The Quick Ten
The latest developments in Affiliate Marketing
Affiliate grows by millions
Despite the difficulties of the recession, the affiliate-marketing industry was worth a total of £3.82 billion in 2008, a 22 per cent increase from £3.13bn the previous year, according to Econsultancy.
Blog and content opportunities
Companies such as Skimlinks are offering bloggers and content creators the chance to engage in affiliate-marketing activities, providing advertisers with a host of new opportunities.
Slump boosts cashback
The economic downturn is making cashback and voucher-code sites increasingly popular, with the aim of boosting traffic and promoting awareness of a merchant’s special offers and sales.
Rise in rebate catcher use
The use of rebate catchers is growing. These remind consumers when they can collect cashback or reward points from merchant sites.
Videos lure customers
Video content is on the increase. This allows potential customers to home in on products for more detail – such as a virtual tour of a hotel room, or a gadget in action – potentially increasing conversion rates.
In-store satisfaction
Affiliate marketing is working closely with other channels, supporting in-store activity, PPC, SEO and on-site promotion to maximise satisfaction and profit.
Brand promotion
There has been a boom in tools to help affiliates promote brands. Firms including Easy Content Units enable integration of live product listings on their sites or blogs.
Affiliate shake-up
Media and search agencies are looking to expand into affiliate marketing and build on existing relationships with clients, while brands such as eBay and Amazon have moved affiliate management in-house.
Clear codes
The IAB’s Affiliate Marketing Council has issued a code of best practice for voucher-code sites to ensure that traffic from affiliates sent to retail sites is not misleading.
Retail research
The IMRG says affiliate marketing accounts for about 10 per cent of UK online retail sales. Econsultancy reveals that 95 per cent of brands claim affiliate’s cost-effectiveness beat paid search at 90 per cent, email marketing at 81 per cent and display advertising at 52 per cent.
Feature
How to...Ensure your affiliates bring good returns
Affiliate marketing has led the way in terms of risk-free advertising, allowing brands to pay only for the ads that generate sales. In an economic downturn this approach is proving even more attractive, but there’s much more to it than meets the eye, reports Kim Benjamin.
The three words most often associated with affiliate marketing are ‘risk-free advertising’. This is largely because of the CPA model that enables brands to link budgets directly to performance and only pay out once they have achieved a sale. It goes without saying that in the tough times brought about by the current economic downturn, such a proposition is proving to be particularly attractive as brands look to bring in a greater and more visible ROI.
But it’s not just the CPA model that is making affiliate marketing an increasingly popular option. According to pay-per-performance agency R.O.Eye, brands are viewing the discipline in terms of quality rather than quantity, as they are better able to measure the value affiliates add. It is no longer viewed as a medium with a one-size-fits-all approach – instead, there are numerous techniques to consider, such as voucher codes, user-generated content and video, all of which fulfil a range of consumer needs and require a different approach.
“We are seeing large brands using short-term campaigns to trial video technology, social media and voucher-code sites with a view to finding out whether these bring incremental revenue,” says Alison Guise, general manager at Commission Junction Europe.
According to Chris Bishop, former head of online acquisition at House of Fraser and now founder of 7thingsmedia, voucher codes continue to dominate the affiliate marketing programmes of most retailers. He believes there will be further innovations in this area as affiliates push for a point of differentiation.
Replicating the CPA model
Moving marketing spend towards a lower-risk model, such as the affiliate channel, is a practice that should continue to grow in a climate demanding transparency and ROI. But how can brands successfully replicate the CPA model in other areas of digital marketing? According to Dan Redfearn, membership manager at the IAB, it can be applied to nearly any product or service.
“Larger publishers can easily incorporate CPA ads into their existing inventory in a similar way to how they already incorporate Google AdWords,” he says. “Marketers need to be aware, however, that to use CPA advertising effectively marketing budgets need to remain uncapped.”
Red Letter Days is just one example of a brand that has extended the CPA model to other areas of the digital mix. Its online marketing manager Angela Greenwood says that as the recession continues to bite, an increasing number of these types of deals will be done, as advertising budgets shrink and online retailers seek to avoid the risk of facing huge costs upfront. Red Letter Days has also invested in some of the latest affiliate marketing techniques, such as using video content (see Casebook).
“We have recently run a number of promotions with media owners which have provided us with advertising in return for commission on sales generated by the activity,” she says. “Media owners direct their users to specific online landing pages, enabling us to track conversion and sales via our website analytics and pay commission accordingly.”
Julia Nisted, European affiliate marketing manager for eBay, says that if brands are to apply this model successfully to other areas of digital marketing, they need to balance ROI against incremental value.
“When it comes to search, brands need to question whether the keywords they are buying are driving sales or whether they are paying for something that would happen anyway”, she says.
And ensuring value for money is a view shared by Gareth Gaston, managing director of online travel company Octopus. Affiliate marketing is a small, but growing part of the brand’s digital marketing activities. “We would like to extend the CPA model to other areas of our digital marketing but we’d need to look carefully at the incremental value,” he says.
Assessing participant value
There are other challenges, too, for brands to consider when applying the CPA model across the digital marketing mix. Matt Bailey, head of affiliates at i-level, says the agency is doing a lot of work to ascertain the true value of each participant within the sale process.
“This will potentially encompass rewarding more than one affiliate within a chain that includes other marketing channels, such as email, social media and PPC,” he says.
