Affiliate marketing is a method of promoting web businesses (merchants/advertisers) in which an affiliate (publisher) is rewarded for every visitor, subscriber , customer, and/or sale provided through his/her efforts.

Affiliate marketing is also the name of the industry where a number of different types of companies and individuals are performing this form of internet marketing , including affiliate networks, affiliate management companies and in-house affiliate managers, specialized 3rd party vendors and various types of affiliates/publishers who utilize a number of different methods to advertise the products and services of their merchant/advertiser partners.

Affiliate marketing - using one site to drive traffic to another - is the stepchild of online marketing. While search engines, e-mail and RSS capture much of the attention of online retailers, affiliate marketing, despite lineage that goes back almost to the beginning of online retailing, carries a much lower profile. Yet affiliates continue to play a fundamental role in e-retailers' marketing strategies.

Cost Per Action
Cost Per Action or CPA (as it is often initialized to) is a phrase often used in online advertising and online marketing circles.

CPA is considered the optimal form of buying online advertising from a direct response advertiser's point of view. An advertiser only pays for the ad when an action has occurred. An action can be a product being purchased, a form being filled, etc. (The desired action to be performed is determined by the advertiser.) Google has incorporated this model into their Google AdSense offering while eBay has recently announced a similar pricing called AdContext .

A related term, eCPA or effective Cost Per Action , is used to measure the effectiveness of advertising inventory purchased (by the advertiser) via a CPC, CPM, or CPT basis. The CPA can be determined by different factors, depending where the online advertising inventory is being purchased.

Interactive Advertising the use of interactive media to promote and/or influence the buying decisions of the consumer in an online and offline environment. Interactive advertising can utilise media such as the Internet , interactive television , mobile devices ( WAP and SMS ), as well as kiosk-based terminals.

Revenue sharing
Revenue sharing is the splitting of operating profits and losses between the general partner(s) and limited partners in a limited partnership . More generally, the practice of sharing operating profits with a company's employees, or of sharing the revenues resulting between companies in an alliance.

Revenue sharing, as it pertains to the United States government , was in place from 1972-1987. Under this policy , Congress gave an annual share of the federal tax revenue to the states and their cities , counties , isthmuses and townships. Revenue sharing was extremely popular with state officials, but it lost federal support during the Reagan Administration . Revenue sharing was ended in 1987 to help narrow the national government's deficit . In 1987, revenue sharing was primarily replaced with block grants.

Revenue sharing, also known as cost per sale is with about 80% the predominant compensation method used in affiliate marketing on the internet. A common scenario is an ecommerce web site operator who pays an affiliate a percentage of the order amounts (usually excluding tax, shipping and other 3rd party cost that are part of the customers order), generated by visitors of the ecommerce web site, that were referred by the affiliate via various different methods.

Contextual advertising
Contextual advertising is the term applied to advertisements appearing on websites or other media, such as content displayed in mobile phones, where the advertisements are selected and served by automated systems based on the content displayed by the user.

Google AdSense was the first major contextual advertising program. It worked by providing webmasters with JavaScript code that, when inserted into web pages, called up relevant advertisements from the Google inventory of advertisers. The relevance was calculated by a separate Google bot that indexed the content of the page.

Since the advent of AdSense, the Yahoo! Publisher Network, Microsoft adCenter and others have been gearing up to make similar offerings.

Contextual advertising has made a major impact on earnings of many websites. As the ads are more targeted they are more likely to get clicked, thus generating revenue for the owner of the website (and the server of the advertisement). A large part of Google's earnings are from their share of the contextual ads served on the millions of webpages running the Adsense program.

Advertising on a Web site that is targeted to the specific individual who is visiting the Web site. A contextual ad system scans the text of a Web site for keywords and returns ads to the Web page based on what the user is viewing, either through ads placed on the page or pop-up ads. For example, if the user is viewing a site about sports, and the site uses contextual advertising, the user might see ads for sports-related companies, such as memorabilia dealers or ticket sellers. Contextual advertising also is used by search engines to display ads on their search results pages based on what word(s) the users has searched for.

Contextual advertising has attracted some controversy through the use of techniques such as third-party hyperlinking, where a third-party installs software onto a user's computer that interacts with the browser by turning keywords on a Web page into links that lead to advertisers that are not paying the Web site to advertise on its pages. A contextual ad is the advertisement that dynamically appears on a Web site.

Content courtesy of Wikipedia