We often get questions from clients regarding affiliate marketing. Here's some insight for those interested in exploring AM as a possible solution for their online campaigns.
Affiliate marketing has been an online force since around 1994. One of the early innovators of affiliate marketing is Amazon.com, who in 1996 launched its associate program permitting associates to place banners or text links on their own sites for individual books, or to link directly to the Amazon home page. While it was not the first affiliate marketing program, it was one of the most successful and served as a good model.
In the digital age, affiliate marketing is a method of promoting a brand’s products or services across the Internet through a network of online independent marketing publishers (also known as “affiliates”). Affiliate marketers are compensated for helping a business achieve certain marketing or sales objectives. The overarching value to the advertiser is that affiliate marketers can offer a pay-per-performance compensation model, meaning the merchant only pays for a desired result. More specifically, advertisers can compensate an affiliate, or an affiliate network on a cost per acquisition/sales (CPA, sometimes known as CPS) basis. Conversions are generally tracked using a link with a personally identifying code, or SUB-ID embedded, enabling the advertiser to track where conversions originate.
The affiliate channel is regarded by many marketers as the predominant direct response channel across all forms of media for sales generation (Hewiston). Moreover, as we track on through time, there are significantly more requirements that advertisers must meet to execute a successful online marketing strategy - those requirements are becoming excessively burdensome for the merchant to manage in-house. Therefore, an increasing number of merchants are seeking alternative options through outsourced affiliate program management, provided by affiliate networks. Industry veterans include names such as CJ Affiliate, ShareASale and Canadian based, Max Bounty. As the affiliate marketing industry continues to mature, there are emerging opportunities in the marketplace for networks to deliver differentiation to their clients in the form of quality, better customer service and of course, greater transparency.
CPA in the New Age
Anecdotally, it seems smaller advertisers routinely pursue affiliate marketing partners who can execute their acquisition mandates on a pay per sale basis. Although this worked increasingly well for all parties between 2007-2010 when CPA campaigns were booming, affiliate earnings per click were high, shifts in payment terms, media costs, regulations, and publisher expectations have put pressures on both networks and publishers. Smaller networks that couldn’t innovate with the industry shifts fell to the sidelines, while only the larger names survived; this consolidation of the masses was a good thing for the health of the industry on the whole, but did reduce the total number of CPA/ CPS networks.
Growth in the industry does remain strong, increasing at a compound annual growth rate of approximately 16%. But, we do see continuing amalgamation of network players. In 2017, AWIN acquired US-based ShareASale, presenting a new, unified AWIN brand, which brought together Affiliate Window and Zanox. Affiliate Crossing merged with Nutryst. There's been a long list so we won't bore you further.
While good CPA networks may be tougher to find and possibly more expensive, more fully integrated value-added solutions are available on a cost per click and/or CPM basis. Robust reporting tools, and analytics have improved dramatically allowing advertisers to take additional risk on a CPM basis, since they’re quickly able to determine a media campaign's potential. More importantly, advertisers can identify marketing sources and affiliates who are effectively producing the desired outcomes as mentioned earlier (ex: conversion tracking via SUB-ID). The optimization of marketing metrics, profit percentages per transaction and other KPI’s are now readily available to an advertiser.