Affiliate marketing

Affiliate marketing is a marketing practice in which a business rewards one or more affiliates for each visitor or customer brought about by the affiliate's own marketing efforts. Examples include rewards sites, where users are rewarded with cash or gifts, for the completion of an offer, and the referral of others to the site. The industry has four core players: the merchant (also known as 'retailer' or 'brand'), the network, the publisher (also known as 'the affiliate'), and the customer. The market has grown in complexity to warrant a secondary tier of players, including affiliate management agencies, super-affiliates and specialized third parties 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, paid search engine marketing, e-mail 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—using one website to drive traffic to another—is a form of online marketing, which is frequently overlooked by advertisers.[1] 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.

Origin

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 almost four years after the origination of the World Wide Web in November 1994.[citation needed]

The concepts 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 dollars per year on the Prodigy service. In 1989, PC Flowers and Gifts developed the business model of paying a commission on sales to The Prodigy network (Reference-Chicago Tribune-Oct, 4, 1995) (Ref The Sunsentinal 1991 and www.dankawaski.com). Mr. 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. Mr. 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 (Reference-Business Wire-Jan, 24, 2000).

Cybererotica was among the early innovators in affiliate marketing with a cost per click program.[3]

During 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 may be interested in purchasing. These websites could also offer a link that would take the visitor directly to CDNOW to purchase the albums. The idea for remote purchasing originally arose because of conversations with music label Geffen Records in the fall of 1994. The management at Geffen wanted to sell its artists' CDs 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.[4]

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.[citation needed]

When visitors clicked from the associate's website through to Amazon and purchased 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.[5][6]

In February 2000, Amazon announced that it had been granted a patent[7] 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.[3]
[edit] 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 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 2006 was £2.16 billion in the United Kingdom alone. The estimates were £1.35 billion in sales in 2005.[8] MarketingSherpa's research team estimated that, in 2006, 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 programs.[9]

Currently the most active sectors for affiliate marketing are the adult, gambling, retail industries and file-sharing services.[10] The three sectors expected to experience the greatest growth are the mobile phone, finance, and travel sectors.[10] Soon after these sectors came the entertainment (particularly gaming) and Internet-related services (particularly broadband) sectors. Also several of the affiliate solution providers expect to see increased interest from business-to-business marketers and advertisers in using affiliate marketing as part of their mix.[10]
[edit] Web 2.0

Websites and services based on Web 2.0 concepts—blogging and interactive online communities, for example—have impacted the affiliate marketing world as well. The new media allowed merchants to become closer to their affiliates and improved the communication between them.

Types of affiliate websites

Affiliate websites are often categorized by merchants (i.e., advertisers) and affiliate networks. There are currently no industry-wide accepted standards for the categorization. The following types of websites are generic, yet are commonly understood and used by affiliate marketers.

* Search affiliates that utilize pay per click search engines to promote the advertisers' offers (i.e., search arbitrage)
* Comparison shopping websites and directories
* Loyalty websites, typically characterized by providing a reward system for purchases via points back, cash back
* CRM sites that offer charitable donations
* Coupon and rebate websites that focus on sales promotions
* Content and niche market websites, including product review sites
* Personal websites
* Weblogs and website syndication feeds
* E-mail list affiliates (i.e., owners of large opt-in -mail lists that typically employ e-mail drip marketing) and newsletter list affiliates, which are typically more content-heavy
* Registration path or co-registration affiliates who include offers from other merchants during the registration process on their own website
* Shopping directories that list merchants by categories without providing coupons, price comparisons, or other features based on information that changes frequently, thus requiring continual updates
* Cost per action networks (i.e., top-tier affiliates) that expose offers from the advertiser with which they are affiliated to their own network of affiliates
* Websites using adbars (e.g. Adsense) to display context-sensitive, highly relevant ads for products on the site
* Virtual Currency: a new type of publisher that utilizes the social media space to couple an advertiser's offer with a handout of "virtual currency" in a game or virtual platform.
* Video Blog: Video content which allows viewers to click on and purchase products related to the video's subject.
* File-Sharing: Web sites that host directories of music, movies, games and other software. Users upload content (usually in violation of copyright) to file-hosting sites, and then post descriptions of the material and their download links on directory sites. Uploaders are paid by the file-hosting sites based on the number of times their files are downloaded. The file-hosting sites sell premium download access to the files to the general public. The web sites that host the directory services sell advertising and do not host the files themselves.

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