"Affiliate marketing is beginning to form the basis of most sites’ marketing and advertising campaigns," says Gordon Hoffstein, president and CEO of Be Free, Inc. The company manages affiliate programs for online merchants, currently boasting more than 2.4 million affiliates in its sales channels. Hoffstein believes that affiliate program advertising will grow even more as site owners begin to realize its benefits and weed out less effective banner ads.

While many site owners are reluctant to send visitors to other sites, Ryan Adams, whose site ClickQuick.com evaluates affiliate programs, said the advantages of well-implemented affiliate programs outweigh this concern. Topping his list is added value to the Web site’s visitors. Affiliate programs allow Web sites "to reach out and provide value to their visitors that they might not otherwise be able to. For example, a site about cars might want to be able to offer their visitors a way to shop for insurance easily and quickly." And the best part? "The owner of the car site can do what he or she does best: create content about cars, and attract visitors interested in cars," Adams says.

Affiliate programs provide benefits to Webmasters, advertisers, and visitors alike by offering visitors easy access to a more diversified product or service line without the expense of additional warehousing or site development on the part of the Web site owner. For advertisers, it’s a no-risk proposition: their products or services are exposed to the site’s visitors, but the advertising costs nothing if the product doesn’t sell.

Another benefit, according to Hoffstein, is that "merchants are more efficiently able to attract and retain customers because they are placing their links in-context to where their potential customers will go on the Web." And visitors benefit by learning about new Web sites that they might not have found on their own -- and by having the option to purchase a product or service instantly.

Potential income from affiliate programs can vary from nothing to several thousand dollars a month. A ClickQuick survey found that only 8% of the respondents made more than $500 per month and most respondents were making between $50 and $300 per month. However, the One and Only Network's top affiliate for December 1999 made more than $12,000 in one month, proving that the potential is there, if you can take advantage of the opportunities.

Unlike the old days of advertising when advertisers paid to place ads and Webmasters were paid based on the number of times an ad was displayed, affiliate programs only pay for results. What defines a result differs from program to program: some programs, such as About.com, pay every time someone clicks through and visits the site; others pay every time someone registers for a free service; and still others, such as Amazon.com, pay only when someone comes from your site and makes a purchase.

Some affiliate programs pay varying rates for registrations, click-throughs, and purchases. There are also variations within programs: Amazon.com pays 15% if you link directly to a book that gets purchased and 5% of purchases if you just link to the main page. Affiliate programs that pay commissions also vary on how they pay. Some pay only if a sale is made on the initial visit, while others encourage users to register with the site and pay the initial referrer a commission on all subsequent sales.

Determining who came from what site and what they purchased is a daunting task, especially when you consider that some sites have huge numbers of associates. For instance, Amazon.com currently has more than 300,000 affiliates and this number is growing. Merchants have solved this problem by assigning each affiliate a unique ID and embedding this ID into the link placed on the affiliate site. If you’re an Amazon.com affiliate and place a banner on your site, every time someone clicks through to Amazon.com, the visit is tracked and if the customer buys something, you get credit.

Some companies turn the management of their affiliate programs over to third parties, such as Be Free, Inc. LinkShare.com, and Commission Junction. These companies track click-throughs, issue checks, and provide an easy way for affiliates to research and sign up for hundreds of affiliate programs at one site. More importantly, from an affiliate’s viewpoint, they require merchants to make deposits into escrow accounts to cover affiliate program costs -- and they will post a notice telling current and would-be affiliate members which merchants are out of cash and aren't paying affiliates.

Many affiliate programs pay out monthly after you've earned a certain amount. This minimum varies from $25 to $50 per month. Other programs pay out quarterly and have minimums ranging from $50 to $200. Watch for these terms to be explained upfront in your affiliate agreement and find out whether you would be notified via email if payout terms change.

