AD – Advertisement, text, banner, flash, video etc.
CJ – Commission Junction (Network)
CPA – Cost per action
CPC – Cost per click
CPL – Cost per lead
CPM – Cost per mil (mil/mille/M = latin/Roman numeral for thousand)
CPS – Cost per sale
CR – Conversion rate
CTR – Click through rate
DRM – Dynamic rich media (type of Ad, technology). It has nothing to do with DRM as in digital rights management
EPC – Earnings per click / earnings per 100 clicks
LS – Linkshare (Network)
NCS – Nationwide Card Services (Network)
OPM – (or APM) – outsourced (affiliate) program management
PFI – Pay for inclusion
PID – Publisher ID (Affiliate/Affiliate site ID)
PF – Performics (Network)
PFP – Pay For performance
PPC – Pay per click
PPCSE – Pay per click search engine
PPI – Pay per impression
PPL – Pay per lead
PPS – Pay per sale
ROI – Return on investment
SAS – ShareASale (Network)
SE – Search engines
SEM – Search engine marketing
SEO – Search engine optimization
SERP – Search engine result page
SID – URL parameter the affiliate can pass to get tracked with sales and leads

Search affiliates that utilize Pay per click search engines to promote the advertisers offers (Search arbitrage)
Comparison shopping sites and directories
Loyalty sites, typically characterized by providing a reward system for purchases via points back, cash back or charitable donations
Coupon and rebate sites that focus on Sales promotions
Content and niche sites, including product review sites
Personal websites (these type of sites were the reason for the birth of affiliate marketing, but are today almost reduced to complete irrelevance compared to the other types of affiliate sites)
Blogs and RSS Feeds
Email list affiliates (Owners of large opt-in email list)

Merchants like affiliate marketing because it is a “pay for performance model”, meaning the merchant does not incur a marketing expense unless results are realized. Some businesses owe much of their growth and success to this marketing technique, especially small and midsize businesses. However, unlike display advertising, affiliate marketing is not easily scalable.

Some merchants run their own affiliate programs while others use third party services provided by intermediaries to track traffic or sales that are referred from affiliates. (see outsourced program management) Merchants can choose from different types of affiliate management solutions including: standalone software, hosted services, shopping carts with affiliate features, and third party affiliate networks.

Affiliate marketing has grown quickly since its inception. The e-commerce website, viewed as a marketing toy in the early days of the web, became an integrated part of the overall business plan and in some cases grew to a bigger business than the existing offline business. According to one report, total sales generated through affiliate networks in 2006 was ?2.16 billion in the UK alone. The estimates were ?1.35 billion in sales in 2005. [1] MarketingSherpa’s research team roughly estimates affiliates worldwide will earn $6.5 billion in bounty and commissions in 2006. This includes retail, personal finance, gaming and gambling, travel, telecom, ‘Net marketing’ education offers, subscription sites, and other lead generation, but it does not include contextual ad networks such as Google AdSense. [2]

Currently the most active sectors for affiliate marketing are the adult, gambling and retail sectors[citation needed]. The three sectors expected to experience the greatest growth are the mobile phone, finance and travel sectors[citation needed]. Hot on the heels of these are the entertainment (particularly gaming) and internet-related services (particularly broadband) sectors. Also several of the affiliate solution providers expect to see increased interest from B2B marketers and advertisers in using affiliate marketing as part of their mix[citation needed]. Of course, this is constantly subject to change.

Snowballing, this system rewards a chain of hierarchical publishers who may or may not know of each others’ existence, yet generate income for the higher level signup. This sort of structure has been successfully implemented by a company called Quixtar.com, a division of Alticor, the parent company of Amway. Quixtar has implemented a network marketing structure to implement its marketing program for major corporations such as Barnes & Noble, Office Depot, Sony Music and hundreds more. This is not considered affiliate marketing. Two-tier programs exist in the minority of affiliate programs; most are simply one-tier. Programs beyond 2-tier are not considered affiliate programs, but rather Multi-level marketing (MLM) or network marketing.

Email Spam
In its early days many internet users held negative opinions of affiliate marketing due to the tendency of affiliates to use spam to promote the programs in which they were enrolled. As affiliate marketing has matured many affiliate merchants have refined their terms and conditions to prohibit affiliates from spamming.

