Affiliate programs are bastardized referral programs.
Both use 3rd parties, either individuals or businesses to drive sales. The difference between the two: the rewards for an affiliate program are purely monetary, while referral marketing relies on trust and personal relationships to drive sales.
What exactly is an affiliate program? A 3rd party person or business is rewarded with money each time their referral of a product or service results in a sale. Most often this is through an affiliate link, that the retailer hosting the affiliate program uses to track sales.
CDNow pioneered affiliate marketing in 1994 and Amazon made it popular in 1996.
Today, internet marketers and bloggers use affiliate marketing regularly. It is a way to generate revenue from their blog and/or email list without creating a product.
There are even circles of internet marketers that essentially recommend each other’s products to the point of incestuousness.
At the beginning of the affiliate trend, readers didn’t know their favorite blogger was getting paid for product referrals. Because of the ‘expert’ recommendation, readers clicked the link and purchased. The lack of disclosure caused confusion among consumers who did not realize the basis for the recommendation was purely monetary.
Sidenote: *There are some marketers who DO the due diligence needed to recommend products and services. They test it and give an honest opinion about how they believe it will benefit their readers. However, not all affiliate marketers do this.
Personally, I believe every consumer has the personal responsibility to research what they buy, but personal responsibility is another topic for another day.
Fast forward to the present. The FTC has affiliate guidelines in place that require clear disclosure about paid affiliate programs.
While still widely used, it seems that affiliate marketing is beginning to fall out of style.
Sandi Krakowski calls it ‘list pimping’. Woo Themes recently shut down their affiliate program due to lack of results from the program and fraud. LKR Social Media shut down their affiliate program at the start of 2012.
In my experience, affiliate programs are annoyances to administer, and not nearly as effective as other forms of partnerships. Bottom Line: Not worth the hassle for most.
I agree with Sandi, don’t pimp your list and don’t ask others to pimp theirs. It is much better to form very few high quality joint venture partnerships that you can nurture.