Internet Works, September 2004
Kickbacks for clickbacks:
Boost your sales with affiliate marketing
Operating an affiliate programme gives you access to top-notch promoters at low risk. They're experienced, daring and only paid for successful sales. Isn't it time you tapped in to the web's greatest sales resource? By Sean McManus
You might think you can't afford to expand your sales team, but you'd be wrong. There are talented promoters willing to push your products on a commission-only basis, so you're only paying for performance. This is affiliate marketing, where keen webmasters can use their design and promotion skills to earn a living and you can tap into a vast network of effective marketeers.
Amazon's Associates programme started to popularise the idea as long ago as 1996. Webmasters linked to Amazon's site and Amazon tracked visitor referrals and paid a commission on any resulting sales. Today, most affiliates are paid a commission in this way although fixed-fee bounties are often paid for delivering business leads, such as credit card applications.
"Affiliate marketing gives us a virtual sales team," says Fiona Maclean, who is director of Easy Date, where affiliates account for a third of sales. "We would not be where we are today without the support of our affiliates. For a business which has grown organically, they have played a vital role."
While most affiliates will be placing your adverts against their own content, some of the most effective partners build websites purely to promote affiliate offerings. This new breed of full-time affiliates is sometimes described as the superaffiliate.
Professional affiliates can earn over £10,000 per month. A few earn over £1 million a year
"Over the last 12 months, we've been researching and developing a base suite of websites and have seen revenues doubling each quarter," says Keith Budden, technical associate at E-Business Assist UK, and superaffiliate. "It is not uncommon for professional affiliates to earn in excess of £10,000 per month, with a few earning more than £1 million a year."
Kieron Donoghue is managing director of UK Offer Media (www.ukoffer.com). He became interested in using affiliate income to support his hobby sites but after two years went full time in December 2003. "I now earn more per month than I did in a whole year working for somebody else," he says.
Successful affiliates are good at website promotion above all else. They're able to attract customers, and some are even prepared to assume risk by paying for search engine adverts. "Affiliates are quite canny," says Darren Richards, who is CEO of programme operator DatingDirect.com and marketing director of affiliate network Netklix (www.netklix.com). "Affiliates have worked out how much they can afford to pay for a click without making a loss."
Working with the major affiliate networks
There are two ways to run an affiliate programme. You can either administer it yourself, or you can work with one of the affiliate networks, such as Affiliate Window (www.affiliatewindow.co.uk), Affiliate Future (www.affiliatefuture.co.uk), TradeDoubler (www.tradedoubler.co.uk), Paid On Results (www.paidonresults.com) or Commission Junction (www.cj.com).
The networks provide reporting tools, track sales and pay affiliates. Most importantly, they bring companies operating affiliate programmes (also called advertisers or merchants) together with potential partners (also called publishers). By joining AffiliateWindow, for example, you gain access to 40,000 active UK affiliates.
"Use one network where you're comfortable with the technology, the company's approach and long term plans"
"In terms of the UK affiliate base, there's a large crossover across larger networks," says Commission Junction's UK and Ireland business development manager Susan Kingston. "We encourage advertisers to use one network where they're comfortable with the technology, the company's approach and long term plans and then dedicate resource to that. Otherwise you spread your revenue and resource across two different networks."
Some companies still prefer to work with multiple networks. Firebox (www.firebox.com) operates its programme through Deal Group Media, Affiliate Window and Affiliate Future. "This is mainly as a test, but also to reach affiliates who may not be on all of the networks," says Firebox affiliate marketing manager Ross Shaw. "Our affiliates can decide which network they want to put their business through. This may not be so important for the superaffiliates, but smaller guys wanting to consolidate all of their merchants to get one bigger payment each month can promote Firebox and not miss out. Our networks also know that we are with the others, so we always have an easy option if the service we receive drops. We have no complaints though."
To promote its dating sites, Easy Date works with Paid on Results, Affiliate Future and Affiliate Window. "Paid On Results has the best reporting platform for us, but doesn't have huge numbers of affiliates," says Fiona Maclean. "Affiliate Window has a good reporting platform although it can be a little slow. It has a large number of affiliates, but some of them are dubious quality. Affiliate Future is popular with affiliates because it automatically validates commissions but it doesn't allow merchants any direct contact with the affiliates and auto-approves affiliate applications."