Finding worthwhile affiliate programs can be difficult and time consuming. If you’re not sure what’s available, the easiest way to find many different affiliate programs in one place is by signing up with Commission Junction, Be Free, Inc., or LinkShare.com. These companies manage hundreds of affiliate programs and allow you to sign up for multiple programs by filling out a single form. If there's a particular company with which you would like to affiliate, but it isn't listed with one of the affiliate managers, try the direct approach. Most companies will list affiliate opportunities under the "About Us," "Affiliates," "Partnerships," or "Opportunities" sections of their Web site. You can also watch the banner ads that scroll across your screen as you're surfing the net, because chances are if you see a banner, the site has an affiliate program.

It's important to choose your affiliate programs wisely. Join only those programs that you can believe in. Some things to consider when choosing an affiliate program:

• Choose products and services that will appeal to your visitors. Never dilute the appeal of your own site by offering affiliate products or services outside your own audience demographic. "Carefully target the affiliate programs and their products and services sold to the interests of your visitors," says Ryan Adams of ClickQuick.com. "Even a top-notch, high-commission program will perform poorly if it is not targeted towards the right audience." If you sell children's clothing online, consider affiliating with an online toy store. If you sell office supplies, partner with an online provider of business services. By targeting your advertising to your customers, you'll have a higher click-through percentage than if you choose partners at random.

• Choose Web sites with a good reputation.
  No matter how limited or valuable your time may be, invest some time in thoroughly investigating your potential affiliate partners. Never join an affiliate program that offers lower quality service or products than your own -- otherwise, your own reputation will suffer by association. You can find information about online companies at RedHerring.Com and Internet.Com. You can find reviews of affiliate programs at ClickQuick.com and Refer-it.com.

• Don't be lured by big, one-time payouts.
  Some Webmasters, new to the affiliate game, will be lured by the large payouts offered by many companies for free registration and will load their advertising space with sponsors paying for registration. Signing up with companies that pay several dollars per registered visitor could add up a lot faster than $0.02 per click. However, many visitors won't take the time to complete the registration process and other visitors will already be members, which means you get nothing even if they click through to visit the site.

• Diversify to stabilize your income.
  Choose partners with a variety of payout methods so that you can create a stable base of income. For instance, if you choose only partners that pay commissions based on sales, you could have an income that varies widely from month to month. However, if you choose a mix of affiliate programs with some paying per click, some for registration, and some for sales, you'll create a more stable income. You might also want to consider when programs pay out and choose some with monthly payouts and others with quarterly payouts.

• Read affiliate agreements carefully.
  Some agreements will specify that you cannot display advertisements for similar sites and some may specify that you use only banners and not text links. Unless you comply with all terms in the affiliate agreement, you will likely find yourself short-changed on payoffs. And you can potentially cut off other revenue streams that could be more lucrative.

• Choose affiliate programs that meet your navigation objectives.
  While some affiliate programs specify exactly how banner and text links must be created, others will allow you to open links in a separate browser window -- allowing your customers to remain on your site at the same time that you take advantage of your affiliate opportunities.

• Choose products and services that don’t compete with what you offer.
  Last but not least -- the obvious: if you're a small bookstore, don’t partner with Amazon.com. Even if you think that customers will appreciate the opportunity to find items that you do not stock, you’ll more likely discover that your customers prefer the lower prices that a huge chain can offer -- on all the items.

After you've chosen the affiliate partners with whom you'd like to associate, you'll need to fill out an application and tell them about yourself and your Web site. Others will carefully review your site for content, number of hits, and current affiliate programs. Acceptance criteria vary widely. DirectLeads, for instance, requires that sites have 3,000 unique visitors per month, while Furniture.com's affiliate agreement states that sites can be rejected if they discriminate on the basis of race, sex, religion, nationality, disability, sexual orientation or age; promote illegal activities; or contain little or no original content.

Some programs review sites immediately, while others take several weeks to give you a decision. You should be notified via email either way and if you're accepted, you'll be sent your affiliate ID and told where you can find the html code you'll need in order to place the appropriate banners or text links on your site. If you're not accepted, you may be told why your site was not accepted and given the option of reapplying when you meet their criteria.

