Affiliate marketing is when an advertiser pays an Affiliate network to distribute it’s display ads to web site owners.  I’ve used Commission Junction (CJ) in the past — but there are several large affiliate networks out there.

It works like this; let’s say an insurance company wants to sell some insurance.  They could go to Commission Junction (or one of the other affiliate networks) and create an account.  They then upload their banner creative and set the amount the are willing to pay web site owners.  The beauty of affiliate marketing is that the insurance company only pays for performance — they can pay per click, per lead, or per sale. Usually they would pay per lead or sale.  So they only pay the web site owners when a sale is made.

Then a fellow with a web site logs onto Commission Junction and copies the insurance companies banner ad creative code to his web site.  If traffic to his web site converts into a sale he gets a check from Commission Junction.  Amounts vary from a couple pennies to a couple bucks per sale — depending on the product sold.

Affiliate marketing is great for products and services that are sold directly over the internet.  Or products and services that require a lot of inbound leads to generate a sale.  I like affiliate marketing because I only pay for a sale.  I get my ads all over the web and only pay when the ad generates a paying customer.

Downside of affiliate marketing is that you can’t control where you ads get displayed.  And there are a lot of unsavory characters out there doing very gray things to turn affiliate ads into sales.