Affiliate marketing

Page semi-protected
Source: Wikipedia, the free encyclopedia.
For marketing to a specific interest group, see Affinity marketing.

Part of a series on
Internet marketing
Search engine marketing
Display advertising
Affiliate marketing
Mobile advertising

Affiliate marketing is a marketing arrangement in which

incentive for the affiliate; this commission is usually a percentage of the price of the product being sold, but can also be a flat rate per referral.[2]

Affiliate marketers may use a variety of methods to generate these sales, including

display advertising, organic social media marketing
, and more.

Though the largest companies run their own affiliate networks (for example Amazon), most merchants join affiliate networks which provide reporting tools and payment processing.[2]

History

Origin

The concept of

e-commerce happened in November 1994, almost four years after the origination of the World Wide Web.[citation needed
]

The concept of affiliate marketing on the Internet was conceived of, put into practice and patented by William J. Tobin, the founder of PC Flowers & Gifts. Launched on the Prodigy Network in 1989, PC Flowers & Gifts remained on the service until 1996. By 1993, PC Flowers & Gifts had generated sales more than $6 million per year on the Prodigy service. In 1998, PC Flowers and Gifts developed the business model of paying a commission on sales to the Prodigy Network.[3][4]

In 1994, Tobin launched a beta version of PC Flowers & Gifts on the Internet in cooperation with

Federated Department Stores.[7]

In November 1994, CDNow launched its BuyWeb program. CDNow had the idea that music-oriented websites could review or list albums on their pages that their visitors might be interested in purchasing. These websites could also offer a link that would take visitors directly to CDNow to purchase the albums. The idea for remote purchasing originally arose from conversations with the music label Geffen Records in the fall of 1994. The management at Geffen wanted to sell its artists' CDs directly from its website but did not want to implement this capability itself. Geffen asked CDNow if it could design a program where CDNow would handle order fulfillment. Geffen realized that CDNow could link directly from the artist on its website to Geffen's website, bypassing the CDNow home page and going directly to the artist's music page.[8]

Amazon.com (Amazon) launched its associate program in July 1996: Amazon associates could place banner or text links on their site for individual books, or link directly to the Amazon home page.[9]

When visitors clicked on the associate's website to go to

Amazon and purchase a book, the associate received a commission. Amazon was not the first merchant to offer an affiliate program, but its program was the first to become widely known and serve as a model for subsequent programs.[10][11]

In February 2000, Amazon announced that it had been granted a patent[12] on components of an affiliate program. The patent application was submitted in June 1997, which predates most affiliate programs, but not PC Flowers & Gifts.com (October 1994), AutoWeb.com (October 1995), Kbkids.com/BrainPlay.com (January 1996), EPage (April 1996), and several others.[13]

Historic development

Affiliate marketing has grown quickly since its inception. The

telecom, education, publishing, and forms of lead generation other than contextual advertising programs.[15]

In 2006, the most active sectors for affiliate marketing were adult gambling, retail industries and file-sharing services.

advertisers in using affiliate marketing as part of their mix.[16]
: 149–150 

Web 2.0

Websites and services based on

bloggers, writers, and independent website owners. Contextual ads allow publishers with lower levels of web traffic to place affiliate ads on websites.[citation needed
]

Compensation methods

Predominant compensation methods

Eighty percent of affiliate programs today use

cost per click (CPC) or cost per mille (CPM, cost per estimated 1000 views).[17]

Diminished compensation methods

Within more mature markets, less than one percent of traditional affiliate marketing programs today use

paid search
.

Cost per mille requires only that the

conversion
process to generate revenue for the publisher: A visitor must not only be made aware of the advertisement but must also click on the advertisement to visit the advertiser's website.

Cost per click was more common in the early days of affiliate marketing but has diminished in use over time due to click fraud issues very similar to the click fraud issues modern search engines are facing today. Contextual advertising programs are not considered in the statistic pertaining to the diminished use of cost per click, as it is uncertain if contextual advertising can be considered affiliate marketing.

While these models have diminished in mature e-commerce and online advertising markets they are still prevalent in some more nascent industries. China is one example where Affiliate Marketing does not overtly resemble the same model in the West. With many affiliates being paid a flat "Cost Per Day" with some networks offering Cost Per Click or CPM.

