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History of Affiliate Marketing

History of Affiliate Marketing

To become a great affiliate marketer, you need to understand the history of affiliate marketing, how it came to be, how it evolved and changed over time. At the risk of sounding cheesy: those who understand the past are the best at predicting the future.

Now, most people think of affiliate marketing as this online thing, but the fact is that affiliate marketing preceded the internet. However, as of today, most affiliate marketing is done online, and for a very good reason.

A lot of that has to do with how online channels give us access to a ton of crucial data and metrics that help us super-optimize our affiliate efforts. But more on that later. Let’s start at the very beginning.

What is affiliate marketing?  

In a word, it’s a form of paid advertising where people receive a commission for promoting someone else’s product. If you get a commission for sending someone a customer, you are technically engaging in affiliate marketing.

All forms of affiliate marketing include the following core elements:  

  • Advertiser or merchant – this is the company selling the product or service. Advertisers can manage their affiliate programs in-house. Alternatively, they can go through an affiliate agency or join an affiliate network.  
  • Affiliates – individuals or companies capable and willing to promote the brand.
  • A product or service being promoted.   
  • Target audience, i.e. customers.

The principle of affiliate marketing is simple. Businesses pay their affiliates a commission in exchange for business referrals. That is, every time an affiliate sends the merchant a customer, they get a reward in return.

There are several different models that a merchant can use to reward said affiliates. Most affiliate marketers today are paid per sale (PPS). Other compensation methods include cost per action (CPA), cost per click (CPC) and cost per 1000 views (CPM). 

Modern-day affiliate marketing capitalizes on the omnipresence of internet and digital technology. It’s one of the most cost-efficient customer acquisition methods. It helps businesses promote their brands and build market presence at a significantly lower cost. Not to mention that someone else is putting in most of the effort.

Modern-day affiliate marketing capitalizes on the omnipresence of internet and digital technology.

How affiliate marketing works

A person visits the website of an affiliate marketer and clicks on an “affiliate link”. The link takes them to the merchant’s website. If this person purchases anything from the merchant, the affiliate marketer gets a commission for sending that person over.

This scenario actually describes how the majority of affiliate marketing works today. Almost all of it is done online and through the use of affiliate links.

But as a concept, affiliate marketing has been around for quite a while. Students selling magazine subscriptions on behalf of the school is also a form of affiliate marketing. So is a discount from your hairdresser for bringing new customers to the salon.   

The problem is, these offline referrals can’t be easily tracked and quantified. Using the previous example, the hairdresser has to manually ask each new customer who had sent them, and then manually keep track of all this information.

When it comes to digital sales and referrals, however, the whole process is quite automated. All you have to do nowadays as a merchant is open up a dashboard and see who’s sending you how many customers, and when.

The ease of tracking referrals is the first reason most affiliate marketing is done online nowadays. But there is another reason that’s just as crucial, and that’s location.

With offline marketing, you’re limited by the physical proximity due to practical considerations. With the internet, the whole globe is within your grasp. As an affiliate marketer, you can actually promote products to people who are on a different continent. In fact, the three of you can all be on a separate continent. The merchant may be in Asia, the affiliate marketer may be in the USA, and the customer can be in Europe.

The beginnings of internet affiliate marketing   

In the early days of the web, computer use was not so widespread. Internet availability was limited. Connection speeds were just a fraction of what we consider normal today.   

In such a small online world, affiliate marketing was much easier. Why? Basically, it was easier to stand out and make a profit before the web became the swarming beehive it is today.

There were lots of small businesses and marketers following a few simple rules. Find the right product, create a website to promote it, choose the right keywords and write content around these keywords. In absence of high competition, this tactic yielded good results.   

This attracted the attention of larger companies. They gradually started investing money and resources in building their own online presence.

Those early affiliate marketing endeavors lacked the subtlety of today’s advertising. The early affiliate marketers were crude and used flashy ads resembling spam. They didn’t care much about providing value to the visitor and then recommending a product. Back then, affiliates didn’t have customer satisfaction in mind. The main goal was profit.

Things are much more sophisticated today. Marketers care a great deal more about the quality of user experience. In fact, you kind of have to do this now. If you want to see any success as an affiliate marketer, you have to provide a lot more value and be a lot more subtle. You can’t be pushy and salesy. That stopped working more than a decade ago.

Today, if you want to see any success as an affiliate marketer, you have to provide a lot more value and be a lot more subtle.

