Affiliate marketing is a method that utilises online networks and influencers to increase sales through referrals. This method, which has roots that predate the internet, has changed and evolved over the years and is now an essential part of the e-commerce ecosystem.
Before the advent of the internet, affiliate marketing existed in rudimentary forms, mainly in the form of recommendations and testimonials. In 1760, British potter Josiah Wedgwood used royal recognition to enhance the reputation of his products – an early form of influencer marketing. In the 20th century, multi-level marketing (MLM) took hold, promoting products through networks of independent distributors.
Birth of Internet-Based Affiliate Marketing
Affiliate marketing as we understand it today, however, has its origins in the birth of the internet. In 1989, William J. Tobin, the founder of PC Flowers and Gifts, introduced an online version of affiliate marketing. He used the online information service Prodigy to sell his products and is considered the first to have conceived the modern affiliate marketing model.
Cookies and the Banner Ads
In 1994, Lou Montulli of Netscape Communications Corporation developed the web cookies. These small data packets allowed businesses to track user activity, marking a crucial milestone for affiliate marketing. That same year, the first banner ad was featured on Wired.com (then known as HotWired), illustrating the potential of online advertising.
Read more about banner history in the earlier Marketing Matters articles!
The Advent of Affiliate Programs
In 1994, music retailer CDNow launched its BuyWeb Program, the first affiliate marketing scheme on the Internet. This program enabled music-related websites to direct potential customers to CDNow’s website, earning a commission for each sale.
Amazon: The Affiliate Marketing Giant
1996 marked a significant milestone in affiliate marketing history with the launch of Amazon’s affiliate program, Amazon Associates. It enabled anyone with a website to become an affiliate and earn a commission for books sold through their referral links. This revolutionary program offered extensive products beyond books as Amazon expanded, enhancing its appeal to affiliates worldwide.
Amazon’s affiliate program didn’t just popularize affiliate marketing; it defined the model’s future. Today, Amazon’s affiliate program spans the globe, covers a wide range of products and offers up to 10% advertising fees for qualifying purchases.
The Birth of Affiliate Networks
In 1998, Commission Junction and ClickBank were founded as intermediaries between affiliates and merchants. These affiliate networks simplified the process for smaller retailers who wanted to use affiliate marketing strategies. In the same year, Wayne Marciano launched Refer-it.com, the first directory for affiliate programs.
Impact of Social Media and The Entry of Google
As social media platforms such as MySpace and Facebook gained prominence in the mid-2000s, affiliate marketing continued to evolve. As the use of these platforms increased, marketers realised their potential to increase traffic and sales.
In 2007, Google entered the affiliate marketing landscape by acquiring DoubleClick Performics for $3.1 billion. This acquisition led to the creation of the Google Affiliate Network, which became a major player in the industry.
Increased Regulation and the Ongoing Evolution
In 2009, the Federal Trade Commission (FTC) introduced the requirement for bloggers, influencers and affiliate marketers to file disclosure statements when they are compensated for recommending a product or service. This development was an important step towards more transparency and trust in affiliate marketing. This trend towards regulation has since spread worldwide.
The history of affiliate marketing is a testament to continuous innovation and adaptability. From its humble beginnings in the pre-Internet era to its integral role in the global e-commerce ecosystem today, affiliate marketing continues to evolve. Amazon’s central role in this story underscores how the initiative of a single company can determine the evolution of an industry. Affiliate marketing will continue to adapt as it is strengthened by technological advances and changes in consumer behaviour.