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When you are starting an online business, affiliate advertising can be a great way of reaching the target audience.  Affiliate advertising is a marketing practice in which a business rewards one or more affiliates for each visitor brought about by the affiliate's marketing efforts.

Affiliate marketing overlaps with other Internet marketing methods such as organic search engine optimization, paid search engine marketing, e-mail marketing, and also display advertising.

Affiliate advertising can be classified into two types:

• Pay per click (PPC)
• Pay performance (PPP)

Pay per click (PPC): Pay per click affiliate programs have gained popularity amongst affiliate marketers. The business owner pay affiliates every time they refer a visitor to their website, regardless if the visitor buys or not. A business owner can either offer text or banner ads for the affiliate to choose and paste on his website. When a visitor clicks on the text or banner ads, the merchant pays a certain amount or percentage to the affiliate. If you are able to drive lots of traffic and generate lots of clicks, then you can make big bucks.

Pay per performance (PPP): This is a better and a profitable approach because with pay per performance the merchant pays the affiliate when the visitor purchases the product (Pay per sale) or signs up for anything the merchant is offering (Pay per Lead).

These are the different types of affiliate programs popular among business owners and are often used by finance and insurance companies who need sign-ups for their business to grow.

Tier affiliate marketing: Also referred to as different level affiliate marketing, are affiliate programs that can benefit affiliates from referring others to the affiliate program. Tier affiliate marketing can be classified into different groups namely single-tier, two-tier, and multi tier. These are based on different levels in the affiliate network by which payments are made.

In single-tier affiliate marketing, commissions are paid for traffic or direct sales whereas in case of two-tier affiliate marketing, the affiliate is not only paid for direct sales that he refers to the merchant, but also for referring other people to the affiliate program; once they sign up and become affiliates, you get a certain percentage of all sells they make. Multi-tier affiliate marketing works on the same principle as two-tier affiliate marketing; however, the affiliate gets additional commissions for a wider number of affiliates in different tiers. You get a percentage of your referrals.

Residual income affiliate marketing: In case of Residual income affiliate marketing, affiliates are given the opportunity to refer other people to the affiliate program. The affiliate gets paid every month as long as the referral stays a member of the affiliate program.

These different types of affiliate programs lay a foundation for starting your own online business. As per your business needs, you can evaluate which type of affiliate program will be profitable for you. You can start your marketing campaign accordingly. The affiliate program will not only enable you to reach wider audience but will ensure better profit margin.