History of Affiliate Marketing

There is a popular urban myth about the origins of affiliate marketing. It goes something like this…

In July 1996, Amazon.com launched the first affiliate program on the Internet. That’s the story in the Amazon.com Associates Program Frequently Asked Questions, at least.

As legend has it, Jeff Bezos, CEO and founder of Amazon.com, chatted with a woman at a cocktail party about how she wanted to sell books about divorce on her web site. After that exchange, Bezos pondered the idea and thought about having the woman link her site to Amazon.com and receive a commission on the book sales. This was the impetus for creating the “first on the Web” Amazon.com Associates Program.

But there are some problems with that claim by Bezos. According to Daniel Gray in “The Complete Guide to Associate and Affiliate Programs on the Net,” there were a number of sites that operated programs prior to July 1996. And that is just the mainstream side of it. There are also many adult sites that dabbled in the affiliate marketing concept before Amazon.com picked it up.

The Mothers of Invention

The big secret of the Internet is that the adult sites came up with many of the best (and worst) marketing concepts that are used in the mainstream.

Brian Clark, president of ReveNews.com and member of Affiliate Union’s board of directors, states, “I’m quite a fan of the adult industry — not a consumer of their product, by any means — but deeply respectful of how much of the innovation in online business models is really happening in that industry first and bemused by people’s reticence to give them the credit or even talk about the subject.”

“Not just affiliate programs, mind you. They’re also the cutting edge of streaming video, pay-for-view content, coercive click conversion, community publishing, etc.,” comments Clark.

Mark Hardie of Forrester Research concurs. “What I see when I look at this industry — putting aside any moral judgments about reprehensible content — is an amazing example of an industry that has banded together to protect its business, push revenue across the industry, and innovate cutting-edge technologies,” says Hardie. “I think there’s a lot here that can be applied elsewhere.”

The consensus of marketing folks and adult industry insiders is that Cybererotica was either the first or among the early innovators in affiliate marketing with a cost-per-click program.

According to John Distasio of CyberFoxes, none of the adult sites are running cost-per-click programs anymore. CyberFoxes, which has been running its affiliate program since 1996, started with the cost-per-click model, but because of the high volume of fraud, it now employs a cost-per-acquisition model. In the current program, which uses CC Bill for tracking and payouts, an affiliate earns 50 percent of a converted lead and a 50 percent residual each time its lead renews on the monthly subscription.

Before There Was Amazon.com

In February 2000, Amazon.com announced that it had been granted a patent (6,029,141) on all the essential components of an affiliate program. The patent application was submitted in June 1997, which was before most affiliate programs but not before PC Flowers & Gifts.com (October 1994), AutoWeb.com (October 1995), Kbkids.com/BrainPlay.com (January 1996), EPage (April 1996), and a handful of others.

“While I admire what Jeff Bezos did for the industry, he in no way pioneered anything,” said Brad Waller, VP of marketing for EPage.

“He popularized the idea, but he was a latecomer — by about two years. There is quite a bit of documentation on this issue, including assertions by Jason Olim and Matthew Olim, in their book about founding CDNow, that they had an informal program in 1994,” continued Waller.

Finding a Solution

Chris d’Eon, current VP of marketing – retention with Proflowers.com faced an early affiliate marketing dilemma when he was at an Internet start-up that was selling online backup solutions (@Backup, now called SkyDesk) back in 1996.

According to d’Eon, “The early challenge [of affiliate marketing] was to build a tracking system. We finally built our own, first using spreadsheets, then a full-blown system. We eventually spun this system off and recently sold it to ValueClick. In the early days, we did meet a few companies doing the same thing as we were… Alexa and Launch.com come to mind.”

The formal birth of affiliate solution providers came to be in 1996 with the launch of LinkShare and Be Free. Commission Junction started up in 1998 to round out what is considered to be the top three.

Directory Assistance

The landscape of affiliate program directories has become a bit overwhelming in the last year. An estimated 50 directories are trying to direct traffic in affiliate space, but it all started with Refer-it.com.

According to James Marciano, he founded Refer-it.com in October 1997 because he could not find one central place for affiliate programs to generate revenue for his site, TheSquare.com. He decided what was needed was a search engine for affiliate programs with ratings and details.

In January 1998, Allan Gardyne started up a one-page associate programs directory. He had hunted in every major search engine for an affiliate program directory and could not find one, so he started his own version. That one-page site officially became AssociatePrograms.com in February 1998. Other important players, such as 2-Tier, Associate-it, CashPile.com, and ReveNews.com, launched later in 1998.

Amazon.com helped bring affiliate marketing into the pages of business journals, but is the Amazon.com Associates Program the first affiliate program there was? I guess it depends on what your definition of “is” is. Just as Al Gore once stated, “During my service in the United States Congress, I took the initiative in creating the Internet,” Amazon.com claims that its program was “the first on the Web.” If you repeat a lie often enough, people will eventually believe that it is true… until you get caught.

By Shawn Collins, The ClickZ Network