History of Affiliate Marketing Business

July 21, 2010 by  
Filed under Affiliate Marketing Tips

Introduction

An affiliate marketing business is an entity which exercises Internet-based marketing practice in which one or more affiliates are given rewards for every customer or visitor that was brought in by the marketing efforts of the affiliates. It is the product of the utilization of the process of crowdsourcing.

The affiliate marketing industry to which every affiliate marketing business belongs is composed of four core elements: the Merchant also known informally as ‘Retailer’ or ‘Brand’), the Network, the Publisher (also known informally as ‘the Affiliate’) and the Customer. Through time and along with the massive growth and expansion of affiliate marketing, non-core elements have branched out from the core elements, some of these secondary elements are Affiliate Management Agencies, Super-Affiliates and Specialized Third Parties vendors.

It is very common for an affiliate marketing business to utilize different techniques used in Internet marketing, especially those techniques that are used for advertising purposes. Organic search engine optimizations, paid search engine marketing, e-mail marketing, and in some sense display advertising are only some of the Internet marketing methods that most affiliate marketing businesses employ. Others however, prefer the use of less traditional strategies like publishing reviews of products or services offered by a partner.

An affiliate marketing business exists inside the world of online marketing wherein one website is used to direct traffic to another website. Affiliate marketing businesses are far more low profile than businesses that target top rankings in the major search engines and website syndications wherein retailers are the primary target. Affiliates however, remain to play a major role in the marketing strategies of e-retailing.

Origin

The affiliate marketing business concept stemmed from the idea of revenue sharing or payment of commission for referred businesses. The birth of the World Wide Web is what really has put the revenue share scheme into action. And the said scheme has become a huge global phenomenon only four years later around November 1994. The cost per click program which was first developed by Cybererotica is considered by most experts to be the first fully launched affiliate marketing business.

CDNOW launched its BuyWeb associate program in November 1994 which is considered the first non-adult affiliate marketing business which sold its idea of click-through purchasing. The idea that music-oriented or music-related websites could have reviews or album lists on their pages that visitors can purchase was the main concept behind CDNOW. The said albums can be purchased at CDNOW by clicking a link at the respective websites that direct visitors to the CDNOW website.

The music label Geffen Records was the main reason for the birth of the idea behind remote purchasing. The Geffen Records management desired to have its website directly sell the CDs of its song artists but wanted another entity to implement such capability. Geffen Records wanted to assign the task of order fulfillment to company entity and CDNOW has been its primary prospect. Geffen Records came to the realization of the possibility of having CDNOW link directly from the artists in the CDNOW website to the Geffen Records website, without having to go through the CDNOW homepage but instead direct the traffic straight to the particular artist’s music page.

In July 1996 Amazon used its amazon.com website to launch its very own associate program in which Amazon associates were able to publish banners or text links on their site for individual books, or link straight to the amazon.com home page.

Whenever a visitor is redirected to the amazon.com website by an associate website and makes a purchase, the individual who owns the said website will receive a commission. Amazon’s associate or affiliate program though not the first of its kind, was the first one to gain worldwide acceptance and recognition. Until now, many affiliate marketing businesses are modeled after the Amazon affiliate marketing business.

Amazon was granted patent 6,029,141 in February 2000, 3 years after the said patent’s application, which made every essential affiliate program and affiliate marketing business component patented under its name. There are however, several affiliate programs that predate the Amazon like PC Flowers & Gifts.com (October 1994), AutoWeb.com (October 1995), Kbkids.com/BrainPlay.com (January 1996), EPage (April 1996), and several more others.

Development

The growth and expansion of the affiliate marketing business industry has been massive and comprehensive. Affiliate websites which were previously seen as mere toys or decorations in the Internet eventually became an integral part of every overall internet business plan. There were also cases in which the online business outgrew its offline business counterpart.

A globally recognized report claimed that the United Kingdom affiliate marketing business network total sales figure has grown exponentially from £1.35 billion in 2005 to £2.16 billion in 2006. The total earnings of the global affiliate marketing industry were estimated to be at a grand total of US$6.5. Primary sources of these earnings were 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 such as Google AdSense.

Adult, gambling, and retail industries are the current leaders of the affiliate marketing body. And the sectors expected to experience most massive growth are the mobile phone, finance, and travel sectors. The entertainment (particularly gaming) and Internet-related services (particularly broadband) sectors come closely after these sectors. Significant increase in the interest from business-to-business marketers and advertisers in using affiliate marketing as part of their mix is also being forecasted by many affiliate solution providers.

Web 2.0

Slowly grabbing the affiliate marketing spotlight is Web 2.0 based websites and services such as blogging and interactive online communities. Such websites and services have paved the way for affiliate marketing businesses to have better communication as well as closer relationships with their associates.

Such development also facilitated faster and more verifiable transmission of information that was devastating to every fake and dishonest affiliate marketing business. Every error or fraud was being quickly circulated thus making associates and visitors alike refrain from interacting with these accused sites.

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