Introduction Conceived of slightly more than a decade ago, affiliate marketing has come a long way. It has grown from just a handful of affiliate pro- grams in the late 1990s to a multibillion-dollar worldwide industry. Affiliate marketing is essentially performance-based advertising, whereby affiliates promote a merchant's product/service and get remunerated for every sale, visit, or subscription sent to the merchant. The most frequently used payment arrangements include pay-per-sale, pay-per-lead, pay-per-call, and pay-per-click. Affiliate marketing is one of the most powerful and effective customer acquisition tools available to an online merchant today. The merchant decides what commis- sion to pay and pays only when the results (sales, leads, and/or clicks) are there. The mainstream concept owes its creation to CDNow.com and Amazon.com. In November 1994, CDNow started its Buyweb program--the first online marketing program of its kind. Amazon continued this pattern in July 1996 with its Associates program. Amazon claims that currently the number of its affiliates worldwide exceeds 1 million. Today nearly all online retailers from the Internet Retailer's Top 500 list have xxix I N T RO D U C T I O N