Affiliate Marketing Best Days Ahead
Crossing the Line - the line between performance and traditional
advertising has been breached and the best days of affiliate
marketing are ahead.
By Greg Shepard
Years before the NASDAQ tanked and banner advertising died,
e-commerce pioneers like Amazon.com and CDNow began partnering
with topic-centric websites to drive revenues, paying a
commission for each sale referred. The practice spread quickly
and became known as "affiliate marketing." By early 1999,
Forrester Research proclaimed "affiliate programs" as the Web's
most effective traffic-driving technique - almost twice as
effective as banner advertising.
Consider that by September 1999, more than three years after
Amazon launched, there were over 1,000 merchants offering
affiliate programs. And by 2000, Amazon's Associates Program had
grown to over 500,000 affiliates. What Amazon founder and CEO
Jeff Bezos started as a polite conversation had grown into an
entirely new industry, bringing with it affiliate networks,
directories, newsletters and a variety of consultants. Other
innovations followed and affiliate marketing is now an integral
part of the Web's composition. It's also now widely heralded as
the Web's most cost effective marketing vehicle.
Still, as affiliate marketing evolved, issues with the model
have been exposed. The affiliate community needs to remember
that affiliate marketing is not about generating cheap
advertising, but developing profitable strategic relationships.
But now there is a way for merchants to now offer a win-win
where both merchants and affiliates have a vested interest.
Improving technologies now make it possible for the formerly
CPS, CPA, CPL performance programs and the CPM, CPC, and flat
advertising models to unify creating a new hybrid that I call
the CPP (Cost-Plus-Performance) model.
The CPP combines a paid campaign with a performance campaign and
offers the best of both worlds. I see this as the future of
affiliate marketing, a wide-open world of performance and
payment where the CPP takes inventory lost to Google's AdSense
and advertisers back. The result is a whole new world of
opportunities for merchants, affiliate managers and affiliates.
The hybrid CPP is converting former CPM, CPC advocates into
affiliate marketing believers. For many top websites, affiliate
marketing now represents a chance to loosen the grip of
pay-per-click search engines and costly advertising. The most
difficult obstacle in affiliate marketing is finding good
affiliates with traffic. If a site sells traffic then they must
have it, and if you negotiate a Cost-Plus-Performance payout
valuable opportunities begin to open up.
Merchants are also realizing that affiliates need better tools
as well. Technologies such as data-feeds, site and shopping cart
abandonment (exit traffic) promise to allow merchants, who are
also affiliates, to increase EPC and EPM numbers without
compromising the visitors experience, thereby improving
monetization. By simply offering additional products and/or
service offers at or after the point of sale, merchants can add
revenue without diluting the sales process.
It's becoming clear to merchants, affiliate managers and
affiliates that the line between performance and traditional
advertising has been breached.
It started with Google's entry into the market. Google's AdSense
captured valuable affiliate program inventory, which caused the
flexible affiliate marketers to evolve again. The industry's
response was to tangle with the paid advertising side of the
market. Google's method is to pay out for ad space - the same ad
space that was used by affiliate marketers. That limits
available inventory and changes the Web publisher's
expectations.
Some affiliate marketers using AdSense end up to cannibalizing
their own market. Why? To get guaranteed income from traffic. If
you pay for traffic, you're guaranteed to get it. The merchants
get guaranteed traffic and the affiliates get guaranteed revenue
from traffic. However, this presents a problem. Traditional
advertising places the risk on the merchants, while performance
places the risk on the affiliate. In either case only one has a
vested interest in the campaign.
It's clear from a handful of recent studies and reports that
marketers are frustrated with the current process.
In a survey of 135 senior-level marketers a recent study found
that while 60 percent of respondents said that defining,
measuring and taking action on ROI is important, only 20 percent
are satisfied with their ability to do so. In addition, 73
percent reported a lack of confidence in their ability to
understand the sales impact of a campaign.
The study, conducted by Marketing Management Analytics (MMA),
the Association of National Advertisers (ANA), and Forrester
Research in April 2005, was presented in July at ANA's 2005
Marketing Accountability Forum.
Also this summer, a MediaLife's media buyer survey quantified
what most already suspected: media buyers think that about only
half of media reps know what the heck they're doing (via
MediaBuyerPlanner.com). A significant minority of the buyers -
about one in six - have such a low opinion of representatives
that they said only 10 or 20 percent are useful.
Complaints centered, unsurprisingly, on time wasting, both in
the form of over-contacting and proving ill prepared when
conversations do take place. Another big complaint proved to be
overly hard selling, with some reps seeming to believe that
repetition or browbeating may succeed in getting a property on
the buy where the numbers won't.
Half of the buyers said they agree with the statement that the
rep problem was "no big deal. Sure, they're annoying sometimes,
but I'm sure they find me equally so. It's how the industry is
set up." About 45 percent agreed instead that they are "a
necessary evil. Most are okay, but there are a few really
obnoxious ones I hate doing business with."
Even with all the issues, the good news is that the affiliate
community is still evolving. Organic search is becoming more
competitive. CPM rates are going up. Paid search is becoming
cost prohibitive and the need for cost effective online
inventory is becoming stronger, causing the affiliate space to
grow at ever increasing rates. As merchants, affiliate managers
and affiliates become even more interwoven, the friction
decreases and new forms of integration and aggregation are made
possible.
I see it this way - the race is on! In the last year the number
of merchants offering affiliate programs has more than
quadrupled. Literally, millions of websites now participate as
affiliates - from personal homepages at Geocities and Homestead
to Fortune 500 companies. And now, more often then not,
merchants with affiliate programs are also affiliates.
Whether termed affiliate marketing, collaborative commerce,
revenue sharing or syndicated selling, the affiliate space leads
the way in the ever changing landscape of online marketing and
has become the Web's fastest, simplest and most cost effective
marketing vehicle.
As both merchants and affiliates continue to recognize the power
of change, affiliate marketing's best days are yet to come. In a
few short years, affiliate marketing looks to become the tail
that wags the dog - controlling the majority of the adverting
and marketing dollars. Despite the less then impressive
advancements in the advertising world and hype, affiliate
marketing stays true to its origins as a better way of
connecting buyers and sellers and rewarding those that
facilitate those relationships.