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Affiliate Marketing is classified into many types. All kinds fall under two basic categories. These are pay/click and pay/performance.

Pay/Click

It is also called PPC. It is considered to be the easiest and most popular affiliate marketing method. This is the greatest thing for small websites. With this method the affiliate marketer places the banners and text ads of merchants on his website. The affiliate is paid for every click made on these banners. When any visitor clicks on these banners and visits the merchant website, the affiliate gets credited. It is not essential that the visitor makes a purchase. However, the typical earning for a single click is very small, usually less than one dollar.

Pay/Performance

Pay/performance affiliate marketing, also called PPC, is extremely famous among big affiliates and all types of merchants. In this method the affiliate gets credited only when any visitor from their affiliate id performs the required action. This required action may be a purchase or becoming a member of a merchant website. This method is very good for the merchants because they will only pay when they are paid. For affiliates, it is attractive because they are getting a good share in the sales of merchant products. The usual share is about 15-20% of sale.

If we classify the affiliate marketing on the basis of depth, then it can be divided into 3 classes. These are single-, two-tier and multi-tier programs. Another type is the one in which an affiliate marketer is paid for every sale that is made by a person referred by him. This is called residual income affiliate marketing. Let us study these types in detail.

Affiliate Marketing: 1-Tier, 2-Tier & Multi-Tier

In an affiliate program of single-tier nature, the affiliates get the commission, only, for the visitor’s traffic or sales to the merchant’s website. Pay/performance and pay/click fall under this category.

Talking about Two-tier marketing, the affiliate gets the commission for every action done by the visitors referred by him. Plus he will get the profit whenever some other affiliate, referred by him, gets the commission. So in this way affiliate is earning directly as well as indirectly.

The multi-tier marketing is the same as two-tier marketing. But in this type, the affiliates get the commission for the sales made by their affiliated affiliates in multiple tiers. The depth of this type may be unlimited.

Residual Income Marketing

In this type of marketing, affiliates get the commission for every sale that his referred person makes on the merchant website. The only requirement is that on the first time visit, the person should come from the affiliate link of the affiliate. Next time if the same person visits the merchant website, even without using the affiliate link, the affiliate will be paid for every sale made by the visitor. The question that arises is how the merchant will know the affiliate id. The answer is very simple. On the first visit of the person from the affiliate website, a cookie is created on the computer of the visitor. This cookie stores the affiliate id of the affiliate. This cookie usually expires after 3 months. In some cases it may be longer. Whenever a visitor visits the merchant website, the visitor’s computer is checked for the existence of any previously created cookie. If the cookie is found, the affiliate id is retrieved from it and the affiliate gets credited for any purchase made by the visitor.

Affiliate marketing is a type of internet advertising in which affiliates drive the traffic to the advertiser’s website for sales. In turn the affiliates receive a share from the advertisers. Affiliates place the ads of advertisers on their websites.

There are various advantages as well as risks associated with this online business. Let us compare this online business with an office job or other business. This may help someone who is considering this business.

1. Low Cost Business

Most people are afraid to start a home based business because of the capital that is normally needed. With affiliate marketing, you need not worry about the money because it does not require much investment. It truly is a low cost business. It is even possible to start this business without any investment.

2. Inventories Not Required

In all other businesses, product management is the most stressful aspect in running your business. In many cases, it is necessary to hire additional people to handle your inventory. But in the case of affiliate marketing, you are not required to maintain any inventory. All of this is done solely by the merchants. This is yet another advantage of affiliate marketing.

3. Unlimited Income

If you are a successful affiliate marketer then you can earn unlimited income. If your website has got a high page ranking then it is assured that you will get more and more sales with the passage of time. After your business is up and running well, you usually don’t need any more investment. Not like other businesses where your income is always limited and you are always required more investments to expand your business.

4. Worldwide Business

With affiliate marketing, your market is not limited to your city or even your country. In this field you have a global market. You just need to set up your website and drive traffic to it from all over the world.

5. Risk

As you know, to start marketing as an affiliate you are not required to make a big investment. This makes it a virtual risk free business. This is the reason why more and more people are engaging in this field day by day. The only risk involved in this business is your time if you are not doing it properly. If you are not equipped with proper knowledge to do this business then you may end up with nothing in hand after waiting for months.

6. 24 hours Sales

As I have said, if you choose to earn your income as an affiliate marketer, the entire world becomes your potential customers.   Your business in affiliate marketing continues twenty-four hours a day. This means that yes, you are earning even when you are sleeping.

You will only enjoy all of the above benefits of affiliate marketing, if you have selected the right products, the right merchants and the right market.

Affiliate marketing has many benefits over other businesses. The main benefits are less investment requirement, 24 hours sale and unlimited sales. But not all the people can be successful in this business as it requires the patience, focus and proper knowledge of market trends. So the risks associated with this business are for those who are not well equipped with proper knowledge and training.