the world as long as you have a computer and internet connection.

How Affiliate Marketing Works
As mentioned, you (the affiliate) will receive a commission on all referred sales to a merchant. All processing and tracking is done on the affiliate network and merchant web site’s back end. An “affiliate network” is a site that hosts several different affiliate programs. An affiliate network is the best choice for most affiliates, as it allows affiliates to join and promote several different sites/offers through just one site. At the end of the week/month, the affiliate network will send out one check for all commissions earned during that specific time period.

For a better example of how affiliate marketing and tracking works, take a look at the presentation from Wikipedia on affiliate marketing. In step 1, a customer will come across your web site or affiliate link. Step 2, the customer clicks the link and is sent to your specific affiliate link’s sales page or web site. In the final process, step 3, if the buyer completes a sale or lead transaction, you (the affiliate) is then rewarded a commission for that lead/sale.

All backend tracking is usually done through an affiliate program or network. To track affiliate leads, you will be given a specific account and user id to create your own affiliate links. Once setup with a network, you can track all information on your affiliate stats.