Illustration of the concept of affiliate marketing

Affiliate marketing is a method of promoting web businesses (merchants/advertisers) in which an

affiliate (publisher) is rewarded for every visitor, subscriber, customer, and/or sale provided through

his/her efforts.

Affiliate marketing is also the name of the industry where a number of different types of companies and

individuals are performing this form of internet marketing, including affiliate networks, affiliate

management companies and in-house affiliate managers, specialized 3rd party vendors and various types of

affiliates/publishers who utilize a number of different methods to advertise the products and services

of their merchant/advertiser partners.

Affiliate marketing overlaps with other internet marketing methods to some degree, because affiliates

are using the same methods as most of the merchants themselves do. Those methods include organic search

engine optimization, paid search engine marketing, email marketing and to some degree display

advertising.

Affiliate marketing - using one site to drive traffic to another - is the stepchild of online marketing.

While search engines, e-mail and RSS capture much of the attention of online retailers, affiliate

marketing, despite lineage that goes back almost to the beginning of online retailing, carries a much

lower profile. Yet affiliates continue to play a fundamental role in e-retailers' marketing strategies.

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History

The beginning

The concept of revenue sharing, paying commission for referred business, predates affiliate marketing

and the internet. The translation of the revenue share principles to mainstream electronic commerce on

the internet happened almost four years after the World Wide Web was born in November 1994 when CDNow

launched its BuyWeb program.

With its BuyWeb program, CDNow was the first to introduce the concept of an affiliate or associate

program with its idea of click-through purchasing through independent, online storefronts.

CDNow.com had the idea that music-oriented web sites could review or list albums on their pages that

their visitors might be interested in purchasing and offer a link that would take the visitor directly

to CDNow to purchase them. The idea for this remote purchasing originally arose because of conversations

with a music publisher called Geffen Records in the fall of 1994. The management at Geffen Records

wanted to sell its artists’ CDs directly from its site but did not want to do it itself. Geffen Records

asked CDNow if it could design a program where CDNow would do the fulfillment.

Geffen Records realized that CDNow could link directly from the artist on its Web site to Geffen’s web

site, bypassing the CDNow home page and going directly to an artist’s music page.[2]

Affiliate marketing was used on the internet by the adult industry before CDNow launched their BuyWeb

program. The consensus of marketers and adult industry insiders is that Cybererotica was either the

first or among the early innovators in affiliate marketing with a cost-per-click program.[3]

Amazon.com launched its associate program in July 1996. Amazon associates would place banner or text

links on their site for individual books or link directly to the Amazon’s home page.

When visitors clicked from the associate’s site through to Amazon.com and purchased a book, the

associate received a commission. Amazon.com was not the first merchant to offer an affiliate program,

but its program was the first to became widely known and served as a model for subsequent programs.[4]

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In February 2000, Amazon.com announced that it had been granted a patent (6,029,141) on all the

essential components of an affiliate program. The patent application was submitted in June 1997, which

was before most affiliate programs but not before PC Flowers & Gifts.com (October 1994), AutoWeb.com

(October 1995), Kbkids.com/BrainPlay.com (January 1996), EPage(April 1996), and a handful of others.[3]

Historic development

Affiliate marketing has grown quickly since its inception. The e-commerce website, viewed as a marketing

toy in the early days of the web, 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, total sales

generated through affiliate networks in 2006 was £2.16 billion in the UK alone. The estimates were £1.35

billion in sales in 2005.[6] MarketingSherpa's research team estimated that, in 2006, affiliates

worldwide earned $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 ad networks such as Google AdSense.[7]

Currently the most active sectors for affiliate marketing are the adult, gambling and retail sectors.[8]

The three sectors expected to experience the greatest growth are the mobile phone, finance and travel

sectors.[8] Hot on the heels of these are the entertainment (particularly gaming) and internet-related

services (particularly broadband) sectors. Also several of the affiliate solution providers expect to

see increased interest from B2B marketers and advertisers in using affiliate marketing as part of their

mix.[8] Of course, this is constantly subject to change.