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
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.
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.
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.
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.