Performance/affiliate marketing

In the case of

convert
because at this point the publisher has already earned his commission. This leaves the greater, and, in case of cost per mille, the full risk and loss (if the visitor cannot be converted) to the advertiser.

Cost per action/sale methods require that referred visitors do more than visit the advertiser's website before the affiliate receives a commission. The advertiser must convert that visitor first. It is in the best interest of the affiliate to send the most closely targeted traffic to the advertiser as possible to increase the chance of a conversion. The risk is absorbed by the affiliate who funnels their traffic to the campaign (normally a landing page). In the case a conversion is not fired the publisher won't receive any compensation for the traffic.

Affiliate marketing is also called "performance marketing", in reference to how sales employees are typically being compensated. Such employees are typically paid a commission for each sale they close, and sometimes are paid performance incentives for exceeding objectives.[18] Affiliates are not employed by the advertiser whose products or services they promote, but the compensation models applied to affiliate marketing are very similar to the ones used for people in the advertisers' internal sales department.

The phrase, "Affiliates are an extended sales force for your business", which is often used to explain affiliate marketing, is not completely accurate. The primary difference between the two is that affiliate marketers provide little if any influence on a possible prospect in the conversion process once that prospect is directed to the advertiser's website. The sales team of the advertiser, however, does have the control and influence up to the point where the prospect either a) signs the contract, or b) completes the purchase.

Multi-tier programs

Main article: multi-level marketing

Affiliate marketing overlaps with network marketing, also known as multi-level marketing (MLM).[19][20] Multi-level refers to different levels of compensation offered by companies to different tiers of distributor. While MLM schemes are not inherently illegal, they become illegal when income from recruitment-fees and similar exceeds the sale of actual goods and services. In these situations, MLM schemes overlap with pyramid schemes and ponzi schemes.[19]

Some advertisers offer multi-tier programs that distribute commission into a hierarchical referral network of sign-ups and sub-partners. In practical terms, publisher "A" signs up to the program with an advertiser and gets rewarded for the agreed activity conducted by a referred visitor. If publisher "A" attracts publishers "B" and "C" to sign up for the same program using his sign-up code, all future activities performed by publishers "B" and "C" will result in additional commission (at a lower rate) for publisher "A".

Two-tier programs exist in the minority of affiliate programs; most are simply one-tier.

From the advertiser's perspective

Advantages for merchants

Merchants favor affiliate marketing because in most cases it uses a "pay for performance" model, meaning that the merchant does not incur a marketing expense unless results are accrued (excluding any initial setup cost).[21]

Implementation options

Some merchants run their own (in-house) affiliate programs using dedicated software, while others use third-party intermediaries to track traffic or sales that are referred from affiliates. There are two different types of affiliate management methods used by merchants: standalone software or hosted services, typically called affiliate networks. Payouts to affiliates or publishers can be made by the networks on behalf of the merchant, by the network, consolidated across all merchants where the publisher has a relationship with and earned commissions or directly by the merchant itself.

Affiliate management and program management outsourcing

Uncontrolled affiliate programs aid rogue affiliates, who use spamming,[22] trademark infringement, false advertising, cookie stuffing, typosquatting,[23] and other unethical methods that have given affiliate marketing a negative reputation.

Some merchants are using outsourced (affiliate) program management (OPM) companies, which are themselves often run by affiliate managers and

advertising agencies
serves in offline marketing.

Types of affiliate websites

Affiliate websites are often categorized by merchants (advertisers) and affiliate networks. There are currently no industry-wide standards for the categorization. The following types of websites are generic, yet are commonly understood and used by affiliate marketers.

Publisher recruitment

Affiliate networks that already have several advertisers typically also have a large pool of

publishers
. These publishers could be potentially recruited, and there is also an increased chance that publishers in the network apply to the program on their own, without the need for recruitment efforts by the advertiser.

Relevant websites that attract the same target audiences as the advertiser but without competing with it are potential affiliate partners as well. Vendors or existing customers can also become recruits if doing so makes sense and does not violate any laws or regulations (such as with

pyramid schemes
).

