Overcoming a history of preconceptions to becoming a multi-billion pound global industry, affiliate marketing has come a long way over the past two decades.
It is widely thought that 2014 marks the 20th anniversary of affiliate marketing. This date reflects when William Tobin of PC Flowers & Gifts started using technology for affiliate marketing in the US (1994), although he did not officially file the patent until 1996.
However, some dispute this date and others see Amazon as the real hero after kick-starting its affiliate marketing programme in 1996.
Founder and CEO of AM Navigator affiliate programme management agency, and founder of the Affiliate Management Days conference, Geno Prussakov, said regardless of the fact that Amazon’s Associates Programme did not launch until mid-1996, its input into validating and building up the industry is difficult to overestimate.
GM and SVP at Rakuten LinkShare, Adam Weiss, who is responsible for Rakuten LinkShare North American P&L, added that while it’s easy to get caught up in the actual birth date of affiliate marketing, what’s important to realise is that the affiliate marketing industry has been an evolution driven by technology, and it’s only set to change and grow further.
“By the very nature of an evolution it’s difficult to put a single birth date on the industry,” Weiss said.
“What you have to keep in mind is that PC Flowers was the first to use technology that demonstrated affiliate marketing can work.
“The efforts that were pioneered by Tobin are the foundation of what we see today and the proof that it can work resulted in those patent filings.”
Co-founder of the Affiliate Summit conferences in the US, Shawn Collins, said it was always his understanding that CDNow was the first mainstream affiliate programme.
Collins, who has been an affiliate since 1997 and was also an affiliate manager from 1997-2007, said he was under the impression that CDNow started up months prior to PC Flowers & Gifts, and that adult site Cybererotica was the first company to use affiliate marketing.
Meir Strahlberg, CEO at Avalanche, a US online dating company with more than 22 websites, agrees with Collins as he believes affiliate marketing existed in the adult industry going back to 1994, if not sooner.
“It’s possible that PC Flowers & Gifts was in fact the first programme, but it’s also possible that one of the early adult companies developed an affiliate programme before them,” he said.
From more of a UK standpoint, Matthew Wood, who created the popular affiliates4u forum in 1999, which later became PerformanceIN.com, said for him, the start of the industry was the UK-based networks being born.
“By this I mean with Kevin Brown and Affiliate Window opening up operations, Adrian Moss with ukaffiliates.com (the now defunct dgm) and buy.at opening its doors shortly after,” Wood said.
“There was also a brief appearance of Magic Button, sadly a platform probably ahead of its time. These networks brought affiliate marketing to mainstream retail with a shift from pure CPA to basket value commissions.”
Wood, who later saw his affiliates4u brand spawn a set of international industry-aimed conferences, said back then it was an exciting and collaborative time with affiliates and networks and a period that saw great growth for the sector.
How different was it back then?
Ok, so perhaps the exact start date is not the most important thing here, but what was it really like way back when?
Wood, who is now MD at vouchercloud, described the affiliate landscape in the late 90s as ‘incredibly embryonic’.
“It was an exciting industry with an easy sell to retailers, I mean, who wouldn’t want to pay on performance at a time where CPM rates were going through the roof?” Wood said.
“Fun times were had back then. Also, back then the community worked together a great deal more than we do now.”
Former CEO at Linkdex and ex-CEO and founder of buy.at, Steven Brown, entered the affiliate marketing scene in 2000. Brown, who is now an advisor/shareholder to a number of online businesses such as Coull, Easyfundraising and Digitouch in Turkey, launched buy.at after trying Commission Junction and realising there was an opportunity for a network taking responsibility for its affiliates.
Back in the day Brown said the concept of the network 'being blind' was accepted.
“However at buy.at we thought this was crazy - big brands' CMOs would not tolerate this so we set out to be accountable and responsible for our affiliates, including putting them together with the merchants,” Brown said.
Austin-based Collins, who became an Amazon affiliate in 1997 with the intention of supplementing his income, said in the early days he 'struggled in isolation'.
“I could not find anybody else that was doing it and there were no forums, newsletters, etc,” Collins begins.
“I was working in magazine publishing and wanted something different so I responded to a job listing to run an affiliate programme for MedBookStore.com (selling medical books online). I got the job because I knew some of the buzzwords and was willing to work for cheap.
“I made it up as I went along, and through experimentation I figured out some methods and practices that worked. I later applied them to other affiliate management jobs and wrote about how I did things in 'Successful Affiliate Marketing for Merchants', which was published in April 2001.”
Collins said there is now pretty much no threshold for getting into the game as an affiliate these days.
For Strahlberg, he said when his company first entered the market in 1997 there were no affiliate networks, nor were there software companies providing tools for running an internal programme.
“In order to run and manage an affiliate system we needed to build everything from scratch,” Strahlberg begins.
“All of the affiliate tracking functionality, back-end reporting, fraud monitoring rules, payment systems, and customer support were developed internally.
“Since building this we have had an in-house proprietary system, which we’ve upgraded over the years and we use this in conjunction to working with networks.”
