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Affiliate Marketing Turns 20: Myths, Milestones & Momentum

Liane Dietrich on April 18, 2014 at 9:25 am

It was the year Forrest Gump sorted through a box of chocolates, the only strike happening in Major League Baseball was between the players and management, and Sheryl Crow declared, “All I wanna do is have some fun.”

1994 was also the year affiliate marketing officially burst on the scene. Now, 20 years later, the affiliate industry is poised to grow to $4.5B by the year 2016, according to analysts at Forrester Research.

Here, we’ll take a look at the past two decades in affiliate marketing, dispelling common myths, highlighting milestones and sharing the biggest opportunities on the horizon.

The Affiliate Industry’s 3 Most Common Myths

Myth #1: Its birthdate Is 1996… Or 1988. Many credit Amazon with launching the first affiliate marketing program in 1996. Others say it started in 1988, when William Tobin launched PC Flowers, Inc. on the Prodigy Network. In fact, affiliate marketing began in 1994 when William Tobin introduced PC Flowers & Gifts. It is a slight name change but that’s not the biggest difference. In 1994, using the patents that Tobin developed, PC Flowers & Gifts was the first company to provide tracking and, truly, affiliate marketing.

Myth #2: Affiliate Marketing Is A Dark Art. Some questionable behavior, especially in the go-go 1990s, cast a shadow on affiliate marketing. Over the years, however, the industry has banded together to expose bad behavior and weed out unsavory affiliates. This Darwinism led to stringent vetting and monitoring processes and the demise of networks that operated with less than admirable intentions. Today, marketers recognize that the pay-for-performance affiliate model drives online traffic and sales and is ideal for testing new markets and expanding overseas.

Myth #3: Affiliate Marketing Is Shrinking. Supporting the Forrester forecast cited above, here are three more signs that the affiliate industry is growing:

More luxury retailers are now creating affiliate programs in response to the growing amount of affluent shoppers that are spending more time online.
A Forrester study reported shoppers in the US that start their research on an affiliate site spend slightly more on average than other shoppers.
That same study from Forrester also found that the affiliate channel has proven to deliver new-to-file customers to advertisers.

As advertisers further recognize the increasing value of affiliates, they’re investing more in this channel.

The Affiliate Industry’s 3 Most Impactful Milestones

For another veteran’s opinion on the biggest milestones over the past two decades, I asked affiliate marketer and prolific blogger Shawn Collins for his thoughts. Shawn is the founder of the popular Affiliate Summit conferences and the AffiliateTip.com website.

Milestone #1: Major Network Acquisitions Lead To Market Consolidation. As affiliate marketing continued to grow in the early 2000s, the industry underwent significant changes. Most notable were Google’s acquisition of DoubleClick and Rakuten’s acquisition of LinkShare. This resulted in affiliate marketing becoming more mainstream as it was integrated into the larger e-commerce ecosystems that the acquiring companies were building.

As the industry evolved, a core group of larger networks continued to thrive and capture more market share, leading to more consolidation. While that’s inevitable in any industry, last summer’s closing of the Google Affiliate Network (GAN) was of particular significance, as it forced a good many advertisers to more carefully evaluate the performance of their affiliate programs. This was a boon for strong networks and agencies that were able to sign new advertisers; yet, it also resulted in a more public exposure of the underperformers.

Additionally, it meant that Google could now more easily eliminate any conflicts of interest with its search arm, as it required publishers to elevate the quality of their content or risk being punished in search results. In fact, this past January, Google officially clamped down on affiliate sites that don’t provide value.

Milestone #2: The Performance Marketing Association (PMA) Is Founded. In 2008, the non-profit industry association was formed to connect, inform and advocate on behalf of the affiliate community. Today, the PMA continues to champion for affiliates, most notably when it comes to online tax issues.

Milestone #3: Affiliate Programs Are Now Ubiquitous Among Online Retailers & Integral To The Digital Marketing Ecosystem. Affiliate programs are now table stakes for online retailers and are no longer viewed as silo marketing efforts.

Collins says he is “genuinely surprised when a company in the Internet Retailer Top 500 doesn’t have an affiliate program.” He also pointed out affiliate marketing’s role within a broader digital marketing strategy. “Affiliate marketing is not a singular tactic, but rather a collection of innovative search, content, email, social media, and virtually all other types of digital marketing.”

Big Opportunities On The Horizon

The biggest opportunities for the affiliate channel are in mobile and social commerce.

Mobile Commerce

eMarketer estimates that m-commerce opportunities will reach over $100 billion by 2017. For the affiliate channel to seize these opportunities, there are two critical factors that must be in place.

Online retailers must fully optimize the consumer’s mobile experience. There is still work to be done there, as The Search Agency’s recent mobile scorecard found that many of the Top 100 web-only retailers failed to offer fully optimized mobile experiences.
Networks need to regularly and rigorously test their ability to track and properly credit affiliates for mobile transactions.

Social Commerce

Social commerce brings social media, content and curation into the online buying experience. A growing market segment, social commerce, is expected to reach $30B by the year 2015, according to analysts at Booz & Co.

Social commerce is gaining in popularity because it provides consumers with unbiased insight to help them with their purchasing decisions. By presenting customer reviews and user recommendations alongside their products, retailers can increase the frequency of a consumer’s visits to their sites as well as the average order value.

The opportunities for affiliates in social commerce come through the rewards that retailers offer for recommendations. These are often in the form of recognition on the site as opposed to a pure commission structure. Affiliates can benefit from social commerce by gaining followers and increasing their visibility as a trusted subject matter expert.

What has been your experience in affiliate marketing over the years? What do you think are the next big opportunities? We’d love to get your feedback in the comments section below.

Stock images used by permission of Shutterstock.com

Opinions expressed in this article are those of the guest author and not necessarily Marketing Land. Staff authors are listed here.

About The Author

Liane Dietrich

Liane Dietrich is Chief Operating Officer, and is responsible for the planning and execution of Rakuten LinkShare's vision to deliver world-class online marketing solutions. Since joining Rakuten LinkShare, now Rakuten Affiliate Network in 2003, Liane has contributed to the company's success in the areas of service delivery, strategic direction and international expansion in her roles as Director, Vice President and Managing Director in Chicago, New York, and London.