Almost any website could be recruited as an affiliate publisher, but high traffic websites are more likely interested in (for their sake) low-risk

cost per click deals rather than higher-risk cost per action or revenue share deals.[25]

Past and current issues

Since the emergence of affiliate marketing, there has been little control over affiliate activity. Unscrupulous affiliates have used

spam, false advertising, forced clicks (to get tracking cookies set on users' computers), adware, and other methods to drive traffic to their sponsors. Although many affiliate programs have terms of service that contain rules against spam
, this marketing method has historically proven to attract abuse from spammers.

E-mail spam

In the infancy of affiliate marketing, many Internet users held negative opinions due to the tendency of affiliates to use spam to promote the programs in which they were enrolled.[26] As affiliate marketing matured, many affiliate merchants have refined their terms and conditions to prohibit affiliates from spamming.

Malicious browser extensions

A browser extension is a plug-in that extends the functionality of a web browser. Some extensions are authored using web technologies such as HTML, JavaScript, and CSS. Most modern web browsers have a whole slew of third-party extensions available for download. In recent years, there has been a constant rise in the number of malicious browser extensions flooding the web. Malicious browser extensions will often appear to be legitimate as they seem to originate from vendor websites and come with glowing customer reviews.[27] In the case of affiliate marketing, these malicious extensions are often used to redirect a user's browser to send fake clicks to websites that are supposedly part of legitimate affiliate marketing programs. Typically, users are completely unaware this is happening other than their browser performance slowing down. Websites end up paying for fake traffic numbers, and users are unwitting participants in these ad schemes.

Search engine spam

As

search engines have become more prominent, some affiliate marketers have shifted from sending e-mail spam to creating automatically generated web pages that often contain product data feeds provided by merchants. The goal of such web pages is to manipulate the relevancy or prominence of resources indexed by a search engine, also known as spamdexing. Each page can be targeted to a different niche market through the use of specific keywords, with the result being a skewed form of search engine optimization
.

Spam is the biggest threat to organic search engines, whose goal is to provide quality search results for keywords or phrases entered by their users. Google's PageRank algorithm update ("BigDaddy") in February 2006—the final stage of Google's major update ("Jagger") that began in mid-summer 2005—specifically targeted spamdexing with great success. This update thus enabled Google to remove a large amount of mostly computer-generated duplicate content from its index.[28]

Websites consisting mostly of affiliate links have previously held a negative reputation for underdelivering quality content. In 2005 there were active changes made by Google, where certain websites were labeled as "thin affiliates".[29] Such websites were either removed from Google's index or were relocated within the results page (i.e., moved from the top-most results to a lower position). To avoid this categorization, affiliate marketer webmasters must create quality content on their websites that distinguishes their work from the work of spammers or banner farms, which only contain links leading to merchant sites.

Adware

Although it differs from spyware, adware often uses the same methods and technologies. Merchants initially were uninformed about adware, what impact it had, and how it could damage their brands. Affiliate marketers became aware of the issue much more quickly, especially because they noticed that adware often overwrites tracking cookies, thus resulting in a decline of commissions. Affiliates not employing adware felt that it was stealing commission from them. Adware often has no valuable purpose and rarely provides any useful content to the user, who is typically unaware that such software is installed on his/her computer.

Affiliates discussed the issues in Internet forums and began to organize their efforts. They believed that the best way to address the problem was to discourage merchants from advertising via adware. Merchants that were either indifferent to or supportive of adware were exposed by affiliates, thus damaging those merchants' reputations and tarnishing their affiliate marketing efforts. Many affiliates either terminated the use of such merchants or switched to a competitor's affiliate program. Eventually, affiliate networks were also forced by merchants and affiliates to take a stand and ban certain adware publishers from their network. The result was

ValueClick and its daughter company Commission Junction filed on April 20, 2007.[33]

Trademark bidding

Affiliates were among the earliest adopters of

Google AdWords, which is responsible for the widespread use and acceptance of pay per click as an advertising channel. An increasing number of merchants engaged in pay per click advertising, either directly or via a search marketing agency, and realized that this space was already occupied by their affiliates. Although this situation alone created advertising channel conflicts and debates between advertisers and affiliates, the largest issue concerned affiliates bidding on advertisers names, brands, and trademarks.[34]
Several advertisers began to adjust their affiliate program terms to prohibit their affiliates from bidding on those type of keywords. Some advertisers, however, did and still do embrace this behavior, going so far as to allow, or even encourage, affiliates to bid on any term, including the advertiser's trademarks.

