Performance Marketing – History and Opportunity

The Beginning
Affiliate marketing largely began with niche and community Websites adding affiliate links to promote specific merchants or products. In the case of Amazon, any Website could add a “virtual bookstore” to their Website by joining and using Amazon’s Associate (Affiliate) Program.

A Shift
Many early affiliate marketers were Website owners who added affiliate links and hoped for a sale. In some cases, these affiliate links were very successful. In other cases, the volume and conversion rates were too low to generate any meaningful income. But the possibility for profit has since turned some of these early affiliates into large performance marketers.

An Attractive Model
Merchants and affiliates found success in the new performance model. By only paying for transactions, much of the marketing or advertising risk shifted from the merchants to the affiliate publishing partner. This method appealed to many online marketers and consequently the industry grew. With an increase in the use of search and the advent of performance publishing, the industry transitioned to performance marketing.

Affiliate Networks
Much of the growth in performance marketing has come from the development of affiliate networks such as Commission Junction and LinkShare. These popular networks enable merchants to use a network to quickly and easily add an affiliate program to their Website. They provide tracking, reporting, payments, and a way to reach top affiliates.

Direct Relationships
With the growth in the market and the maturation of tracking technologies, many companies set up their own internal programs. In some cases these are run along with affiliate networks. Other times they operate exclusive to affiliate networks. The growth in lead generation, a segment of performance marketing, has also contributed to the industry’s growth.

Performance Marketing Industry Emerges
Performance marketing has contributed to the success of many leading e-commerce merchants and online companies., which introduced the first well-known affiliate model for driving traffic and transactions, is just one example of a company that has achieved significant success thanks to its affiliates’ marketing efforts. Since it began in 1996, affiliate marketing has evolved into a thriving industry now referred to as performance marketing.

With the growth in performance marketing, several top affiliates have expanded from one-person shops into successful companies. While these top affiliates are often referred to as “super affiliates,” many (Vertive included) prefer the term “performance marketing company” to describe these businesses.

Performance Marketing Industry Size
The performance marketing industry is now a large and growing market segment of Internet marketing. Because it is a relatively new and fragmented industry segment, it is difficult to pin down the actual size of the market. Various research groups have sized the market differently:

  • Marketing Sherpa sized the affiliate marketing industry at $6.5 billion in 2005
  • The IAB estimates Referrals/Lead Generation (which overlaps with performance marketing) to be a $1.3 billion industry in 2007
  • JupiterResearch pegged affiliate marketing fees at $2.1 billion in 2008.

The one common theme in each report is that performance marketing continues to emerge as an influential industry.

Leave a Reply