Performance-based affiliate marketing gives online advertisers the most-efficient opportunity to gain sales and leads at the fixed cost per sale or lead of their choice. It’s no wonder, then, that approximately 80% of advertisers in a Forrester study allot 10% of their marketing budget to their affiliate programs. Moreover, half of them generate 20% of their revenues with this method. Forrester estimates an average 10% increase per year to $6.8 billion in affiliate program spending by 2020.
Affiliate programs aggregate thousands of websites to sell products and services for merchants, accounting for 16% of online revenue. Advertisers post a description, its payout, marketing assets in a software program that generates trackable links to give each website proper credit as well as issue payments. These systems provide both advertisers, known as merchants, and websites, known as publishers, 24/7 access to all statistics.
Advertisers may choose off-the-shelf software to run the program internally and/or choose one or more affiliate networks to do so. Networks charge 2-3% of the sale on top of the revenues the affiliates earn. They not only provide the platform, but actively recruit and promote programs as well as monitor affiliates for fraudulent activity.
Commission Junction (CJ) is the largest of these with 75,000 publishers and 3,000 merchants, but it also costs the most in set-up. Others to consider include Pepperjam, LinkShare with the smallest, least expensive ShareASale (14,000 publishers), where set-up costs are lower. Publisher duplication across these networks ranges between 80-98%. There are a few dozen other networks, but these are the main ones to discuss at the outset.
Advertisers can provide a variety of assets for websites to choose from: textlinks, banner ads, datafeeds, search marketing and emailing.
As a rule, 20% of affiliates generate 80% of revenues, so it’s important to develop relationships to get additional and more prominent exposure. Advertisers create custom creatives and promotions and offer higher payouts for top performers.
Outsourced Affiliate Program Management (OPMs)
Hiring a manager makes sense to realize a program’s true potential. It takes several months and effort to nurture recruits to post assets. OPMs charge about $1500/month and take a performance fee above affiliate payouts of about 3%. They are responsible to monitor activities, results, fraud and spam and take quick action every day while generating status reports regularly.
“We’ve seen that affiliate is one of our best ROI channels. It yields more revenue for our .com property than SEM, display, or social. We always invest in the most efficient channel first.” —Advertiser in Forrester survey