Affiliate marketing is not a new model and has long been used as a user acquisition strategy online. The question now is whether it is still a viable model and can it lead to successful revenue generation for businesses and publishers?
Looking back at the early days of digital marketing, affiliate marketers were one of the first to recognize and exploit the potential of the web as a major revenue source. They invested in SEO and paid search to built sites the main value of which was in linking consumers looking for a product/brand with the company who sold it, as these organizations typically didn’t have any search presence themselves.
Affiliate Marketing Now
The methodologies used by affiliate networks nowadays have undergone significant changes compared to the early generation affiliate marketing websites. The affiliates who survived and thrived went on to build stand-alone resources that promote affiliate programs and in fact the supposed ‘death’ of affiliate marketing was no more than a shift. It can be perfectly illustrated by Seth Godin’s quote “You don’t find customers for your products. You find products for your customers”.
Affiliate Marketing strategies:
There are many strategies for monetization in the world of affiliate marketing. Often, sites use a combination of more than one method and by tweaking and adjusting each of them, they find the best combination. Here are some of the main affiliation techniques with their pros and cons:
- Product Review
Product review sites are a great medium for affiliate marketers as they clearly attract consumers who are already interested in the products being reviewed, so eventually they’ll be interested in purchasing those products. Thus the publisher writes reviews and then places affiliate links so users can purchase those products. This model works for both physical and digital products.
Pros: It’s a very direct method to generate sales and once the reviewer earns the trust of the audience, the online property becomes very valuable for affiliates.
Cons: Can be very short-lived as there’s always the risk that the reviews might not be an honest reflection of the product qualities so audiences can be doubtful and stop visiting the site. Even when publishers are very transparent about the fact that they have affiliate links, it might work against them to be seen as promoters of the products.
- Banner Ads
Some publishers prefer to present the affiliate links as banner ads, which in the end of the day might not matter so much to the viewer.
Pros: Might be a way to avoid conflict of interest with the site content as users will perceive the links just as ads.
Cons: Users are getting savvier and even if they don’t spot the fact that the banners are actually affiliate links, they might just ignore them.
- Partner Area
Another way to display affiliate links is to create a separate space on your site and mark it as ‘partner zone’ or ‘blogroll’ or whatever works for your audience and content. Thus you will combine transparency and will avoid conflict of interests to a certain extent:
Pros: Great for sites that are considered authoritative and have a high level of trust amongst their audiences. The endorsement for the affiliates is there without making it too ‘in-your-face’ for the audience.
Cons: Might be less visible and thus not generate very high interest.
- Product Feed or Aggregation
A good example of this method is price comparison/aggregation sites. They provide users with comparative information on prices and features, so placing links to the providers of the products and services is seen as a natural extension of the content.
Pros: Value is created by offering comparison and a direct way to make a purchase.
Cons: Affiliates may make claims and assumptions about the product when comparing it to a similar one from competitors, that are unfounded or wrong.
Best Practices for Affiliate Marketing:
- Hedge your expenses:
Most affiliate deals are performance based: You pay affiliates on a lead/ install/purchase etc. Some agree to a revenue share. This is the best thing about affiliate marketing: Your affiliates assume all the risk. The downside is that the risk is calculated into the price you are paying.
As time progresses and as you start seeing consistent results, you can and should turn to a less direct compensation model that will leave more money in your pockets.
- Track your affiliates’ performance:
Affiliates are a performance business. Make sure you track their performance using more than one tracking system, and at least one dedicated affiliate tracking system. That way you can strengthen better-performing deals, and cut low volume partners out. Tracking tools usually provide fraud detection and prevention tools, so be sure you use those
- Adapt your offers:
Affiliate offers and model vary CPA, revenue share, fixed cost to name but a few. Even the same offer can range in values: CPIs (costs per install) start at $0.5 for some markets and advertisers and can go as high as $11 for top tier markets in high demand game genres. As a beginner, you’ll to offer a lucrative deal, but as time progresses and you start making a name for yourself, you can lower the bids and still enjoy the same traffic volumes
- Beware of cannibals:
Some affiliate offers include a discount or a cashback. While these are useful, they can also be damaging as users get dependent on such offers and start to actively look for those just before making a purchase. In that scenario you are overpaying: you paid for the original referral of the user to the site, as well as to the affiliate!
Affiliate marketing should be a mutually beneficial business partnership between a merchant/producer and the affiliate. However, it can be tricky for both sides. Publishers might lose reputation if they are seen to be promoting the wrong products/services or not doing it for the right reasons. Merchants might see their profits being cannibalized as affiliates offer additional discounts, cashback to attract users to click on the link and make a purchase.
Mostly, affiliate deals can be viewed as sales expenses and are therefore hedged and guaranteed to work as there will be no payment back to the affiliate unless a sale is made.
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