The concept of revenue sharing has been around for quite a while, long before the internet. But the idea of affiliate marketing has taken it to new levels, and become a staple form of advertising and bringing in business for all types of e-commerce.
Online merchants find affiliate marketing highly advantageous due to the fact that it presents little to no risk both for the merchant and the 'affiliate.' The way it works is that the affiliate earns a type of commission or fixed amount based on the number of sales the affiliate brings to the merchant, either through on-line links on the affiliates website – or through email, blogs, rss feeds and many other kinds of on-line communication. Some merchants (only about 1% of affiliate marketing) use a cost-per-click remuneration system, which simply means that the affiliate earns every time an internet searcher clicks on an advert on their site or email. However, due to fraudsters taking advantage of this method (creating ad-ware, sending spam, or useless indexing sites) this form of remuneration is not preferred and becomes too risky for merchants to use.
Affiliate marketing also bears no cost on the merchant in the original set-up – in other words, it costs nothing to place advertising banners on affiliate's sites, and there is only a cost if a lead or sale has been generated (which is advantageous for all.) Merchants also get to set the parameters, and decide on the incentive schemes. Thus, it is a very inexpensive (but highly efficient way) to grow a business.
Source CMT Music Awards 2012