Affiliate programs are run by companies as a means generate leads and/or direct sales from other websites. They pay the affiliates who show their products of their website, as commission for the products or services sold by the links on these sites. As an example, if a website owner registers for amazon.com's affiliate program, then he will get the choice to select and show different type of banner ads or links on his website. Now it a visitor clicks on these banners and purchases a product from amazon, the website owner will receive a commission.
Revenue is generated by one of these methods:
Click Through: The affiliate is paid based on the number of the visitors which click on the ads to go to the website.
Leads: Affiliate is paid based on the number visitors that fill a specific survey.
Purchases: Affiliate is paid commission on the number of sales that are generate from affiliate traffic.
Affiliate programs can prove very beneficial for both the companies providing the affiliate program and the affiliates. The problems are that small companies can not afford to run affiliate programs most of the times because of high costs of developing and maintaining affiliate programs. and for the website owners the commissions are rarely above the 5% mark because most of the sales on internet are made with small profit margins.