Affiliate marketing is an agreement between two websites in which one site (the affiliate) sends traffic to another site by means of advertising or content.

In return, the affiliate receives a percentage of sales generated.

Having worked with affiliate programs for several years now I can vouch that's it possible to make a very comfortable living working from home with affiliate programs.

Sure there are downsides - there can be sales tracking issues; dud affiliate programs, and there's always those dreaded returns and commission chargebacks.

But the upside more than makes up for it: you get to be your own boss; you can set your own hours; you're building a potentially enormous recurring stream of income; and there's no workplace politics or overbearing boss to hound you.

But the best part is this: the potential to make money is unlimited - there is no glass ceiling.

So if affiliate programs are such a great concept - why do statistics tell us that only 5% of affiliate marketers ever make money online?

Why aren't more affiliates making more money?

In my online experience I've seen a few affiliate websites that are absolute genius at selling. Most however make several deadly mistakes that are probably costing them thousands of dollars in sales.

Here are the 3 top reasons why 95% of affiliate websites don't make more money and how you can steer clear of the pitfalls:

Reason #1: Trying to sell too many products.

Have you ever visited a website and been knocked senseless with sales offers? Banners flashing, moving text - moving up, down, left to right, right to left, bright laughing images bouncing across your screen.

Then the pop-ups come - pop-ups, pop-unders, pop-overs. It's non-stop sales-pitch overload - and you can't get out of there fast enough. It takes you a full five minutes to re-focus your eyes once you manage to escape from the website

Ok, some affiliate websites aren't that bad but you get the point.

While working for a bank several years back, I learned one of the #1 rules of sales: "A confused mind always says 'No'." If you give someone too many options, too many choices, or even too much information too quickly - they won't buy anything. They will always say 'No' to the sale.

Solution? Reduce the confusion and you'll INCREASE the sales.

Top affiliates will tell you to focus on one or two products per website (or per web page). Never more than that.

If you want to increase your conversion rate, stop selling so many products on one website. Focus on the top one or two that make you the most sales. You'll then have a lot more customers saying 'yes' and putting cash in your pocket.

Reason #2: Website theme is too general.

When choosing a theme for your website, think niche, not general. For example, unless you're Best Buy or Future Shop, you might not want to build a website about computers. That's way too general and you're now in competition with the big boys. Why put yourself through that?

This is a fundamental mistake new affiliates make. They choose a website theme that is much too general. They choose to make a website about computers or credit cards or diets or insurance.

These are all profitable topics of major interest to many people. But the topics are too broad and you'll be running yourself ragged trying to be all things to all people.

Solution? Make your website theme as niche as you can - while still being profitable.

For example, instead of a website about computers, why not a site about laptops only? Instead of diets, why not diet patches? Instead of credit cards, why not no-fee credit cards? You get the idea.

By doing this you'll be way ahead of most affiliate marketers. You'll also be setting yourself apart from the crowd - people will remember your website as a 'specialized' website and you'll be the first website they'll visit when they want a laptop, or a diet patch review or a no-fee credit card.

Reason #3 Poor Choice of Affiliate Program

If you're an affiliate who isn't making the money you think you should be making - maybe the problem isn't anything you've done. The problem could be the affiliate program.

Not every affiliate program is created equal and for every 1 that makes you money, there are 10 that won't. It's not your fault, that's just the way it works. You've got to test and try different programs to find the true winners.

Experience will show you which ones are a good fit for your website and your visitors. Learn from that experience and then spend more time and effort on the programs that make you the most money.

And don't just go by the highest EPC numbers (earnings per one hundred clicks). I know of one affiliate who purposely seeks out low-earning EPC affiliate programs because he says there's little competition for them. He makes a tidy little sum from several of these affiliate programs that other affiliates are ignoring.

Your personal experience is the best indicator of what will make you the most money. I've tried some affiliate programs that were (apparently) huge earners. They didn't make me a dime. I've tried others that didn't look so hot as far as earnings and they make me $1000+ per month. It really depends on you and your website.

If you're not making the money you think you should be making - and you feel you're doing everything else right, it could just be your choice of affiliate program. Try changing affiliate programs and see if that increases your sales.

Those are 3 main reasons why 95% of affiliate websites don't make the money they could be making. Steer clear of these pitfalls and you'll be on your way to being in that top 5% of affiliate marketers making the big bucks.