Affiliate marketing was first used by Jeff Bezos, the founder of Amazon. The story goes that Bezos was at a party in the mid 90's and started chatting to a woman who wanted to sell books on divorce through her website without having to become a merchant herself. This resulted in Bezos coming up with the idea of linking her to Amazon and giving her a commission on anything she sold.

The industry came a long way in a short time and by 1999 affiliate marketing had landed in the UK, with DGM, Commission Junction and Tradedoubler starting networks. Today the industry is thought to contribute over "£2bn a year to the UKs economy, with a growth rate of 60% per anum."¹

Affiliate marketing works through a relationship between a merchant (advertiser) and an affiliate (publisher). The merchant creates a campaign that they wish to run as part of their marketing mix. This campaign is distributed to a base of affiliates who place the advertisements on their sites. If a user clicks through from an advert on an affiliates website and performs an action, usually a sale, on the merchants site the affiliate will receive a commission on that sale. The system works on a cost per action model which makes it a appealing to both merchants and affiliates.

Merchants benefits are obvious, they only pay for performance, and any other exposure is essentially free marketing. For affiliates the benefits are also great, get paid for generating sales for other people and monetise a part of your site that otherwise has no revenue.

(¹ Statistics from E-consultancy 2006)

For more information on affiliate marketing see the following resources.

To download the IAB's affiliate marketing guide click here.