History of affiliate marketing – the birth of the idea  

Many people believe that the concept of affiliate marketing originated with Amazon. This is not surprising, considering the popularity of Amazon’s affiliate program. But it was the entrepreneur W.J. Tobin who first conceptualized the idea of performance-based advertising.   

In 1989, Tobin founded PC Flowers Inc. and started the first affiliate program designed to promote his products on the Prodigy network. For every sale, PC Flowers Inc. paid Prodigy a commission.

Prodigy is an online service, providing paying users with a wide range of services. It includes news, stocks and weather info, e-shopping, news, stocks and much more. In essence, Prodigy introduced the concept of a comprehensive online content portal.   

PC Flowers Inc. was among the first e-commerce services on Prodigy. More importantly, it was the first one to be a great financial success. Over the years, Tobin’s inventive concept generated millions of dollars in profits for Prodigy. Tobin applied for a patent on tracking and affiliate marketing in 1996. Patent was granted on October 31, 2000.   

In 1994, Tobin founded PC Flowers & Gifts, an online shop for flowers and gift products. Through Tobin’s patents, the company provided affiliate services for many large websites. By 1998, PC Flowers & Gifts had over 2700 affiliate marketing partners.   

The tracking cookie is born

The invention of cookies in 1994 by a programmer named Lou Montulli was another milestone. It facilitated the ability to more accurately track performance in affiliate marketing. It’s now one of the most commonly used tracking methods.   

Cookies are small data files that are stored on people’s computers when they visit a certain site. The purpose is to identify users and store site login information. They can be used to track what people are doing and gather info about their interests and web behavior. This, in turn, makes them useful for the creation of targeted ads matching specific user profiles.  

Amazon joins the game  

In 1996, Amazon launched their own affiliate marketing program called Amazon Associates. It was the first program to be available to the general public. Given Amazon’s global presence, it was easy to generate great interest. The program required people to sign up so they could include links to Amazon products on their blogs. For each sale, Amazon paid its affiliates a portion of the generated profit. This model was later adopted by many other affiliate networks.  

In 1996, Amazon launched their own affiliate marketing program called Amazon Associates.

The first affiliate networks appear

The first affiliate networks – Commission Junction and Clickbank – were founded in 1998. This allowed smaller companies unrelated to Amazon to join the affiliate marketing game. In fact, Commission Junction and Clickbank are quite successful to this day. They are still among the best providers of affiliate marketing services on a global scale.   

Affiliate networks act as middlemen between affiliates and merchants. Businesses looking to increase their customer base can pay a fee to join the network. The network then reimburses the affiliates for the sales leads they generate.   

As a rule, affiliates could join the networks for free. The merchants are usually required to pay a certain fee. Affiliate networks work best for companies that lack resources for large-scale marketing efforts.

Introduction of the pay-per-click method

The first PPC ads were born with GoTo.com (later called Overture.com). They were the first to implement it back in 1998. It was when it’s founder figured out that he could get people to bid for a higher placement on the search engine results page. And that’s how PPC was born. 

Affiliates being keen on always finding better ways to get traffic were some of the first people to jump on board and start using PPC from the earliest days.

 

Google AdWords enters the scene

In 2000, Google launched AdWords. But it wasn’t until 2002 that they introduced PPC. In the interim, it charged per 1000 views or CPM. Today, Google AdWords might just be the most popular advertising platform for affiliates. However, the way that affiliates use AdWords has morphed over time.

In the early days, an affiliate would just put an affiliate link in the ad itself and focus on optimizing the PPC. This means finding the best ad description, title, keywords and ways to bid. However this is no longer an option, and affiliate marketing through PPC is nowadays a 2-step process.

This means that as an affiliate you utilize PPC to get traffic to your own website. And then on your own website, you might promote other people’s products with an affiliate link. More often, however, successful marketers focus on getting people onto an email list as quickly as possible.

This means that the PPC traffic is sent to a website that’s primarily designed to convert people into email subscribers. And from then on most affiliate sales are made through email marketing.

The introduction of rules and regulations   

Getting started with affiliate marketing is easy if you’re willing to put in the effort. But, you also have to comply with federal guidelines.

In 2000, the US Federal Trade Commission issued the first guidelines governing product promotion.   

As a federal body, the job of the FTC is to foster healthy competition, protect and educate consumers. The FTC guidelines were designed to ensure the legitimacy of affiliate marketing.   