Search Engine Spam / Spamdexing
There used to be much debate around the affiliate practice of spamdexing and many affiliates have converted from sending email spam to creating large volumes of autogenerated webpages each devoted to different niche keywords as a way of SEOing their sites with the search engines. This is sometimes referred to as spamming the search engine results. Spam is the biggest threat to organic search engines whose goal is to provide quality search results for keywords or phrases entered by their users. Google’s algorithm update dubbed “BigDaddy” in February 2006 which was the final stage of Google’s major update dubbed “Jagger” which started mid-summer 2005 specifically targeted this kind of spam with great success and enabled Google to remove a large amount of mostly computer generated duplicate content from its index.

Sites made up mostly of affiliate links are usually badly regarded as they do not offer quality content. In 2005 there were active changes made by Google whereby certain websites were labeled as “thin affiliates” and were either removed from the index, or taken from the first 2 pages of the results and moved deeper within the index. In order to avoid this categorization, webmasters who are affiliate marketers must create real value within their websites that distinguishes their work from the work of spammers or banner farms with nothing but links leading to the merchant sites.

Affiliate links work best in the context of the information contained within the website. For instance, if a website is about “How to publish a website”, within the content an affiliate link leading to a merchant’s ISP site would be appropriate. If a website is about Sports, then an affiliate link leading to a sporting goods site might work well within the content of the articles and information about sports. The idea is to publish quality information within the site, and to link “in context” to related merchant’s sites.

Adware
Adware is still an issue today, but affiliate marketers have taken steps to fight it. AdWare is not the same as SpyWare although both often use the same methods and technologies. Merchants usually had no clue what adware was, what it did and how it was damaging their brand. Affiliate marketers became aware of the issue much more quickly, especially because they noticed that adware often overwrites their tracking cookie and results in a decline of commissions. Affiliates who do not use adware became enraged by adware, which they felt was stealing hard earned commission from them. Adware usually has no valuable purpose or provides any useful content to the often unaware user that has the adware running on his computer. Affiliates discussed the issues in various affiliate forums and started to get organized. It became obvious that the best way to cut off adware was by discouraging merchants from advertising via adware. Merchants that did not care or even supported adware were made public by affiliates, which damaged the merchants’ reputations and also hurt the merchants’ general affiliate marketing efforts. Many affiliates simply “canned” the merchant or switched to a competitor’s affiliate program. Eventually, affiliate networks were also forced by merchants and affiliates to take a stand and ban adware publishers from their network.

Trademark Bidding / PPC
Affiliates were among the earliest adopters of Pay-per-click advertising when the first PPC search engines like goto.com (which became later Overture.com, acquired by Yahoo! in 2003) emerged during the end of the nineteen-nineties. Later in 2000 did Google launch their PPC service AdWords which is responsible for the wide spread use and acceptance of PPC as an advertising channel. More and more merchants engaged in PPC advertising, either directly or via a search marketing agency and realized that this space was already well occupied by their affiliates. Although this fact alone did create channel conflicts and hot debate between advertisers and affiliates, was the biggest issue the bidding on advertisers names, brands and trademarks by some affiliates. A larger number of advertisers started to adjust their affiliate program terms to prohibit their affiliates from bidding on those type of keywords. Some advertisers however did and still do embrace this behavior of their affiliates and allow them, even encourage them, to bid an any term they like, including the advertisers trademarks.

Lack of Self Regulation
Affiliate Marketing is driven by entrepreneurs who are working at the forefront of internet marketing. Affiliates are the first to take advantage of new emerging trends and technologies where established advertisers do not dare to be active. Affiliates take risks and “trial and error” is probably the best way to describe how affiliate marketers are operating. This is also the reason why most affiliates fail and give up before they “make it” and become “super affiliates” who generate $10,000 and more in commission (not sales) per month. This “frontier” life and the attitude that can be found in such type of communities is probably the main reason, why the affiliate marketing industry is not able to this day to self-regulate itself beyond individual contracts between advertiser and affiliate. The 10+ years history since the beginning of affiliate marketing is full of failed attempts to create an industry organization or association of some kind that could be the initiator of regulations, standards and guidelines for the industry. Some of the failed examples are the Affiliate Union, iAfma, USAMC, Affiliate Marketing Advertising Board and Affiliate Marketing Trade Association.

