The different methods of making money online can be basically broken down into three groups. Making money from displaying ads like Google Adsense, selling other people's products through affiliate marketing and selling your own products.

Personally I do all three. Some people concentrate on Adsense and some people only sell their own products. Adsense is obviously the easiest way to make money online. All you need to do is place a bit of code on your website and Google automatically displays ads from its huge pool of advertisers directly related to your content. You then get paid each time someone clicks on your ad. This has the downside that you only make when someone clicks to leave your website and sometimes you are only paid pennies for this.

Making your own product is often lauded as the most profitable way to make money online. Of course you need to be able to create something that people are prepared to buy. This usually involves creating some kind of info product. The advantage is that you keep all of the money for every sale you make.

With affiliate marketing you only make a percentage of the sale. This can vary quite a lot from company to company, but with regular bricks and mortar type companies the range might be around 5-10 per cent. This doesn't sound like a huge amount of money but you as an affiliate marketer don't have to do much to get this commission and if you are selling expensive products like televisions or computers the commission can quickly add up to a decent income. Also if you think how the company needs to order the product, keep it in storage, ship it to the customer and handle payment and all aspects of customer support, you can quickly see the advantages of being in the affiliate marketing business.

What exactly is affiliate marketing?

Affiliate marketing is basically selling other companies products and services on your website or through some other method of internet marketing, like through an email list or PPC (pay per click) advertising.

You join an affiliate program and get you will get banners and links to put on your website. The links contain an individual tracking code, so the affiliate knows you referred the sale. When someone clicks on the link and ends up buying the product, you receive a percentage of the sale.

Why do companies run affiliate programs?

Companies run affiliate programs to get more sales. They have people promoting their products for free and they only have to make a payout if a sale is made. Traditionally companiese have had to go out and spend money advertisign their products with no guarantee that they would actually make a sale. Has there ever been a better form of advertising?

What do you need?

First of all you will need your own website or blog. Many companies like to see you have at least one established and functioning website to get approved. Some companies might reject your applcation if you do not have your own website on your own domain.

The most important factor in determining the success you will have with affiliate marketing is finding relevant affiliate programs that your site visitors are interested in and importantly will want to buy.
There is no point for example offering pizza coupons on your weight loss website. By offering relevant products for sale on your website, you are not only creating an income stream but adding value to your website.

How can I join a program?

Companies that have an affiliate program will have a link at the bottom of their website labeled either Affiliates, Webmaster or Partners. Click on the link to get more information and join the program. Many companies manually approve their affiliates. At the minimum you will need to supply your name, address, how you would like to be paid, your website details and tax information.

Start with Amazon

If you are new to affiliate marketing, the first program you problem want to join is Amazon. Amazon's affiliate program gets a lot of criticism, but it is one of the easiest to sign up for and with their volume of products they sell on their website, you will be sure to find some products that are relevant to your website.

Amazon also offer a large number of different ways to display their ads. I always like keeping it simple on my websites and I like just uploading the book cover to my website and writing a description along with the link for people to purchase the product through. Amazon does have its critics, but is an easy affiliate program to implement and is even a good way to fill out your website with some content.

Once you have successfully implemented Amazon affiliate program on your website, the next step is to try and find more programs. When I was starting out, I visited competing websites in my niche and saw what they were promoting. People generally try a few different programs and when they find some successful, converting programs, they tend to promote it fairly heavily. By looking at what similar sites are promoting, you can save yourself some time with testing different programs. Of course what works for one site, doesn't mean it will work for yours.

Affiliate Networks

Many companies know the advantages of running an affiliate program on their website, but sometimes they don't want to go to the trouble of setting it up and running it themselves, so they join an affiliate network. The affiliate network manages the whole affiliate program, getting affiliates and importantly, paying affiliates.

One advantage of using affiliate networks, is that after you sign up, you get a huge array of potential products you can sell on your website, in almost any category you can think of. Affiliate networks also have some tools which you can see which affiliate programs are converting better. The downside of course is that because you are dealing with an extra entity who has to be paid also, so your percentage payout might be less than dealing with a company directly.

Some of the most well known affiliate networks are Commission Junction and Linkshare.

Two and multi-tier affiliate programs

A two-tier affiliate program, means that you not only make money from every new person you refer to a program, you also make a percentage from all of the people they refer. Two-tier affiliate programs are a great way to build passive income, as you will continue to make money even if you stop promoting that product.

Final thoughts

Affiliate marketing is a great way to earn money on the internet. Many people start with making money from the Google Adsense program and then turn to affiliate marketing to diversify and increase their earnings. It is important to use affiliate programs that directly relate to the content of your website and which your users will find useful. Affiliate marketing is a great way for companies to promote their products on the internet and it is really a win-win situation for everyone involved.