The guidelines have been amended many times since then, but the gist remains the same. Any compensation (fee, discount, free products) received in exchange for a promotional effort must be disclosed. Failure to do so is considered deceptive marketing by the FTC.

As a result, it exposes marketers and their endorsers to financial sanctions. FTC doesn’t actually monitor the behavior of all bloggers. However, if multiple complaints are received, the agency will initiate an investigation.   

There are a few rules affiliate marketers need to know when it comes to FTC guidelines. The connection between the affiliate and the merchant must be disclosed in a clear and obvious way. People should be able to read and understand the disclosure easily. It’s best to place it at the top of the article so people don’t have to scroll down to see it. The disclosure doesn’t have to be too verbose or overly technical. You can simply include “sponsored post”, “ad” or “this post contains affiliate links”.

This disclosure requirement applies to all advertising mediums. Blogs, videos, webinars, social network posts, infographics, and podcasts.   

There are a few rules affiliate marketers need to know when it comes to FTC guidelines.

Niche marketing   

As affiliate marketing grew, it became ever more competitive. On the one hand, the sheer number of people getting involved made things tougher. On the other hand, large businesses with huge budgets entering the fold didn’t help either. This made things much more difficult for the average affiliate.

While in the early days, you could just go in and target something as general as “weight loss” and make a profit, this is no longer the case unless you have the budget of a big business. So affiliate marketers had to evolve and discover new ways to make money as independent affiliates.

One of those changes was the popularization of the concept of “niches”. These are basically narrow market segments that can often be easier to enter and succeed in. The idea is that niche marketing can address the needs of small but specific population groups with similar interests.

Whilst the big marketer can target “Fitness” in general, a niche marketer can target something as specific as “preparing for a CrossFit competition” or “fitness for people who travel a lot”.

Or let’s look at another example – while a big marketer can focus on “dating” in general, the niche marketer might focus on “dating for divorcees over 45”.

It’s important to note that niches don’t exist per se. They are defined by the needs and requirements of such groups that aren’t sufficiently met by mainstream marketers. So, the aim is to create and deliver products that satisfy their taste. Niche marketers do best when they focus on sharing highly relevant and valuable content that resonates with that particular audience segment.

The main advantage of niche marketing is that such highly specialized segments have little or no competition. When done properly, this type of affiliate marketing can be highly profitable.

Ways to earn money as an affiliate marketer  

There’s certainly no shortage of ways to reach and influence the people inside of a niche or a market. To maximize affiliate sales, make sure you explore different options and see how you can combine them. Let’s look at some of the most popular affiliate marketing avenues.

Doing product reviews  

A lot of successful affiliate marketers specialize in just doing reviews. This means that they create a specialized product review website, and review a lot of different products. The review then simply links the reader to online stores where they can buy the product. However, the links are almost always actually affiliate links.

It’s a pretty beneficial deal for all sides concerned. The customer is reading reviews because they are doing their research before buying the product. Perhaps one of your reviews convinces them to buy it, so they click on that link and head to that merchant and buy the product. Meanwhile, you get a commission for sending them over.

The fun part about product reviews is that you can use them for almost any market. You might have a website that reviews smartphones, a website that reviews weight loss products, or even a website that reviews different kinds of books on dating or self-improvement.

The one caveat with specialized review sites is that you need to choose a market that’s large enough. A small niche will generally not have a lot of products to review. So you can’t actually create a review site that specializes in reviewing products about taking care of Siamese cats. There are simply not enough affiliate products out there to review and promote.

And this is where the idea of combining several avenues comes in. Product reviews can actually be a part of another strategy. You don’t have to specialize in product reviews. Perhaps you have a blog dedicated to a niche that only has a dozen or so products. You can still review the couple of products that do exist.

A lot of successful affiliate marketers specialize in just doing reviews.

Blogging and content marketing

In most courses about affiliate marketing, your first step is to create an email list. The second step is to start a blog. There’s a reason for this universal advice. I don’t think you’ll ever find an affiliate marketer that doesn’t have a blog or an email list. The fact is that these two are the highest performing tools in any affiliate’s arsenal.

It won’t be an exaggeration to say that blogs and email lists are the most affordable way to achieve all of your major goals as an affiliate. This includes getting discovered by new people, building a relationship with them, as well as demonstrating authority and expertise. These are crucial for gaining the trust that makes people click on your affiliate links.

Both email marketing and blogs help you achieve pretty much the same goals, and as a smart marketer, you want to use both in a synergistic fashion.

