This post will be shared in three parts. Its main purpose is to give a background to affiliate marketing so that persons practising this form of business model as well as those aspiring to do so can have a healthy appreciation of the development of affiliate marketing and hopefully show better appreciation of this form of business. Its tripartite fold includes the merchant, the network and the publisher and somehow must redound to a symbiotic relationship among the three. Enjoy Part 1 – what is affiliate marketing?
What is Affiliate Marketing?
Affiliate marketing is a type of performance-based marketing in which a business rewards one or more affiliates for each visitor or customer brought by that affiliate’s own marketing efforts. The industry has four main players:
the merchant (also called ‘retailer or ‘brand’)
the network (which contains offers for the affiliate to choose from and takes care of the payments)
the publisher (also called ‘the affiliate)
and the customer
The market has grown in complexity and has resulted in the emergence of a secondary tier of players, including affiliate management agencies, super-affiliates and specialized third party vendors
As we continue to discuss what is affiliate marketing? we can consider that it overlaps with other internet marketing methods to some degree, because affiliates often use regular advertising methods. Those methods include organic search engine optimization (SEO), paid search engine marketing (PPC -pay per click), e-mail marketing, content marketing and in some sense display advertising. On the other hand, affiliates sometimes use less orthodox techniques, such as publishing reviews of products or services offered by a partner.
Affiliate marketing is commonly confused with referral marketing, as both forms of marketing and the main difference between them is that affiliate marketing relies purely on financial motivations to drive sales while referral marketing relies on trust and personal relationships to drive those sales.
What is affiliate marketing? is a question frequently asked by many with some amount of anxiety with respect to the possible answer but at the same time the activity of affiliate marketing is frequently overlooked by advertisers. While search engines, e-mail and website syndication capture much of the attention of online retailers, affiliate marketing carries a much lower profile. Still, affiliates continue to play a significant role in e-retailers’ marketing strategies.
The history of Affiliate marketing (how did it all begin)
The concept of revenue sharing – paying commission for referred business – was being done before affiliate marketing and the Internet. The translation of the revenue share principles to mainstream e-commerce took place in November 1994, approximately four years after the origination of the World Wide Web (WWW).
The concept of affiliate marketing on the Internet was conceived of, put into practice and patented by William J. Tobin, founder of PC Flowers and Gifts. This was launched on the Prodigy Network in 1989 and remained there until 1996. By the year 1993, PC Flowers and Gifts generated sales of over $6million per year on the Network, culminating in the development of the business model of paying a commission on sales to the Prodigy Network in 1998.
In 1994, Tobin, in cooperation with IBM, launched a beta version of PC Flowers & Gifts on the Internet. By 1995 PC Flowers & Gifts had launched a commercial version of the website and had 2,600 affiliate marketing partners on the World Wide Web. Tobin applied for a patent on tracking and affiliate marketing on January 22, 1996 and was issued a U.S Patent on Oct 31, 2000. He also received a Japanese Patent on Oct. 5, 2007 and U.S patent on May 17, 2009 for affiliate marketing and tracking. In July 1998 PC Flowers and Gifts merged with Fingerhut and Federated Department Stores.
In November 1994, CDNOW launched its BUYWeb programme. They had the idea that music-oriented websites could review or list albums on their pages which their visitors might be interested in purchasing. These websites could also offer links that could take a visitor directly to CDNOW to purchase the albums. The idea for remote purchasing originally arose from conversations with music label Geffen Records in 1994.
The management at Geffen wanted to sell their artists’ CD’s directly from their website, but did not want to implement this themselves. Geffen asked CDNOW to design a programme to facilitate order fulfilment. Geffen realized that CDNOW could link directly from the artist on its website to Geffen’s website, bypassing the CDNOW home page and going directly to an artist’s music page.
Amazon.com (Amazon) launched its associate programme in July 1996. Amazon associates could place banner or text links on their sites for individual books, or link directly to Amazon’s home page.
When visitors clicked from the associate’s website to Amazon and purchased a book, the associate received a commission. Amazon was not the first merchant to offer an affiliate programme, but its programme was the first to become widely known and serve as a model for subsequent programmes.
In February 2000, Amazon announced that it had been granted a patent on components of an affiliate programme for which application was made in 1997 and this predates most affiliate programmes.
Affiliate marketing has grown quickly since its inception. The e-commerce website, viewed as a marketing toy in the early days of the Internet, became an integrated part of the overall business plan and in some cases, grew to a bigger business than the existing offline business. According to one report, the total sales amount generated through affiliate networks in 2016 was 2.16 billion pounds in the UK alone. The estimates were 1.35 billion in sales in 2005.
The MarketingSherpa’s research team estimated that, in 2016, affiliates worldwide earned US 6.5 billion in bounty and commissions from a variety of sources in retail, personal finance, gaming and gambling, travel, telecom, education, publishing and forms of lead generation other than contextual advertising programmes.
In 2006, the most active sectors for affiliate marketing were the adult, gambling, retail industries and file sharing services. The three sectors expected to experience the greatest growth are the mobile phone, finance and travel sectors. Soon after these sectors came the entertainment and Internet-related services sectors. Also, several of the affiliate providers expect to see increased interest from business-to-business marketers and advertisers in using affiliate marketing as part of their marketing mix.
I hope that we were able to satisfactorily answer the question on what is affiliate marketing? There are many twists and turns as the business model developed and like everything in life, evolution has played its part. In part 2 we will look at web development and its impact on affiliate marketing.