Performance based marketing invented in 1989 and now in widespread use
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 industry has four core players – the merchant (also known as ‘retailer’ or ‘brand’), the network (that contains offers for the affiliate to choose from and also takes care of the payments), the publisher (also known as ‘the affiliate’), and the customer.
The concept of affiliate marketing on the Internet was invented by William J. Tobin, the founder of PC Flowers & Gifts in 1989. He developed the business model of paying a commission on sales to the Prodigy Network. Affiliate marketing is now widespread with Amazon’s affiliate program (developed in 1997) being the most well known.
Affiliate marketing methods include organic search engine optimisation (SEO), paid search engine marketing – pay per click, e-mail marketing, content marketing, display advertising, and published product and service reviews. In 2000 Google launched its pay per click service, Google AdWords, which is responsible for the widespread use and acceptance of pay per click as an advertising channel.
Eighty percent of affiliate programs today use revenue sharing or pay per sale as a compensation method and another nineteen percent use cost per action. Cost per action/sale methods require that referred visitors be converted into an action/sale before the affiliate receives commission.
Affiliate websites include price comparison service websites and directories, loyalty websites, content and niche market websites, personal websites, weblogs and websites syndication feeds, e-mail marketing list affiliates, shopping directories, and file-sharing. Affiliate marketing is attractive to businesses as it is a ‘pay for performance’ model.