For example, both your blog and your email newsletter would demonstrate your expertise and help establish you as an expert.

There is, however, one thing that blogs are much better at – and this is “discovery”. Yes, your newsletters can be so amazing, that your readers share them with all their friends, and it does happen. But most people will not discover you that way, and this is where blogging comes in.

Blogging is the lowest entry method to attracting new people. In essence, you want to look at blogging as your entry level “free traffic generator”. The more valuable content that you put on your blog, the more new people will discover you and your expertise. This happens even if all you do is just post new content regularly.

Search engines and word-of-mouth will make sure that the world learns about your valuable content, provided it is in fact highly valuable. You can, of course, do lots of other things like promoting your blog on forums and social media, in guest posts, videos and comments, on other people’s blogs, etc.

Social media and videos

Using social media platforms and producing lots of fancy videos sounds so cool to new marketers. The truth, however, is that these are secondary to having a quality blog and quality email newsletters.

Sure, you want to eventually get around to building a Twitter presence, uploading some cool YouTube videos, or potentially building an Instagram presence that evolves your brand. Still, you have to realize that the barrier to entry is a lot higher and the returns come much later on.

The way you want to approach is that you want to build an amazing amount of content on your blogs, and then promote that content on channels like Twitter and Facebook.

Once you’re ready and have the resources, producing some videos might become an option, too.

Video content is quite similar to blogging in that it achieves all the same goals. It gives people lots of value and establishes you as an expert. The only difference is that creating videos requires quite a bit more investment than writing blog posts. And the return isn’t as instantaneous. You need to produce a lot more videos before they attract any traffic, and that requires much more investment.

This has to do with the fact that video sharing sites are actually social networks, so they work differently to a blog. Whether or not your video gets promoted depends on social cues similar to those on any social network. You’re actually fighting for people’s attention in a different way than when you build a blog and the search engines send you a reader.

And just like blogging, videos can be part of a synergistic system. Your blog posts can promote your videos, and your videos can promote your blog. And both of them should encourage people to sign up to your email list. In fact, you should make it clear that your best content is inside of those newsletters. “Yeah, the videos and blog posts are good, but wait until you join my newsletter and see the stuff I have for my email subscribers.”

You should encourage people to sign up to your email list.

Newsletters  

Email marketing and affiliate marketing are the perfect match. There’s a reason that all the most successful affiliate marketers place most of their effort in email marketing. This is for two reasons. 

  • Email marketing is the best way to cater to the needs of specific subsets of people
  • It is the best way to build relationships, gain trust and demonstrate authority and expertise

It is through well-crafted segmented campaigns that you can best gain credibility and trust. Don’t try to force people to buy through your emails. Rather let your content speak to their needs and inspire them to visit that merchant’s website.

To see what works best, you can test different subject lines, templates or content. A quality email provider will provide a good A/B split testing tool that helps you test the response of different email versions.  

All you need is a reliable email marketing platform that cares about your deliverability rates

While most email providers focus on the fancy features, over here at Emercury we actually care about your bottom-line profits as an affiliate. Sure, we have all the fancy marketing features, but that’s not enough.

We also work closely with our community of affiliates to make sure that they understand the best sending practices and what actually creates results. It doesn’t matter if you do everything else right, but your emails aren’t getting delivered to enough inboxes. You’re losing out on a lot of commissions and much profit.

When you work with Emercury, you get your own deliverability manager and access to a team that understands affiliate marketing in and out. If you want to have a look, feel free to try our free-forever plan. (however I would always suggest speaking with us before getting started to make sure you get started on the right foot 😉 ) Our free plan includes almost all of our features at no cost. In fact, it even includes the kinds of features others reserve for high-tier paid plans. We want to give you easy and free access to our platform so that you can see why so many affiliate marketers are loving Emercury and switching over. Why not contact us today for a free consultation on how we can help you.

Happy mailing everyone and of course of you like the article please share it with others!

Michael Batalha is the CEO & Founder of Emercury an email marketing platform designed to help marketers with converting sales, converting leads, and converting traffic. He has been in the email marketing industry for 16+ years. He is an entrepreneur at heart and has been one his whole life. He sits on the board of the Entrepreneur Organization of New York and loves giving back to entrepreneurs. He has graced the pages of Forbes and won Entrepreneur of the year award at the Empact Summit at the United Nations. You can catch him speaking at events througout the year on email marketing and email reputation.

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