Prussakov, who entered affiliate marketing as a merchant in 2001, before starting his own affiliate programme for one of his own online B2C business, said affiliate marketing back in the day was known as the 'wild wild west', in terms of what affiliates were doing, and how merchants were handling things.
“Affiliate marketing is significantly more intricate now than it was back then, both on the affiliate front and on the merchant end,” Prussakov begins.
“For instance, present-day omnichannel shopping, as well as participation of multiple affiliates in the same sales funnel, call for robust attribution models.
“Affiliate marketing in 2014 is also much more structured, more legally regulated (in the US) and self-regulated (in the UK) now.
“With frequent researches conducted on both sides of the pond, the industry is now being taken much more seriously by those outside of the industry, much more so than it was 'back in the day'.”
Jochem Vroom, the Dutch entrepreneur and founder of voucher platform Flipit.com, entered the industry in 2007. He then went on to work at zanox before launching his own company in 2009.
“When I first entered the industry it was ringtones, search tricks and online dating and I have to say it was a bit more cowboy'ish back then,” Vroom explained.
“Also at that time a lot was going on in the mobile entertainment industry and the networks played a large role in this niche in the countries I was working in."
“However, we all knew this wasn't going to last forever - the big brands were coming and a big client was joining every week. Slowly business turned more towards big brands and left most of the mobile entertainment companies behind.
“Although this was not always the case as I remember working for the client: King.com - back then just a tiny company struggling to get a few leads, but look at it now!”
Rakuten’s Weiss still believes there are some misunderstandings in the industry about the role of affiliate marketing and what happens behind the scenes. However, he said nefarious behaviour is quickly identified and addressed not just by Rakuten LinkShare, but by the industry as a whole.
“Because the industry has been so selective in its recruitment and diligent in evaluating affiliates, the role of performance marketing is elevating,” he said.
“Everybody wins when everybody works together to fully vet applicants and monitor behaviour for the good of all advertisers and publishers.”
The biggest positive changes over 20 years
We asked our panel of industry pros for their thoughts on the greatest positive changes the affiliate marketing industry has seen since its debut.
Brown stressed the biggest developments have been related to giving the channel integrity and he said it is slowly getting a place at the top table when sales and marketing activities are being planned.
“It's the networks being open which led to affiliates and merchants being on the same wavelength and therefore better placed to understand and appreciate the value each is adding,” Brown said.
He also said that tracking innovation now allows better engagement between the consumer and the merchant on the affiliates’ sites.
Prussakov agreed on the technology front, alongside the improvements of research and the importance of education.
Key changes for US-centric Collins included the summit organised by Wayne Porter in 2002 in New York City, which brought together affiliates, advertisers and networks to discuss adware. In addition to that he said the emergence of compliance companies, such as BrandVerity and Optizmo, and the formation of the Performance Marketing Association.
Strahlberg, who predicts affiliates becoming increasingly tech savvy over the years, said firstly the evolution of the market from cost-per-action (CPA), to being primarily cost-per-free lead (CPL) has been a big change.
“This change is great for the affiliate, but it’s not as attractive for the advertiser. However, this is the way that the industry has gone, and it’s a reality for any company that wants to seriously compete in our space,” Strahlberg said.
“Second, affiliates used to give up their data and send their traffic to an advertiser’s landing page. We thought this was a flaw that did not benefit the affiliate, so we developed an API that allows affiliates to control their data, and maintain ownership of it. Now, affiliates can send leads to us via API and they can still earn the same profits, if not more.”
He also stressed there are so many more ways that companies are paying for traffic. From CPA and CPL to revenue share and cost-per-click.
“We’ve also recently seen a revival of co-registration campaigns and 'host & post'. With these campaigns, we purchase co-opted leads from other dating sites, and affiliate marketers,” Strahlberg added.
Strahlberg, who said at one point Avalanche maintained relationships with more than 30 networks at the same time, before narrowing this down to about five, also said he has been most impressed with networks that have policed and eliminated fraudulent affiliates.
On the subject of networks, Weiss, who entered the affiliate marketing scene in 2003, said the top three changes that stand out to him are the consolidation of networks, the more integrated role that affiliate marketing is playing in the marketing stack, and formation of the Performance Marketing Association in 2008.
“Companies realise they can shorten the sales cycle when they combine digital marketing channels,” Weiss begins.
“The key, however, is knowing which combination of channels is going to be most effective and proving the impact each channel had on sales. This is one of the main reasons we recently acquired DC Storm – its attribution platform ensures that marketers have a comprehensive view and unbiased reporting on campaign results.”
For Amsterdam-based Vroom, he said it's the quality, the number of available merchants globally, and the rules; such as improvements in the codes of conduct/best practices for certain niches, which stand out as the big industry changes.
People power pushes UK scene
Bristol-based Wood said an early win for the UK market specifically was the work of a number of persistent ambassadors who really helped with cleaning up the market from spyware and some adware products, mainly originating from the US.