The only places where the different people from the industry, affiliates/publishers, merchants/advertisers, networks and 3rd party vendors and service providers like outsources program managers come together at one location are either online forums and industry trade shows. The forums are free and even small affiliates can have a big voice at places like that, which is supported by the anonymity that is provided by those platforms. Trade shows are not anonymous, but a large number, in fact the greater number (quantitative) of affiliates is not able to attend those events for financial reasons. Only performing affiliates can afford the often hefty price tags for the event passes or get it sponsored by an advertisers they promote.

Because of the anoymity of forums, the only place where you are to get the majority (quantitative) of people in the industry together, is it almost impossible to create any form of legally binding rule or regulation that must be followed by everybody in the industry. Forums had only very few successes in their role as representant of the majority in the affiliate marketing industry. The last example[9] of such a success was the halt of the “CJ LMI” (”Commission Junction Link Management Initiative”) in June/July 2006, when a single network tried to impose on their publishers/affiliates the use of Javascript tracking code as a replacement for common HTML Links.

CPA Networks “Threat”
Affiliate marketer usually avoid this topic as much as possible, but when it is being discussed, then are the debates explosive and heated to say the least. The discussion is about CPA Networks and their impact on “classic” Affiliate Marketing. Traditional Affiliate Marketing is resources intensive and requires a lot of maintenance. Most of this includes the management, monitoring and support of affiliates. Affiliate Marketing is supposed to be about long-term and mutual benefitial partnerships between advertisers and affiliates. CPA Networks on the other hand eliminate the need for the advertiser to build and maintain relationships to affiliates, because that task is performed by the CPA Network for the advertiser. The Advertiser simply puts an offer out, which is in almost every case a CPA based offer, and the CPA Networks take care of the rest by mobilizing their affiliates to promote that offer. CPS or revenue share offers are rarely be found at CPA Networks, which is the main compensation model of classic Affiliate Marketing.

The Name Affiliate Marketing
Voices in the industry are getting louder that recommend a renaming of Affiliate Marketing. The problem with the word affiliate marketing is that it is often confused with network-marketing or multi-level marketing what it is absolutely not. “Performance Marketing” is one of the alternative names that is used the most, but other recommendations were made as well, but who is to decide about the change of a name of a whole industry. Something like that was attempted years ago for the Search Engine Optimization Industry, an attempt that obviously failed since it is still called SEO today.

Pay-per-impression (PPI) / Cost-per-thousand (CPM)

Cost-per-mil (mil/mille/M = latin/Roman numeral for thousand) impressions. Publisher gets from Advertiser $x.xx amount of money for every 1000 impressions (page views/displays) of the Ad. The Ad can be text (AdSense), banner image or rich media.

Pay-per-click (PPC) / Cost-per-click (CPC)

Cost-per-click. Advertiser pays publisher $x.xx amount of money, every time a visitor (potential prospect) clicks on the advertiser’s Ad. It is irrelevant (for the compensation) how often an Ad is displayed. commission is only due when the Ad is clicked. See also click fraud.

Pay-per-lead (PPL) / Cost-per-action/acquisition (CPA) / Cost-per-lead CPL)

Cost-per-action or Cost-per-acquisition (CPA), Cost-per-Lead (CPL). Advertiser pays publisher $x.xx in commission for every visitor that was referred by the publisher to the advertiser (web site) and performs a desired action, such as filling out a form, creating an account or signing up for a newsletter. This compensation model is very popular with online services from internet service providers, cell phone providers, banks (loans, mortgages, credit cards) and subscription services.

Pay-per-sale (PPS) / Cost-per-sale (CPS)

Cost-per-sale (CPS). Advertiser pays the publisher a percentage (%) of the order amount (sale) that was created by a customer who was referred by the publisher. This model is by far the most common compensation model used by online retailers that have an affiliate program. This form of compensation is also referred to as Revenue sharing.

Pay-per-call (no abbreviation exists yet)

This is a new compensation model. No official abbreviation exist yet. Advertiser pays publisher a $x.xx commission for phone calls received from potential prospects as response to a specific publisher Ad. Recently developed call-tracking technology allows to create a bridge between online and offline advertising. Pay-per-call advertising is still new and in its infancy.