Compensation disclosure

Bloggers and other publishers may not be aware of disclosure guidelines set forth by the FTC. Guidelines affect celebrity endorsements, advertising language, and blogger compensation.[35]

Lack of industry standards

Certification and training

Affiliate marketing currently lacks industry standards for training and certification. There are some training courses and seminars that result in certifications; however, the acceptance of such certifications is mostly due to the reputation of the individual or company issuing the certification. Affiliate marketing is not commonly taught in universities, and only a few college instructors work with Internet marketers to introduce the subject to students majoring in marketing.[36]

Education occurs most often in "real life" by becoming involved and learning the details as time progresses. Although there are several books on the topic, some so-called "how-to" or "silver bullet" books instruct readers to manipulate holes in the Google algorithm, which can quickly become out of date,[36] or suggest strategies no longer endorsed or permitted by advertisers.[citation needed]

Outsourced Program Management companies typically combine formal and informal training, providing much of their training through group collaboration and brainstorming. Such companies also try to send each marketing employee to the industry conference of their choice.[37]

Other training resources used include online forums, weblogs,

podcasts
, video seminars, and specialty websites.

Code of conduct

A code of conduct was released by affiliate networks

beFree
and Performics in December 2002 to guide practices and adherence to ethical standards for online advertising.

Sales tax vulnerability

In 2008 the state of

US Supreme Court ruled that the presence of independent sales representatives may allow a state to require sales tax collections. New York determined that affiliates are such independent sales representatives. The New York law became known as "Amazon's law" and was quickly emulated by other states.[38] While that was the first time states successfully addressed the internet tax gap, since 2018 states have been free to assert sales tax jurisdiction over sales to their residents regardless of the presence of retailer affiliates.[39]

Main article: Cookie stuffing

Click to reveal

Many voucher code web sites use a click-to-reveal format, which requires the web site user to click to reveal the voucher code. The action of clicking places the cookie on the website visitor's computer. In the United Kingdom, the IAB Affiliate Council under chair Matt Bailey announced regulations[40] that stated that "Affiliates must not use a mechanism whereby users are encouraged to click to interact with content where it is unclear or confusing what the outcome will be."