"The costs of set up vary tremendously, but we have found all networks will negotiate rates," she says.
The cost of using networks
As well as a setup fee and monthly charges, networks usually charge a percentage of the money paid to affiliates, called an override. "Let's say a publisher generated a sale for Tesco and that sale was worth £100 and Tesco was giving affiliates 10% commission," says TradeDoubler's chief marketing officer Will Cooper. "£10 would go to the publisher and we would charge 30% of that, so Tesco would pay £13 for the sale."
The costs vary tremendously, but all networks will negotiate rates
Newcomers Paid On Results and Netklix are priced aggressively. Netklix eschews an override in favour of a 10p flat fee for referred sales or leads. "By all means pay the affiliate a percentage because they've done a bigger deal if they've sold a £1000 TV than if they got someone to register on your site, but the network sitting in the middle has done no extra work at all," says Netklix's sales and marketing director Darren Richards.
"The volumes are very much different," points out Will Cooper. "While the product value might be much higher, sales volumes will be lower. We are one of the most expensive providers in the marketplace and there's a reason for that. We know that advertisers get their return on investment very quickly. We don't want to undersell our proposition."
10 things to consider before joining an affiliate network as a merchant
- How many active UK affiliates does the network have?
- Can I vet affiliates and visit their websites before they join my programme?
- Does the network provide statistics to help assess the effectiveness of potential affiliates?
- Can I communicate directly with my affiliates?
- Does the network support text links, banner adverts and product feeds?
- Does the network allow spyware?
- Does the network offer account managers who will help me to recruit affiliates and will offer advice on adverts? If these are compulsary, what level of service can I expect?
- Does the network offer real time tracking for affiliates and merchants?
- Can I offer different commission structures to different affiliates?
- How much does it cost to join the network and what are the ongoing fees?
Some companies opt to run their own affiliate programme outside of the major networks. Silly Jokes (www.sillyjokes.co.uk) ran a programme independently using a script from Groundbreak that costs $200. The scheme has 400 affiliates.
Some affiliates don't trust independent schemes
"Network fees are high and you really can achieve a lot with a small amount of time on an independent programme," says Silly Jokes director Caroline Creasey. "We are totally in control and Groundbreak is very easy to use. When researching affiliate marketing I just called up a few merchants and some were very disillusioned and felt it was money wasted joining a network. We didn't have the £2k required to join the bigger networks but discovered that it wasn't required for success in affiliate marketing."
Silly Jokes has now moved to work with the Paid On Results network alongside its independent programme.
"Some affiliates don't trust independent schemes," says Creasey. "They often fold after the affiliate has put a lot of effort into promoting them and all commission is lost. Affiliates don't want to keep track of dozens of independent schemes when they can get all stats from one network source." Networks will also aggregate payments from different advertisers so affiliates reach their payment threshold sooner.
Property company Nueva Vida is using Kowabunga's My Affiliate Program software to run its programme. Affiliate manager Des Donnelly says: "Cost was an issue, so TradeDoubler and Commission Junction were out. I became sold on the independent nature of the Kowabunga solution which ensured I owned my relationship with the affiliate (rather than the network owning it). I also liked the opportunity to use a system that allowed me to choose the way we could grow and implement new ideas. The Kowabunga solution is expensive, but is probably the Rolls-Royce of independent software solutions."
You will only succeed in affiliate marketing if you can match the going rate for commissions in your market sector.
"Do some research," says Kieron Donoghue. "This happens a lot in the financial sector: Let's say that the average going rate for a lead for somebody who is genuinely interested in taking out a loan is £10. Then a new loan company launches an affiliate scheme which offers 10p per lead. Who in their right mind is going to promote them when they can get 100 times better rates with their competitors? You may think this is an exagerration but believe me, this happens every week in every market."
"We have researched car hire recently for our new site www.carhirerental.co.uk," says Keith Budden. "Commissions range from 30p to 12.5% of hire value (approximately £22). We guess it is self evident which company we would be more likely to promote."
