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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 the
affiliate's own marketing efforts.
The market has grown in
complexity, resulting in the emergence of a secondary tier of players,
including affiliate management agencies, super-affiliates, and specialized
third party vendors.
Affiliate marketing 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 use third
parties to drive sales to the retailer. The two forms of marketing are
differentiated, however, in how they drive sales, where affiliate marketing
relies purely on financial motivations, while referral marketing relies
more on trust and personal relationships.
Affiliate marketing is frequently
overlooked by advertisers. While search
engines, e-mail, and web site 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 concept of revenue
sharing—paying commission for referred business—predates affiliate
marketing and the Internet. The translation of the revenue share principles to
mainstream e-commerce happened in November 1994, almost four years after the origination of
the World Wide Web.
The concept of affiliate
marketing on the Internet was conceived of, put into practice and patented
by William J. Tobin, the founder of PC Flowers & Gifts. Launched on
the Prodigy Network in 1989, PC Flowers & Gifts remained on the
service until 1996. By 1993, PC Flowers & Gifts generated sales in excess
of $6 million per year on the Prodigy service. In 1998, PC Flowers and Gifts
developed the business model of paying a commission on sales to the Prodigy
NetworkIn 1994, Tobin launched a beta version of PC Flowers & Gifts on the
Internet in cooperation with IBM, who owned half of Prodigy. 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 U.S. Patent number 6,141,666 on Oct 31, 2000. Tobin also received
Japanese Patent number 4021941 on Oct 5, 2007, and U.S. Patent number 7,505,913
on Mar 17, 2009, for affiliate marketing and tracking. In July 1998 PC Flowers
and Gifts merged with Fingerhut and Federated Department Stores.
Cybererotica was among the early
innovators in affiliate marketing with a cost per click program.
In November 1994, CDNow launched
its BuyWeb program. CDNow had the idea that music-oriented websites
could review or list albums on their pages that their visitors might be
interested in purchasing. These websites could also offer a link that would
take visitors directly to CDNow to purchase the albums. The idea for remote
purchasing originally arose from conversations with music label Geffen
Records in the fall of 1994. The management at Geffen wanted to sell its
artists' CD's directly from its website but did not want to implement this
capability itself. Geffen asked CDNow if it could design a program where CDNow
would handle the order fulfillment. 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 program in July 1996: Amazon associates could place banner or
text links on their site for individual books, or link directly to the Amazon
home page.
When visitors clicked on the
associate's website to go to Amazon and purchase a book, the
associate received a commission. Amazon was not the first merchant to offer an
affiliate program, but its program was the first to become widely known and serve
as a model for subsequent programs.
In February 2000, Amazon
announced that it had been granted a patent on components of an
affiliate program. The patent application was submitted in June 1997, which
predates most affiliate programs, but not PC Flowers & Gifts.com (October
1994), AutoWeb.com (October 1995), Kbkids.com/BrainPlay.com (January 1996),
EPage (April 1996), and several others.