See also

References

  1. ^ "Affiliate Marketer: Definition, Examples, and How to Get Started". Investopedia. Retrieved 2022-09-25.
  2. ^
    doi:10.1109/ICEMT.2010.5657647
    .
  3. ^ Chicago Tribune, October 4, 1995[full citation needed]
  4. ^ The Sunsentinal, 1991[full citation needed]
  5. ^ PC Week Article, January 9, 1995[full citation needed]
  6. ^ Business Wire, January 24, 2000[full citation needed]
  7. ^ Business Wire, March 31, 1999[full citation needed]
  8. ISBN 0-9661032-6-2
    .
  9. ^ "What is the Amazon Associates program?". amazon associates. Archived from the original on 11 May 2011. Retrieved 2011-04-20. Amazon Associates is one of the first online affiliate marketing programs and was launched in 1996.
  10. ISBN 0-7897-2525-8
  11. ISBN 0-07-135310-0
    .
  12. ^ US 6029141 
  13. ^ Collins, Shawn (2000-11-10). "History of Affiliate Marketing". ClickZ Network. Archived from the original on 2007-10-12. Retrieved 2007-10-15.
  14. ^ October 2006, Affiliate Marketing Networks Buyer's Guide (2006) Archived 2006-12-14 at the Wayback Machine, Page 6, e-Consultancy.com, retrieved June 25, 2007
  15. ^ Anne Holland, publisher (January 11, 2006), Affiliate Summit 2006 Wrap-Up Report -- Commissions to Reach $6.5 Billion in 2006, MarketingSherpa, retrieved on May 17, 2007
  16. ^ a b c "Internet Statistics Compendium 2007". e-Consultancy. February 2007. Archived from the original on 2005-03-10. Retrieved 2007-06-25.
  17. ISBN 978-1475155662
    .
  18. ^ CellarStone Inc. (2006), Sales Commission, QCommission.com, retrieved June 25, 2007
  19. ^
    ISBN 9780199285990
    . Retrieved 3 October 2022.
  20. ISBN 9780749473419. Retrieved 3 October 2022.{{cite book}}: CS1 maint: location missing publisher (link
    )
  21. ^ Tom Taulli (9 November 2005), Creating A Virtual Sales Force, Forbes.com Business. Retrieved 14 May 2007.
  22. ^ Danny Sullivan (June 27, 2006), The Daily SearchCast News from June 27, 2006 Archived August 22, 2006, at the Wayback Machine, WebmasterRadio.fm, retrieved May 17, 2007
  23. ^ Wayne Porter (September 6, 2006), NEW FIRST: LinkShare- Lands' End Versus The Affiliate on Typosquatting Archived 2006-10-17 at the Wayback Machine, ReveNews, retrieved on May 17, 2007
  24. ^ Jennifer D. Meacham (July/August 2006), Going Out Is In Archived 2007-01-23 at the Wayback Machine, Revenue Magazine, published by Montgomery Research Inc, Issue 12., Page 36
  25. ^ Marios Alexandrou (February 4, 2007), CPM vs. CPC vs. CPA Archived 2007-11-14 at the Wayback Machine, All Things SEM, retrieved November 11, 2007
  26. ^ Ryan Singel (October 2, 2005), Shady Web of Affiliate Marketing, Wired.com, retrieved May 17, 2007
  27. ^ Roger A. Grimes (2016-07-26). "3 ways websites get pwned -- and threaten you". CSO from IDG. Retrieved 2017-11-28.
  28. ^ Jim Hedger (September 6, 2006), Being a Bigdaddy Jagger Meister Archived 2007-12-23 at the Wayback Machine, WebProNews.com, retrieved on December 16, 2007
  29. ^ Spam Recognition Guide for Raters Archived 2007-07-03 at the Wayback Machine (Word document) supposedly leaked out from Google Archived 2011-05-13 at the Wayback Machine in 2005. The authenticity of the document was neither acknowledged nor challenged by Google.
  30. ^ December 10, 2002, Online Marketing Service Providers Announce Web Publisher Code of Conduct Archived 2007-08-27 at the Wayback Machine (contains original CoC text), CJ.com, retrieved June 26, 2007
  31. ^ December 12, 2002, LinkShare's Anti-Predatory Advertising Addendum, LinkShare.com, retrieved June 26, 2007
  32. ^ ShareASale Affiliate Service Agreement, ShareASale.com, retrieved June 26, 2007
  33. ^ April 20, 2007, AdWare Class Action Lawsuit against - ValueClick, Commission Junction and beFree Archived 2007-07-04 at the Wayback Machine, Law Firms of Nassiri & Jung LLP and Hagens Berman, retrieved from CJClassAction.com on June 26, 2007
  34. doi:10.17705/1CAIS.02706
    .
  35. ^ FTC Publishes Final Guides Governing Endorsements, Testimonials. Ftc.gov (2013-06-27). Retrieved on 2013-09-19.
  36. ^ a b Alexandra Wharton (March/April 2007), Learning Outside the Box, Revenue Magazine, Issue: March/April 2007, Page 58, link to online version retrieved June 26, 2007
  37. ^ March/April 2007, How Do Companies Train Affiliate Managers? Archived 2007-09-29 at the Wayback Machine (Web Extra), RevenueToday.com, retrieved June 26, 2007
  38. ^ Mazerov, Michael (24 July 2009), New York's "Amazon Law": An Important Tool for Collecting Taxes Owed on Internet Purchases, Center on Budget and Policy Priorities
  39. ^ South Dakota v. Wayfair, Inc., 585 U.S. No. 17–494. (June 21, 2018).
  40. ^ IAB, Friday, 27 March 2009 IAB affiliate council strengthens voucher code guidelines Archived January 7, 2010, at the Wayback Machine

Citations


Retrieved from "https://en.wikipedia.org/w/index.php?title=Affiliate_marketing&oldid=1239902712"