Affiliate Marketing: How e-Commerce Businesses Reward Other Sites to Refer Customers to Them
Affiliate marketing means reimbursing another online marketer for promoting your wares and sending you interested customers. These arrangements have been around since the beginning of Internet marketing, taking advantage of the speed and low cost of online communications.
But the practice very early on developed a reputation for sleaze. The trouble was that many sites sprang up with the sole mission of acquiring and passing along names, without regard to quality or product interest, and growing rich on the bounties paid by legitimate merchants. Often these referring sites would promote the referee using unsavory or even illegal tactics, like spam or spy-ware. Much of this bad practice has centered around questionable categories like Internet gambling, porn, and “free stuff.â€
Affiliate sites fall into four types today:
1. Search engine marketing arbitrage, where savvy buyers of search engine media resell the resulting inquirers to merchants. A leading example is Traffic Strategies.
2. Coupon and deal sites, like Coupon Mountain.
3. Loyalty and rewards sites, like Ebates, MyPoints, and UPromise.
4. Comparison shopping sites, like PriceGrabber and MySimon.
In the purer world of legitimate e-commerce, however, real affiliate marketing can be an extremely reliable source of profitable new business. According to a new study by Shawn Collins, the 2007 AffStat Affiliate Marketing Benchmark, 15% of retailers generate greater than 5% sales conversion rates on visitors referred by affiliates.
In years past, merchants signed up as many affiliates as possible, figuring the more traffic, the more sales would result. But these days, retailers are going for quality over quantity. In 2007, 37% of retailers do business with fewer than 500 affiliates, up from 24% in 2006. Clearly, online merchants are recognizing that paying to drive site traffic will only make sense if there’s have a prayer of persuading these visitors to buy.
But there is another reason to keep an eye on affiliate quality today. The Federal Trade Commission (FTC) has jumped into this otherwise unregulated field, forcing a group of porn sites to ensure that their affiliates market responsibly. Those affiliates were sending out sexually explicit emails to promote the porn sites, without following the rules of the CAN-SPAM act that forbid misleading email subject lines and header information. The FTC now holds the merchants directly responsible for the marketing practices of their affiliates—which means the retailers must choose their associates wisely.
According to John Ardis, Vice President of ValueClick, which owns Commission Junction, the leading tool for managing affiliate relationships, many online merchants are refusing all applicants for affiliate status. “These sites are keeping a tight control on the relationship,†he says. “They are looking at each potential affiliate in detail, using an invitation-only policy.â€
As affiliate marketing matures, and the easy money gets harder to find, online marketers are working harder to identify ways to attract and convert real customers using referrals from iliates. Notable experiments include:
- Add Web 2.0 applications. Some sites are trying to jazz up their sites with cool new capabilities, like blogs, video, podcasts and user-generated content.
- Don’t stop marketing. Recognizing that there is strong potential in the 98% of visitors who haven’t yet converted, Commission Junction is testing an approach they call “3DBT,†or 3-dimensional behavioral targeting, whereby a referred visitor is tracked at multiple online touchpoints, such as banner ads, site visits and email communications, so the conversion process can continue beyond the initial contact.
UPromise attracts members by offering the chance to park money in tax-advantaged savings accounts for their children’s future college. Here, participating retailers are sweetening the pot by offering UPromise members free shipping to stimulate higher sales conversion rates.