It's important to follow the rules when you participate in affiliate programs or you'll find your membership terminated or suspended. Each affiliate agreement is slightly different, but many contain directions concerning the following:

• Placement of Ads: Your agreement will likely specify the size, style, and number of ads that you can place per page, and identify whether you can use ads in newsletters or exclusively on your Web site. Most request ads to be located in a "prominent place" on the site, but a few will be very specific about ad placement.

• Site Content: Site content provisions vary widely. Some simply specify that you will not post adult content on your site and others require that your site has valid content concerning a particular topic -- rather than serving primarily as a portal site with a collection of links.

• Exclusivity: Some agreements require that you not accept advertisements from similar sites.

• Use of Links: Most agreements require that you use links exactly as provided without any modifications.

• No Spam: All agreements prohibit the promotion of their site through the use of unsolicited email.

Making money with affiliate programs isn't as simple as putting up banner ads and expecting the checks to roll in. You'll need to do some work to get the maximum payout from your affiliate programs. Here are some simple steps you can use to make affiliate programs work for you:

• Keep it Clean: Nothing turns visitors off faster than pages and pages of banner ads. Most visitors will quickly click to another site if your opening page is too "busy" or slow to download. As ClickQuick.com's Ryan Adams puts it: "The number-one way [to get visitors to return] is to offer a reason for those visitors to come back. If your site is on some free web host, and is filled with 25 banner ads for affiliate programs on the first page, your visitors have no reason to return. Matter of fact, they will usually hit the Back button to leave before they click an ad to go to an affiliate partner."

• Use Text Links: Web users are becoming immune to banners and will ignore them. But if you include links within an article or include a text link and a description, visitors are more inclined to visit the referenced site.

• Provide Related Content: Content is what brings users to your site and what will keep them there. Take some time to develop relevant, actionable articles that will provide your visitors with truly useful information rather than simply regurgitating the same "old" material offered on similar sites. A site offering garden supplies can engage visitors by offering zonal growing tips, targeted industry news, frost warnings, and top-notch features and discussion pieces -- as well as a forum area where members can post questions and discuss the topics in the articles.

• Monitor Your Results and Adapt as Necessary: Take advantage of the up-to-the-minute tracking offered by most affiliate programs. Check your results often and make changes as necessary. If your banners aren't working, try text links. If your hottest affiliate program is buried 3 levels into your site, move it to the front page and see if your results improve. Refer-it.com's Affiliate Manager Shawn Collins has seen positive results by moving ads around and featuring different products. Collins said, "We feature different books on our homepage from time to time and whichever book we feature at a given time tends to outsell the others which are only featured in our bookstore."

• Take Advantage of Special Offers: Many sites run daily, weekly, or monthly specials -- and provide related banners! For instance, MotherNature.Com recently ran a promotion offering $20 off on a visitor's first purchase.

• Increase Your Hits: Take steps to increase your hits through search engine placement and newsletters; the more people visit your site, the more people will visit your sponsors.

Affiliate programs are the wave of the future, according to some Internet experts. A study by Forrester Research showed that on average, affiliates of top retailers generate 13% of total online revenues and will increase to 21% by 2003. According to Ryan Adams, "Affiliate programs will continue to evolve. The concept is still fairly new, and the boundaries are still being tested. I think in the near-term we will see more competition for quality affiliates. This means higher commissions or special bonuses to attract and retain the top sites."

What changes might we see in the longer term? Adams thinks more programs will move to help webmasters better integrate products and services for sale into their content. "Banner ads are poor performers for referring product sales, so affiliate programs will need to better teach their affiliates how to creatively integrate links, and also provide additional tools to reduce the manual work required in setting up and maintaining links."

Building an online empire isn't an easy proposition. It takes hard work, products you believe in, relevant content, excellent customer service, and repeat customers. Carefully chosen affiliate programs can help build your online business by providing a steady cash flow and bringing visitors back to your site. And who knows, maybe one day you'll be successful enough to sponsor an affiliate program of your own.