Bailey adds that there also needs to be a view taken on the impact of different types of marketing on acquisition versus branding. Whereas the branding element of affiliate marketing is offset by the CPA paid to the last referrer, it is essential to bear in mind that, with other channels, the branding impact that is provided by other types of marketing is incredibly hard to track and in turn extremely hard to reward on a performance-only, risk-free basis.
This is an area in which affiliate networks are increasingly working towards becoming involved. Tradedoubler has been working with Hilton Hotels to analyse the online journey every customer makes on their way to a purchase, to understand what influences a user’s behaviour. The research looks at a number of factors, such as: whether it is the PPC ad that initiates a journey; what impact an email reminder has; at what stage the peer review on the affiliate site becomes crucial; and how display reinforces the rest of the digital activity.
Gauging affiliate value
“Looking at all this data gives marketers the opportunity to really see how different channels influence each other and how changes in budget allocation can have a real impact on customer conversion and sales,” says Ben Manning, affiliate product developer at Tradedoubler. “Using this same technology for an affiliate programme, the user-journey analysis can similarly highlight the value driven by each affiliate and affiliate type, as well as which ads work most effectively at which point. The client gets more sales and affiliate traffic is used more efficiently.”
With so many different types of publishers working on the CPA model, such as cashback sites, price-comparison sites and loyalty sites, brands have access to a variety of marketing methods, all with the risk-free factor of performance-based payments. Unsurprisingly, Samantha Guise, head of communications at Affiliate Window, believes the affiliate networks are best placed to advise brands on which type of publisher will best suit their programme.
However, an increasing number of media agencies are getting involved in affiliate marketing, and as the CPA model spreads to other areas of advertising, affiliate networks will have to work hard to differentiate themselves in the face of increasing competition.
Ultimately, Guise says, convincing other players in the digital marketplace to use the CPA payment model would be a tough job. But it is clear affiliate marketing can be a very effective way of generating sales at low cost and with little risk. With the likes of Amazon claiming that it expects its affiliate channel to contribute as much as paid search by 2012, it’s an area in which brands are likely to devote an increasing amount of time and resources.
Having well and truly shaken off its ‘shady’ image, affiliate marketing now looks set to go from strength to strength.
Smart think!ng: Affiliate marketing
1. To make the most of CPA-based advertising, avoid capping your marketing budget for specific campaigns
2. Brands must demand transparency of activity and measurability of results
3. When applying the CPA model to other forms of digital marketing, brands must weigh up ROI against incremental value
4. Affiliate networks are helping brands to apply the CPA model across other aspects of digital marketing
5. Ascertain the true value of each participant within the sales process
Second Opinion
Despite the economic climate, it has been a positive year for affiliate marketing. In fact, with the recent downturn forcing advertisers to scrutinise their budgets, the sector is flourishing.
Brands are recognising the relevance of affiliate marketing, so it comes as a refreshing surprise to say that 2009 has been one of the most eventful and successful years the industry has experienced for some time. The tremendous rise in the popularity of voucher codes and cashback sites among consumers is proof, and has caught the attention of advertisers vying for customer eyeballs and sales, helping the sector to boom.
The affiliate-marketing sector has also come on in terms of industry progression and self-regulation. The IAB Affiliate Marketing Council has made positive steps, bringing networks together to promote best practice in the industry, and encouraging greater transparency and communication between advertisers and publishers.
It is initiatives like this that will help to drive the sector forward in a responsible and accountable way.
Next year is set to be even better. Consumer awareness of affiliate channels is increasing, and the use of cashback sites is an excellent example of an industry innovating and responding to market changes.
We expect to see uptake of affiliate marketing extend beyond its traditional comfort zones into sectors such as automotive and FMCG to boost sales. It is a strong sign that affiliate marketing is broadening its focus to quality as well as quantity.
Peter Rowe is the managing director of Affilinet UK
CASEBOOK:
Red Letter Days experiments with CPA-based video ads
For brands such as Red Letter Days that rely on inspiring consumers to invest in experiences, video content is one of the most obvious promotional methods to employ.
Red Letter Days worked with Affiliate Window to test and launch integrated ‘ShopWindow’ video players in November last year. The players allow content to be altered remotely without the need to upload a new video every time. The brand’s affiliate sites include My Experience Days and Driving Days.
Information is supplied from Red Letter Days’ digital inventory, and it is updated on a daily basis, dependent on stock availability and product launches. Generic video content may feature overall details about the brand and range of experiences, enabling Red Letter Days to target products dependent on the content’s specific affiliate needs, seasonality or popularity.
“Using video on our site has increased conversion rates and given customers a glimpse of what they can expect on the day,” says Angela Greenwood, online marketing manager at Red Letter Days.
“We can show cars racing round a track, or even a trip in a hot-air balloon. While banners perform well, including videos on our affiliate sites gives customers another view.”
Additional video-content units have been created featuring individual experiences with the relevant product information and pricing featured in a dropdown, accessed by hovering over the top of the video unit. By clicking through, consumers are also directed straight to the deep-linked page, optimising the user experience and removing any unnecessary clicks.
By appending every video unit with affiliate tracking, Red Letter Days is able to track clicks and sales as a result of consumers accessing these short video clips. Greenwood says that although the use of video is still in its infancy for Red Letter Days, the number of its affiliates using the medium has more than doubled since launch.