The Evolution of Affiliate Marketing
Affiliate marketing is one of the most popular forms of performance marketing. Working with affiliates is the ultimate solution for merchants who want to save on their marketing budgets, and instead let other marketers utilize their own promotional channels to bring in conversions and sales.
But the way we know affiliate marketing today hasn’t always been like that. Here’s a look at the humble beginnings of affiliate marketing, right up to the point we know it right now.
Commissions on Sales in the 1990s
As various sources tell us, the beginnings of affiliate marketing date back to around 1993 to 1995 when a company called PC Flowers & Gifts developed their revenue sharing system, offering commissions on sales – performance marketing. At that time, PC Flowers & Gifts had around 2,600 affiliate partners on the web.
Another revenue-sharing model was developed by Geffen and CDNOW, and the goal was to make it easier to sell music on the web, and enable music-related websites to rate and review albums on their pages. Then, the visitor could be sent over to CDNOW to purchase the albums they were interested in.
Of course, we can’t overlook the biggest retailer of them all – Amazon – when talking about affiliate marketing. Amazon’s associate program saw its birth in 1996, and although it wasn’t the first such creation, it has become the first to gain main-stream publicity and popularity, and has thus served as a model for other similar programs built by other companies.
Right now, the pay-per-sale model still remains the most widely used revenue sharing model out there. It’s reported that around 80 percent of all affiliate programs use it.
And it’s not difficult to see why, since it is the only model that guarantees profits to the merchant for every person that the affiliate manages to bring in – the ultimate form of performance marketing.
Apart from pay-per-sale, we also have a handful of other models that are in use today. Let’s start with the old-school CPM model that still has its place in some niches, despite being just a leftover from the TV and radio advertising industries.
And we can say the same about CPC (cost-per-click). Even though it is one of the most popular models when it comes to paying for advertising, it isn’t such a hit with modern affiliate programs due to its high dependence on the quality of the traffic sent by the affiliate, creating monetization difficulties for merchants.
Combined, both CPC and CPM are used only by around one percent of affiliate programs.
Finally, we have the CPA (cost-per-action) model, which came to life rather recently, as a variation of the pay-per-sale model.
At some point, it became clear that sales are not the only kinds of actions that are profitable to the merchants, and that in order to grow their revenue by attracting new affiliates, they will need to start paying commissions on other actions as well. These days, this involves things like app installs, user registrations, email opt-ins, and so on.
Right now, the CPA model is reported to be used by around 19 percent of affiliate programs.
Is this the end of the affiliate marketing evolution? Surely not. We can only wait and see what new developments the future brings, both in terms of new revenue sharing models and interesting programs themselves.