“Who remembers the days of 180solutions for example? Clarke Duncan, Paul Wheatley, Duncan Popham, Kevin Edwards, myself and others lobbied tirelessly to ensure these unscrupulous companies did not steal genuine affiliate sales,” Wood explained.
“The worst example we discovered was an affiliate bidding on an affiliate network’s tracking link within the 180solutions product – hence overwriting all sales from other affiliates for a merchant.”
Wood, who back in 1999 first dabbled with freebie and competition lead generation sites to fund the university bar tab, also placed the birth of a4uexpo and the Performance Marketing Awards as milestones too.
“Finally, a significant help has been the IAB's Affiliate Marketing Council, which has worked tirelessly to detail best practice guidelines and push for greater transparency within the sector. The work of Kevin Edwards, Matt Bailey and Helen Southgate especially should not be forgotten,” Wood added.
Today and the future
Reverting back to today’s affiliate marketing scene, Wood adds that modern day affiliate marketing is ‘dynamic, innovative and collaborative’.
“It’s still a hidden powerhouse of digital marketing – almost like an executive in their late 20s - a hungry middle-weight with room to grow and diversify, but with a lot more to prove and realise,” Wood said.
He said it has been somewhat 'exceptional' how affiliate marketing and entrepreneurs continue to evolve and diversify as technology and user behaviour changes.
“That to me is what makes our space so exciting to work within,” Wood added.
He said it is now everyone’s job to ensure that new startups, business models, agencies and retailers embrace performance as a solid metric and revenue stream as we continue to evolve.
Brown also stressed that affiliate marketing is now a mature part of the marketing mix and is no longer siloed.
“CPA advertising can't be viewed in isolation because of matters like attribution and how all components of advertising add up to giving the advertiser share of voice and branding benefit, as well as the sales with which the affiliate channel is synonymous,” he said.
Aside from the obvious of video and mobile growing dramatically within affiliate marketing, Brown said the process of an affiliate sending prospective purchasers off to the merchant site to complete transactions is a disconnect in the user journey; a blocker to the user experience of affiliates wishing to create their own brand.
“Therefore the next step change in the performance industry is merchants willing (commercially and technically) to provide APIs to the checkout process, allowing the transactions to complete on the affiliate site under the affiliate brand,” Brown added.
“Then affiliates who add the most value will really stand out and be able to grow.”
He also says that retargeting and product recommendation needs to mature so that data about each consumer is used in their interest, and is under their control, rather than too many merchants/networks using elements of consumer-level data in their interest and under their control.
Rakuten's Weiss said he has been seeing firsthand the increased awareness among e-commerce companies seeing the affiliate channel as a source for innovation.
“Specifically, more and more e-commerce companies are joining our network because they realise that the pay for performance model is an ideal way to build stronger relationships with retailers,” Weiss said.
“The analyst predictions, and the greater awareness of affiliates as strategic partners, explain why the rest of the marketing industry is tuning into the fact that affiliate marketing has evolved into a thriving channel. These factors, along with its proven success, is what’s driving its popularity.”
In terms of industry evolution over the next decade, alongside the growth of affiliate marketing and a greater awareness and recognition for affiliate marketing, Weiss predicts there will be fewer networks driving the majority of affiliate activity - yet the channel will still be thriving.
On his current European industry view, Vroom said some German advertisers are ‘scared and over-optimised’, but in France, advertisers are now 'firing away', even for portals with less quality, after realising the opportunities are limitless. Vroom says he is at last pleased that it is now ‘quality’ that is winning.
On today's affiliate marketing landscape, Prussakov added: “I have always said that no other way of marketing a product or a business online yields better ROI than affiliate marketing. It was just a matter of time and education.
“But the mission isn’t complete yet. While for some merchants affiliates bring in as much as 30% to 40% of their business, others don’t even have affiliate programmes in place (yet).”
A brand’s view
Sean Keaveny is the SVP of business development at Upromise, a free college savings programme that allows members to save for college by making purchases from thousands of online retailers.
It is the only cashback / rebate shopping programme where money earned can be automatically directed into a 529 college savings plan, into a high yield savings account, or used to pay off a private student loan.
Keaveny, who previously spent four years at a performance-based ad network, said working with affiliates, via Rakuten, is a key part of the brand’s marketing mix.
“Major retail brands have come to view the affiliate channel as a critical part of the sales mix, where companies like Upromise can build powerful value propositions and foster joint marketing relationships with their shared customers,” Keaveny said.
“It’s no longer the area of the market where internet tricks were used to sell non-branded products.”
He said today, and into the future, affiliates need to focus on the customer and add value in ways that the retailers are not able to do on their own.
“Whether it’s enabling mobile payments, offering targeted location-based deals or helping them financially plan for a college education, consumers will continue to use the services of affiliates that make their days easier, and enhance their overall quality of life.”
What do you think?
How has the affiliate marketing channel faired for you over the past 20 years? Feel free to comment below and share your stories.