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Online Affiliate ProgramOnline Affiliate Program is a product of ecommerce and online web promotion. An on-line seller offers a commission to another for referring a customer to an on-line site. An offer to a person to compensate them in some fashion for bringing in business, without any additional incentive to locate (find, recommend, recruit, sponsor) more business finders, is a one-tier program (at least for the purposes of this article.) When an Online Affiliate Program contains two sources of income; namely, compensation for bringing in business, and compensation when you locate (find, recommend, recruit, sponsor) more business finders who then bring in business, it is a “two-tier” program. The Online Affiliate Program involves selling something, and paying commissions for sales. You can see the money flow, and the reason for the money flow.When someone buys something, the money flows from the buyer to the program. This is a customer sale. Note that selling across an international boundary, into another country, may require little or no advance permission or registration. When the program pays a commission to the “customer finder” money flows away from the program to an income opportunity seeker, to reward the person for bringing business volume to the program. This money flow evidences the existence of a single-level income opportunity. (To use Online Affiliate Program words, “one-tier”) Note that there exists no incentive for the income opportunity seeker to find more income opportunity seekers, only to find customers. Offering an income opportunity to the residents of another country very often requires significant legal and regulatory preparation, and needs to be differentiated from the sale of products or services. If, in addition to the above, the Online Affiliate Program pays a commission to an income opportunity seeker based upon the business volume of another income opportunity seeker introduced by the first income opportunity seeker, a twofold incentive exists. The income opportunity seeker has a financial incentive to get customers for the program, and a financial incentive to find more income opportunity seekers. In this second case, the second type of money flows away from the Online Affiliate Program to an income opportunity seeker, to reward the person for business volume not directly generated, but generated by the income opportunity seeker “found” by the first one. This second type of money flow evidences the existence of a two-tier Online Affiliate Program. In the US and in many other foreign countries, different and more stringent laws and regulations apply to multi-level income opportunities that may not apply to single level income opportunities. There are two other characteristics to the money flow away from the Online Affiliate Program (both one-tier and two-tier) that should be noted. It is gross income, taxable to the recipient, to the extent that income exceeds allowable business deductions. And in the US it is reportable by the payer under the 1099 rules to the extent that it exceeds $600 in a year to an individual recipient. Comparable foreign laws need to be carefully researched on the questions of taxable nature, and reporting, and in some countries, withholding requirements. Generally, Online Affiliate Program are offered by sites selling goods or services, although some affiliate programs reward other types of transaction such as getting a visitor to sign up for a free newsletter, or download a screensaver etc. but the basic concept remains the same.
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