There can be a bidding war. You have to understand what each user is worth to you
Affiliate rates can be tailored for different partners. The prize-giving skill games website Gameaccount (www.gameaccount.com) offers affiliates a choice of a 25% cut of the revenues a customer generates or a £15 bounty for delivering the registration. "The smaller the site, the more attractive the bounty becomes," says marketing director Kevin O'Neal. "If you're sending several hundred visitors a month, you want to take the risk and benefit from the upside. If you're only sending 10 users, you'd rather have the £150. We offer affiliates both deals but advise them what sites of similar size and characteristics usually prefer."
"Competition can be fierce," he says. "That's the biggest challenge - knowing what the right price is. There can be a bidding war and you have to understand what each user is worth to you. We're in a better position to understand our walkaway point from negotiations now, but in the past we didn't have sufficient data."
As well as a good rate, affiliates are looking for merchants who can close the sale so their hard work delivering traffic isn't wasted.
"Through TradeDoubler we get a list of affiliates who want to join," says Jessica Luthi, affiliate manager for fashion retailer ASOS.com. "I'll look at the website and I can quickly gauge what level they're on in terms of technology. I can see if they're good at graphics and navigation and it's the first step to working out where they are. If they're a newbie, they're probably using banner farms and need guidance on what will work. Intermediate sites might display merchants higgledy piggledy and need to be told where ASOS would fit in. Superaffiliates would have a cracking website, using PHP and product feeds. Product feeds drive most sales for ASOS."
"We get better conversions where there is a crossover in content," says Luthi. "Relevancy is key. But we have an affiliate with links to tropical fish and in the middle of it all an ASOS link. It generates one or two sales a month. Sometimes it is just about the amount of traffic."
Don't neglect ordinary affiliates. They will become superaffiliates if looked after properly
Affiliate programme operators report that relatively few affiliates drive most business and some operators go as far as to drop underperforming partners. "We found that 5% of affiliates made 95% of sales," says Chris Brown, director of Gamble.co.uk which runs an affiliate programme to market its gambling accessories. The company built whitelabel sites for their biggest affiliates and dropped the ineffective ones. "It's always the guys with small sales who email each week to ask what's going on and demand a cheque as soon as their balance reaches £10," says Brown.
Other operators prefer to nurture their affiliate base. "DatingDirect has some affiliates where conversions aren't very good at all," says Darren Richards. "We're not losing anything - we're getting brand awareness because our banner ad is being shown in effect for free. You can't neglect ordinary affiliates because they will become superaffiliates if looked after properly."
Gameaccount has 'a couple of thousand' affiliates through Commission Junction, which deliver about the same amount of business as one of its 40 major portal partners. "Little partners add up but burn out quickly," says Kevin O'Neal. "They promote, get their bounty and they've gone fishing in that pond. Levels drop off and it's less worth their while, so you have to keep recruiting."
"We have a vetting process. Gameaccount doesn't have any political views and because of that we won't go with a site that's too overtly political. If we don't understand the site, particularly if it's in a foreign alphabet, we'll say no. We don't want Gameaccount affiliated with anything we can't stand behind."
While paying a commission on sales is relatively low risk, paying a bounty for leads exposes the business to a risk of fraud. "One thing to watch for is that there are a bunch of sites that will tell you to sign up with this advertiser and we'll give you £10 for doing so," says O'Neal. "They split the commission with users. We've caught that and blocked that commission in cases."
Spyware is another scam that is damaging for both advertisers and publishers. It sits on the machine and intervenes when the user visits an advertiser's site, inserting the spyware's affiliate code. Any affiliate that referred the visitor loses commission, and the advertiser can end up paying for visitors to its website even if they just type in the address. Spyware can be particularly hard to tackle for advertisers administering their own programmes.
"Several months ago we realised that adware companies were generating huge commissions by claiming commission on sales generated by visiting merchants' sites directly," says Affiliate Window's chairman Kevin Brown. "Adware companies sign up to affiliate programmes and using software scan the URL bar and replace any directly typed URLs with their affiliate equivalent. Merchants end up paying for their own traffic."
Affiliate Window has banned adware and spyware from its network, as have Paid On Results, AffiliateFuture and Deal Group Media among others.
