At first, advertisers used strategies such as E-mail Marketing, Search Engine Marketing, RRS Capturing and Display Advertising are used to sell the product successfully. The web traffic can be traced with the assistance of a third party or internal teams. Unfortunately, this involves a lot of work. Initially, methods such as spamming and false advertising were used to lure visitors. However, the invention of complex algorithms and advance security made doing business and shopping online safer, later leading to the development of better terms and conditions.
Due to this pressure in-house affiliate programs for merchants became obsolete and were replaced by out-sourced programs. The companies that offered this service have expert program management techniques. They also have associated publishers who assist them in advertising.
Affiliate marketing was started by cdnow.com who had music oriented websites. They placed list of music albums on their site and they paid others if they put those links in their websites when a visitor bought their album through their site. Their first associate was Geffen Records. Later on, Amazon was approached by a woman who offered to sell their books on her website in return for a certain percentage of the sales. They liked the idea and started the Amazon associates program where they received a commission for every sale of their products that was made via their associates' sites.
Since its introduction, the affiliate network has been adopted by various businesses like travel, education, telecom, mobile, gaming, personal finance, retail, and subscription sites, the most common being adult and gambling sectors. In UK alone, affiliate marketing produced 2.16 billion pounds.
The compensation methods used are Cost per sale (CPS), Cost per action (CPA), Cost per mile (CPM) and Cost per click (CPC). The first two are the more famous methods today. This is because in CPM and CPC, the visitor which turns up on a particular website might not be the targeted audience and a click would be enough to generate commission.
In CPS and CPA, however, a commission is not counted unless the visitor buys a product or service from the website that he or she has been brought to through the click. Therefore, the affiliate has to keep sending targeted traffic to the advertiser in order to increase his/her sales.
This strategy is very effective because the money is being paid only when results have been achieved. Many businesses have profited from this form of marketing.