Affiliate marketing is a type of performance based marketing where retailers reward influencers for each new customer acquired through the influencer’s own marketing efforts. Think of it as a bounty – brands reward affiliates for the purchases they drive. Today, it’s a relatively widespread practice, but how did it start?
Before the internet: The expression ‘affiliate marketing’ has traditionally been used in an online context, but arguably, the concept existed way before the World Wide Web. Indeed, there are still examples of offline affiliate marketing today, like when a hairdresser offers a discount to an existing customer for referring a friend. However, this kind of old-school affiliate marketing wasn’t very widespread as it presented many difficulties in terms of tracking: the referral had to be tracked in a way that allowed the affiliate to be paid, which wasn’t always easy.
The internet revolutionised: The internet revolutionised pretty much everything, not least of which advertising. As people increasingly started looking to the internet for product information, reviews, and recommendations, the web became a key element in brands’ marketing strategies.
There were also technological developments, like the advent of Web 2.0 and the introduction of the cookie, that made it much easier to track the impact of advertising on the purchase funnel. Add to that the explosion of ecommerce in the late 1990s, of blogging in the early 2000s, and of user generated content soon after, and the field was set for affiliate marketing.
The first affiliate marketing programme: William J. Tobin conceived, implemented, and patented affiliate marketing as we know it. He set-up the first affiliate programme for his company, PC Flowers & Gifts in 1989.
The second first: Amazon was one of the first to use affiliate marketing with the launch of its Associates Programme in 1996. This is considered a key milestone for the affiliate world as the programme attracted widespread, global interest and was widely perceived as a model for retailers looking to implement their own.
The rest of the story: 1998 saw the launch of the first affiliate networks – Commission Junction and Clickbank. These networks made affiliate marketing a lot more accessible to online retailers smaller than Amazon, by offering payment solutions and facilitating exchanges between merchants and affiliates. Soon after, in 2000, the United State’s Federal Trade Commission published guidelines for the sector, which helped cement its legitimacy in the online marketing world.
A few years later, in 2008, more legislation was introduced across the US (such as the Affiliate Nexus Tax and new disclosure guidelines) to further regulate the field.
In the UK, by 2012, affiliate marketing represented 6% of the country’s online economy and £9 billion in sales, according to data from the Internet Advertising Bureau.
Or is it? With online stores outperforming their offline counterparts more often than not, affiliate marketing is a field with lots of potential. Indeed, US affiliate marketing spend alone is predicted to reach $4.6 billion in 2016. With the rise of new markets like India and Russia, affiliate marketing looks like it’s set to last.
This (old) article by ClickZ (from 2000!) takes a deeper look into the origins of affiliate marketing (and the influence of the porn industry).
If you’re more of a visual sort of person, this infographic bygives a visual history of affiliate marketing.
And, though Wikipedia is much maligned as a source for articles, the section on affiliate marketing is very informational.
There is also this report by Forrester and Rakuten Linkshare from June 2012 with forecasts for the field. It’s free to download, but you’ll need to fill-out a quick form.
Last but not least, this handbook from the UK’s Internet Advertising Bureau offers even more insight into the practice.