"There has been uproar at publishers but it is a misconception that there are hundreds of sales being overwritten and stolen from publishers," says TradeDoubler's Will Cooper. "From our statistics, this is just not the case. I don't think that scumware, spyware or parasiteware should be part of any affiliate network. I do think there's a legitimate place for adware. Some networks have banned adware companies outright. I'm surprised they've taken that step. We have to realise we work in a very fast, dynamic online environment which is constantly changing. We will change our policies to adapt to new technologies."
Case study - I want one of those
Anna Corp, online marketing manager for www.iwantoneofthose.com, tells us how she manages the company's affiliate programme.
When did the affiliate program launch?
It was one of the first marketing campaigns we did after our launch four years ago in 2000. We offer a tiered rate starting at 9% and going up to 12% for our biggest affiliates.
Why did you begin affiliate marketing?
We had a very limited marketing budget. We spent money on PR but for other marketing we had to pay for performance. We were jumping on the back of other people's marketing. If someone has a shopping site which they've optimised to appear in search engines and they ran our banners it worked well. We only ever paid commission so we knew where our spend was going.
How is your programme administered?
We work with Deal Group Media. We're really happy with them. They have proactive account managers who do a lot of extra work bringing top affiliates together so they can do bespoke campaigns.
How do you choose your affiliate partners?
We have information on our website explaining how it works and affiliates can sign up with Dealgroup or send me an email and I will look at the site. Dealgroup has some rules - the site has to be complete and can't have adult content. We want someone who is representing our brand well. If someone finds a dodgy looking site and can then buy from I Want One Of Those, it won't look good for our brand.
How many affiliates do you have?
We have 2500 affiliates, about 30 of those bring in about 90% of the revenue. Others are personal pages or specialist niche sites.
What implications does that have for managing the network?
It makes it easier because you can pick off the best performing ones and do bespoke campaigns for them. We wouldn't ever ignore the little affiliates, but we can ask those that are driving traffic and getting good conversions and driving sales what else we can do to help them.
What results have you seen from affiliate marketing?
Of all the marketing we do, the cost per acquisition is lowest for affiliates. The basket size tends to be higher for affiliate referrals than for search engine referrals. Affiliates tend to be shopping portals so people take time to shop and buy. With search engines, people know what they want, come and buy it and then go away. The ROI for affiliate marketing is the highest for all web activity. It accounts for about 10% of all web revenue. [Company turnover was £7.2 million in 2003].
Creative that works
Banner adverts are almost invisible now that internet users are experienced at screening them out. Effective copy needs to integrate closely with the publisher's site so it can soak up some of its credibility.
"The best types of advert are those that don't look like adverts!" says affiliate Kieron Donoghue. "An example would be that you write a review of a product or service, and after a paragraph or two explaining the features and benefits of a product you place a simple text hyperlink that says something like 'click here for more' or 'click here for our special offer'. These tend to work best as the user does not necessarily think that they are being 'sold' to. They see these sorts of ads as tools for gathering information that they are looking for."
The best types of advert are those that don't look like adverts
More sophisticated affiliates will work with product feeds, supplied by merchants in XML or CSV files. Affiliates can provide detailed product information to customers and hand them over just in time for the sale. Often affiliates can combine feeds from different advertisers. "We can display a range of goods that no one shop could ever provide. The recent availability of datafeeds from many merchants means we can usually show our visitors the entire stock range of several stores in whatever field they're looking," says Isobel Hughes, Retail Therapy Online's (www.retailtherapyonline.co.uk) business development director. "They can make choices on RTO without having to visit all the merchants' sites. We often find that we can display goods in a more attractive and easy to use format than many merchants who make it hard for customers to navigate their sites."
Affiliates prefer unbranded creative and will avoid adverts that make it easy for customers to conduct business without going through their link. "We need clean creative which does not include the merchant URL or worse, the merchant telephone number," says Keith Budden. "One of our pet hates is merchants who try to use affiliate marketing for free branding."
Customers rarely buy on the first visit to a site, so cookies are often used to ensure that affiliates are rewarded for customers who return to buy later. "Ensure you have long cookie lengths," says Nicky Iapino, chief operating officer at Deal Group Media. "We recommend at least 30 days and the longer the better."
