In its most basic form, Affiliate Marketing is a form of revenue share where the affiliate (or publisher) is paid a commission based on visitors, sales, subscriptions or registrations that have come to the merchant through the affiliate's efforts.

Google's AdSense is a very well known form of Affiliate Marketing, and serves as a good example of how it works. Every time you or I click on a Google advert at a site, the site owner is paid a set amount of money for the click. This is known as a Cost-Per-Click model (CPC.) However, Google's Affiliate Marketing model is unique because it is based on contextual advertising. Every banner or advert is based on the affiliate's website content. This and the fact that Google monitors the clicks, has made CPC work very well for Google.

However, in the early days of Affiliate Marketing, most companies employed a CPC model without these regulations, resulting in various problems and abuses. Some affiliates began using adware and tracking cookies. Some employed force-click techniques, used false-advertising, or created spam sites with stuffed keywording (random keywords laced all over the site for search engines to pick up.) Many other unethical techniques were used such as spam e-mailing etc. Some of these techniques are even used today (known as 'Black Hat' SEO or promotion) but due to the updated algorithms of search engines they bring very little success to those using them.

Only 1% of the market use CPC as their model for Affiliate Marketing as a result of the above, and it has now evolved into two other Affiliate Marketing models. The first is the Cost-Per-Sale (CPS) model. This model pays the affiliate commission only if the lead generated through the affiliate's efforts (banners, emails etc.) results in an actual sale. For instance, if an affiliate has a link to an online bookstore, and I click on the link, the affiliate receives no commission unless I buy some books. Depending on the merchant's specifications, the affiliate receives more money if I buy many books.

The next Affiliate Marketing model, Cost-Per-Action (CPA) works very similarly, except that it refers to sites that don't necessarily make sales, but are subscription or registration based. It could be an e-Newspaper or an e-Magazine site. The affiliate then receives commission only based on whether I perform the necessary ACTION on the merchant's site, such as register or subscribe to the merchant's service.

Some merchant's have employed the CPA system for their Affiliate Marketing and set up registration paths. What this means is that if I register on one site, I am also directed to another site selling a service that I might be interested in. Sometimes registration to the other site is free and automatic, sometimes it isn't, but any action on my part results in the original site being paid a commission etc. Merchants often team up so that if I register on one, I am directed to the other, or vice versa. Such a system can be incredibly effective.