Affiliate marketing began in the late 1990s. Amazon is generally credited as the first company to launch an affiliate program. This program still exists in the form of Amazon Associates, which is probably the largest in the world. Associates linked their websites to Amazon books and received commissions when those people made purchases.
Another early pioneer in the affiliate space was BeFree, founded by Tom Gerace at around the same time. Commenting on the formation of BeFree, Tom reflected:
"I started off in '93, '94. I was recruited to the Harvard Business School to write their foundational case studies on the Internet. We thought the Internet was obviously going to become a place where people published content and information and sold things, and that there would naturally be an ad model to connect those two experiences.
When we started to dig into what those experiences might be like, and how they would be different from the ways media companies and brands had operated in the traditional media world, we concluded that brands were facing both a massive challenge and a massive opportunity.
Online, we realized, audiences were going to be distributed across tens, hundreds, maybe thousands of experiences, and brands would need a way to measure the value they were receiving from different media buys. They would need to optimize those buys and make intelligent purchasing decisions in a new, highly fragmented world. They would also want the ability to track, down to the purchase, which ad exposures had driven user awareness and user conversion, and to pay for that value proportionally.
I got so excited about it. I was talking to my brother. I was the business guy behind BeFree, and Sam was the technology guy. We dove in, as I guess many entrepreneurs do, with passion, a lot of blind optimism, and a desire to make our mark."
Tom's first big customer was Carl Rosendorf. Carl worked with BeFree to launch barnesandnoble.com's affiliate program, which was, in 1997, one of the first programs in the industry to use the term affiliate. Carl oversaw Barnes & Noble's marketing and wanted to launch a digital marketing program at scale. When he met Tom, he realized BeFree had the technology he needed to manage this endeavor, and they partnered on the launch.
Carl's team took the unusual step of managing the program in-house, building his own team to utilize BeFree's technology and pursuing a strategy rooted in business development principles. He employed senior marketing and business development executives, and paid BeFree a fixed technology licensing fee— two principles that are making a comeback in today's affiliate marketing space. Barnes & Noble's program pioneered the use of an expiry period for cookies and operated online reporting by portal while others were still relying on faxes once per week.
Reflecting on this period, Carl recalls that, at the time, "There were other names out there we thought we could use." The concept of affiliate marketing, however, "best represented what [he] wanted to do." The rest is history. BeFree adopted the name as well, and it soon caught on.
As Carl describes it, "We thought of it as our merchandising network. We hired business development people. I think we started with five account executives. Their role was to get the contracts signed. Account executives worked with anywhere from one to ten partners, depending on the size of the partners."
Carl created a "hit list" of twenty-five websites he wanted to partner with, signing twenty-three of them to exclusive multiyear relationships, many of which included minimum fee guarantees. When Frank Sinatra died, in 1998, the team created banners and links advertising books about the great man.
These were displayed prominently on the homepages of huge websites, such as msn.com, cnn.com, and usatoday.com. The company sold millions of dollars' worth of books and other related products on the back of this approach.
It's fascinating that one of the first programs to use the term affiliate, early in Generation One, was founded on a model that looks familiar to market leaders witnessing the emergence of Generation Three. Carl agrees that Generation Three "is exactly the model of affiliate marketing we created in 1997."
You've just read an excerpt from chapter three of Robert Glazer's new book, Performance Partnerships: The Checkered Past, Changing Present and Exciting Future of Affiliate Marketing.
To learn more about the history of affiliate marketing and where it's headed in Generation Three, order your very own copy today!