Everybody I spoke to said the key to running a successful affiliate programme is communication between the merchant and its affiliates. "I wish companies communicated more with affiliates," says Kieron Donoghue. "In a lot of cases we know the online market better than the merchant. So why not leverage that and work more closely with us. Unfortunately only a handful of affiliate managers see affiliate marketing as a partnership."
While a programme might see a burst of activity on launch, it will quickly go stale if it's not adequately supported in-house. "It is imperative that every merchant gets an affiliate manager," says ASOS.com's affiliate manager Jessica Luthi. "Affiliate management is not a 9-5 job. It could be 24/7 if I let it. I focus on administrative tasks during the day and networking in the evening. The less formal these dos are the more successful they are in terms of building relationships. The reason affiliate marketing works for us is that affiliates trust me."
Plan for success
Affiliate marketing is 1% inspiration and 99% perspiration with a 20% override. Use this roadmap to direct your energies in the right place.
1 Recruit affiliates
Joining an affiliate network gives you access to a database of potential partners who are already promoting other sites in the network and is a good way to kickstart recruitment. For best results, try to bring partners in from outside as well. Put a prominent 'become an affiliate' link on your website's homepage to promote the opportunity to people who are already familiar with your site. Seek out so-called 'superaffiliates' who make their living from running affiliate sites. To find them, enter keywords relevant to your business in a search engine to find the shopping portals and review sites they operate.
2 Negotiate deals
Work out the going rate for commissions in your industry and if you can't beat them, match them. Top affiliates will defect to another company that offers more money if you don't reward them adequately. Consider the lifetime value of a customer when working out what you can afford to pay: in some fiercely competitive niches, advertisers pay more than their margin on their first sale because they know they'll make more from each customer in the long run.
3 Create the creative
If you have a banner advert that is already delivering clickthroughs, use it as a starting point. Provide a range of links in different sizes, colours and designs. Affiliates will know what works best for their audience and it's better to have too much than too little. Text links are more effective, so enable publishers to link to any of your products directly. If your site is database driven, provide a product feed. Refresh creatives regularly.
4 Build relationships with affiliates
Everyone agrees communication is key. Be available for your affiliates and be proactive in thanking and helping your top referrers. Send a newsletter to all affiliates detailing new deals they can offer their customers and give affiliates enough notice to act upon short-term promotions. Consider organising face-to-face meetings or webchats. Respond promptly to queries and encourage feedback.
5 Ensure affiliates get paid
Affiliates must work hard to promote your offering before you pay them. Justify their faith and ensure their loyalty by paying them punctually. Payments are typically made by bank transfer but can also be made by cheque. Minimum payment thresholds of about £25 are common.
6 Analyse and revise
Use the reporting tools at your disposal to monitor progress. Identify your top performing affiliates and work hard to keep them happy. Monitor adverts for both clickthrough and conversion. It's possible to have adverts with low clickthrough rates but high conversion rates and you don't want to drop these by mistake. Share your intelligence: help affiliates to see which creative is most effective and will drive more sales.
7 Keep at it
Launching your programme is just the start. Affiliates need ongoing support. You need to constantly bring new blood into the network and adverts need to be refreshed regularly to stop them looking stale. Appoint somebody in-house to lead and grow the affiliate programme for best results.
Key points for you to take away
- You're transferring risk. Affiliates are working to promote your product without any up-front payment. That risk needs to be balanced by a competitive reward and your ability to close the sale, otherwise they will partner with your competitors. Affiliates need reassurance and nurturing. Successful programmes require constant communication.
- You can operate within an affiliate network or manage your own programme. Smaller affiliates like network programmes. They're seen as being more trustworthy and they aggregate payments and performance reports. Affiliate networks can be expensive to join, but fees are often negotiable. Independent programmes have greater freedom and lower entry costs than some networks.
- Content sells. The most effective conversions come from product feeds, where your catalogue is supplied to affiliates to integrate in their website. Affiliates can combine product feeds from different retailers to create a unique visitor experience. E-commerce sites that don't offer product feeds are unlikely to attract the best affiliates.