A safe bet – affiliate marketing and its benefits for advertisers
For those of you that are unfamiliar with the term, affiliate marketing is one of the more prevalent forms of Internet advertising. Affiliate marketing in simplistic terms, is the process of a 3rd party website (known as an affiliate, or publisher) sending traffic to an advertiser (with an affiliate programme) website, in a mutually beneficial contractual agreement, usually struck through an affiliate network.
Should this traffic meet the conversion requirements on the advertiser site (which could constitute a lead, sale, download etc), then the affiliate will get a pre-agreed commission. The commission is usually either a flat fee, or a percentage of the final order value. An obvious and more traditional example of this model is the way in which travel agents work, i.e. offering the providers products and services via their outlets, and then taking a percentage commission of the order value, the only difference with the affiliate model is the network in the middle providing the technical solution, and taking an override on all revenue passing through it.
Affiliate marketing’s prevalence stems from the fact that it is pretty much open-ended. Anyone with a website can apply to join a multiple affiliate networks and sign up to multiple programmes. In my experience, as long as their site exhibits a fairly nice aesthetic, and of course functions well, they will sail through the application process and be able to promote an advertiser in no time at all.
What are the benefits of affiliate marketing over more traditional display campaigns? The most notable benefit is derived from the fact that the advertiser only pays for the traffic that converts on their site. Therefore, once the necessary set-up and network access fees are deducted, all costs incurred are worthwhile in that they have provided the advertiser with a customer, and, dependent on the event they pay on, some form of revenue.
Given the current economic climate and the resultant tighter controls on corporate budgets, advertisers are increasingly turning to the affiliate model as a safe option for their marketing activity. No conversion means no cost. Another positive effect of the rise of affiliate marketing is the natural rise in competition. Whilst still a consideration in Affiliate Marketing contractual terms, mainly due to the guaranteed gross profit for the Affiliate Networks, set-up fees and network access fees are increasingly being phased out as network savvy advertisers pitch the networks against one another in an effort to score the best deal. The relevance of this again refers back to affiliate marketing becoming the ultimate solution for advertisers that seek to reward their affiliate partners for conversion, without incurring any added cost whatsoever. The model represents extremely cost-effective scalability. As long as there is a fairly good conversion rate and competitive commission structure, after the initial launch and gradual take-up of the programme the EPC (earnings-per-click) will begin to increase. Earnings-per-click is the metric that affiliates predominantly base their choice of partnerships on. It is calculated by dividing the commission the affiliate has earned by the amount of unique visitors they have sent to the advertiser site. So, in relation to the aforementioned cost effective growth of affiliate programmes, once the EPC data is compelling enough affiliates will be falling over themselves to promote an advertiser proposition, and during all of this affiliate and network activity the advertiser could (in theory), creative changes and the like permitting, sit back and wait for the customers to come and spend.
Affiliate marketing’s applications have, in recent years, become increasingly diverse, as networks keen on growing their revenue endeavour to source ever more inventive sources of traffic billable at a cost-per-acquisition. However, if you are not already aware, it is probably worth explaining the technical implementation of an affiliate programme before discussing how the model can be manipulated.
The advertiser will approach a network, with a view to setting up an affiliate programme. Once contract I’s are dotted and the T’s crossed, the advertiser will need to specify the ‘event’ that they want to track. An event constitutes ANY form of activity that the advertiser wants to be able to see in the networks reports. The event with the commission attached will most likely take the form of a lead or a sale. A lead is usually an end-user signing up to some form of product or service, or filling in an application form for a credit card etc. A sale is fairly self-explanatory, although a retail sail obviously differs greatly from an opened and funded and account and then a staked bet from a gambling operator, say a sports book, casino or bingo site. The commission qualifying event is then created by the network, given a numerical id, and then provided to the advertiser’s technical implementations team along with the pixel firing code.
The next step is for affiliates to sign-up to the advertiser’s programme. Once they have been approved, they need to download the creative from their interface. Without going into too much detail on what is a fairly technically complex process, the creative that the affiliate uses will have the advertisers tracking appended. This is then displayed on the affiliate site, and once an end-user clicks through, a cookie is dropped, and which is the key to the activation of the pixel firing back at various stages of the user journey.
This event code is implemented advertiser-side at the point when the transaction, whatever that may be, is finalised. At this point the final pixel will fire back to the networks database, rendering it visible in reports, and the commission will automatically be added to the affiliate accounts.
So what of the other applications for affiliate marketing? The first real revolution was call tracking, whereby an affiliate is given, rather than just banners, a unique phone number that means they can be remunerated for phone AND online conversions. This number is displayed on the affiliate site, but is also dynamically pulled into the advertiser’s site instead of the usual phone number once an affiliate clicks through.
The end-user is none the wiser, they are simply under the impression they are calling the advertiser, when in reality they are calling the network, which then redirects the call to the advertiser call centre. Calls are usually tracked on a ‘qualified’ metric, as the human intervention required to track an actual sale often makes the process impractical, so instead the average time to convert by phone is gleaned from the advertiser by the network, and then the commission is paid for any users that stay on the call for the that amount of time, an internal pixel being fired and commission allocated upon commencement of this time. Call tracking prevents commission leakage to advertiser call centres, a recurring problem for affiliates partnered with advertiser that offer expensive, high-end, or complex products that in the mind of the end-user necessitate a call for more information before a final purchasing decision is made (a decision that is usually carried out on the phone, preventing the affiliate from getting the commission).
Increasingly, networks are attempting to take the economical entity of affiliate marketing offline, and advertising in newspapers, radio, and other offline space at a CPA. So how is this possible? Well the first and most obvious application is using call tracking technology to track offline advertisements. So a media owner would be issued with a unique number, and then this would track whenever a prospective customer used it to phone the advertiser.
Increasingly popular is advertising offline, via radio for example, and then using an exclusive offer sending end-users to a specific landing page on the media owners website, which the user then clicks through causing the product to be tracked as a normal affiliate transaction. This only really lends itself to advertiser’s that can offer the media owner exclusivity on a deal, as there needs to be a hook to drive the traffic to the owner’s landing page, otherwise the traffic will leak straight onto the advertisers site.
Most recent examples of growing profile of affiliate marketing and its increased offline usage include both The Sun and The Mirrors cash back pullouts offering a range of advertiser deals and giving all of the commission back to the end-user.
Most UK brands now have a traditional affiliate programme set-up, and it is likely that there will be more and more advertiser forays into offline adverting using CPA tracking as the credit crunch tightens its grip on available budgets and advertisers need to see a return on their ad-spend.
