HOW AFFILIATE MARKET WORKS, AND WHY IT WORKS

In order to get more traffic and sales, a merchant can start what is known as an “affiliate program”.

In practical terms, an affiliate program is simply the 'structure' under which the merchant will provide support and incentive to the affiliates who join the program. Setting up the program requires the merchant to do several things:
✔ Implement an affiliate “tracking” system
✔ Decide what to pay affiliates for each referred sale on a given product.
✔ Set up support and resources for affiliates so they can easily market the products

The affiliate tracking systems can be run by the merchant, or through a third-party like Commission Junction or Clickbank. “Commissions” (what affiliates are paid) are usually set as a percentage of product price. Lastly, the support and resources include things like banners, solo ads and other pre-written promotional material the affiliate can use.
When an affiliate joins a particular affiliate program, he is given an “affiliate link”.
This link is unique to that individual affiliate, and all visitors referred by the affiliate through that link are tracked and credited to the affiliate.
To sum up: when a visitor clicks through an affiliate link and purchases something, the affiliate who referred that visitor gets credit for the sale and gets paid a commission.

Once you have the link, you can start using it on your own website, in e-mails, in Google
Adwords ads, and so on. The link will take the visitor to the merchant's sales page, while crediting you with the referral if a sale is made. Pretty simple, right?

The reason affiliate programs works so well is because of the incentive provided to affiliates, and the cost-effectiveness provided to the merchant. The affiliate wants to earn money. The merchant wants to save money, and he does, because he doesn't have to pay the affiliate anything until a sale is made.

This is different from traditional advertising, where you have to pay up front for visitors and have no guarantee of sales. So, the relationship between an affiliate and a merchant is really a win-win situation. For the affiliate, especially, there's no limit on income. As an affiliate, you can earn as much money as you are able to generate in commissions.

This is unlike a regular job where you have a fixed salary our hourly wage. If you were to refer $100,000 in sales as an affiliate on one product, and if your commission is 50%, then you get $50,000. It doesn't matter how long it took you to do it…or even whether you do it month after month.

You control your own financial destiny all the way.