I also didn't get it, and I worked very closely with Danielle for a long time at Twilio. Then one day my sister-in-law who writes a blog about her hobby farm and Etsy business IMed me and asked "how do I make money from my blog?" She's tech savvy, but the idea of an affiliate network is outside her realm of understanding. I sent her to refer.ly and she instantly got it. That's the sweet spot. It's not me or you.
Amazon is one exception where joining Amazon's affiliate program is probably no harder than joining refer.ly, though.
Dan Siroker of Optimizely mentioned something interesting in a talk he gave at Rock Health. Before he founded Optimizely, he and his co-founders tried to reward people who could convert their Twitter followers in a similar fashion. He concluded that "we couldn't pay people enough to spam their friends."
I worked for a startup that was essentially trying this same thing. It became clear, pretty quickly, that we also couldn't pay people enough to make them spam their friends with deals.
Referly seems to be making a name for themselves, so I'm curious how they turn out.
I've been obsessed with the concept of perfect information applied to the web since I worked on Whrrl several years ago. http://en.wikipedia.org/wiki/Perfect_information
The reality is that there are huge existing businesses with names you recognize like Mary Kay and Tupperware who take advantage of the power of friends selling to friends, but with them you are limited to their inventory, you pay an upfront cost (buying samples and baseline inventory), and a lot of labor/time to make a sale. The goal with Referly is to broaden the products you refer, eliminate up front expenses, and reduce the amount of effort to generate a sale. This might not be for the HN audience, who can make $100/hour coding, but for a stay-at-home Mom who blogs and sells stuff on Etsy Referly is a great option for additional income. It's also great for anyone who has every written a blog post listing their top 10 book recommendations.
As to why you should use us rather than your own Amazon tag - we get a better commission rate because we have economy of scale. And you can refer products from any of these websites http://refer.ly/merchants
Mary Kay and Tupperware tapped into the western womans' need to meet in person and converse with friends. Referly is trying to tap into the broadcasting phenomenon, or "bragging", that occurs over social networks, which in this instance translates to spam.
That's one of the reasons I will never buy any product of theirs. You don't get to me through my friends. I consider abusing private friendships for commercial gain un-ethical.
This is exactly the flaw that I see with Referly.
Not just with friends - you're diluting the quality of you communications when you become an advertiser, and in order to make it worth your time you're going to have to spam.
(note - that doesn't mean they can't make money. Looks like a pump-n-dump to me)
When someone "games" a system to any major extent, the tracking data would expose that users "gaming" attempt.
Additionally, since you take no cut of the affiliate payment, I'm trying to find out who you're actual customer is?
The Amazon problem could be harder to manage as they scale since they can't do subid tracking per user and probably try and correlate redirects to specific Amazon purchases, but that is going to leave a lot of grey area for any other purchases the user should be credited for but turns out to be too difficult to correlate.
IMO, Steam does this better than anyone. I wish there were Steam for real world products, including sharing post purchase use and satisfaction.
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I wish you had some way to do demo targeting on first use even before signup. When I first visit the site, I see a lot of stuff I'd pay to not have. (Kitschy junk...maybe due to Etsy partnership?).
At the very least, I'd show 2-3 really diverse sets of items on the first page for non-logged-in non-cookied users. Maybe your market is basically 50-70 year old females right now, and so it's worth not making the initial set of items appealing to anyone else. I would hand-curate the front page rather than letting it be what appears to be driven by users, but keep it somewhat up to date with what's popular on the site. The first page view should be beautiful and compelling.
There is actually a list of filter keyword links right above the products. Those are the sample keywords that I want to prime my users, actually with "laptop" as the last keyword. Though I do know it's not obvious enough to most visitors.
The dilemma is if I start to promote things that _you_ care about, my existing users will feel that I'm turning my back on them and quickly drop off.
Geez, I wish I were Pinterest that only needs to serve 50-70 year old females forever :-P