In the world of digital advertising, there’s no getting away from the fact that affiliate marketing strategies are one the rise, and show few, if any, signs of abating. Research has indicated that as much as 15% of digital media industry’s revenue comes from affiliate marketing. Performance based marketing has really found its niche in the digital sphere and many brands, retailers and other advertisers like it because it is thought to ‘share the risk’ between the advertiser and the publisher. The risk, of course, is that the advertiser will spend money advertising on the publishers’ channels and will not see a return in terms of direct sales.
Affiliate marketing in print
In the world of print, any form of direct response (discount code, voucher etc.) included in the advert was often viewed as very perilous by the publisher as a means by which to assess the publication’s merit as an advertising channel. After all, few of us have ever seen a print advert and acted immediately on it, purely on account of its placement in one publication. Say, for instance, you had seen an advert for a perfume which you like and wanted to buy, could you say in all certainty exactly which of the placements tipped you over the edge into buying territory? I would like to buy a Patek Philippe, which I’m sure has been influenced by the memorable advertising for that brand, but if I were to do so (unlikely), which of the scores of publications I have seen the brand advertised in should get the credit? What if, by chance, I had picked up a copy of ‘How to Spend It’ on my way to the shops but had been subscribing to The Economist for 15 years? If I mention that I saw it in HTSI to the brand, they might reward HTSI by booking more placements. The Economist gets no credit for the sale, yet I have been exposed to the brand consistently over a long period of time. Direct response is, frankly, unlikely in print and you’d have a hard time persuading a publisher to ‘share the risk’ on account of receiving it.
So how has the model found traction in the digital advertising sphere to the extent that over 80% of brands utilise affiliate marketing?
The first and most obvious point is that the amount of time between seeing an advert online and being able to purchase from the advertiser is drastically reduced, meaning that hoping for direct sales off the back of an advert becomes less of a pipe dream and more a genuine possibility. This is particularly true of mobile: more than 30% of affiliate-generated sales originate from a mobile device.
While direct sales remain the ultimate goal, many adverts have the aim of directing the visitor to the brand’s site, and affiliate schemes are often offered on that basis. But is this really ‘sharing the risk’ with the publisher? Or is it more a case of handing over the risk?
An online publisher will almost certainly veer towards the latter. If the advert doesn’t get many clicks, is that the fault of the publisher? Or is it the brand or product? Or is it (one dreads to think) the advert itself? It might be a poor advert. If that’s the case, should the publisher bear the brunt of its lack of success?
Digital advertising effectiveness
Even if the advertising is strong and the product appealing, can the potential customer easily navigate their way to a purchase? Is the e-commerce website design totally effective? What if they got lost on account of poor website design and development? These are things which are out of the publisher’s control, and it could be argued that only paying them as a result of sales, when there are so many other factors in play, is deeply unfair.
It would appear to make more sense to offer a ‘pay-per-click’ (PPC) scheme, where the publisher is rewarded on the basis of people interacting with the advert. This, however, has its weaknesses, as the world of ‘click fraud’ rears its ugly head. Also, if site visits are what you’re after, even a strong advert in a perfect place would probably get a click-through-rate (CTR) of around 0.2%. So if you’re looking for an extra 2000 visitors to your site, that’s a million impressions, which is a lot of inventory, for which the publisher would expect decent compensation. How much are those clicks worth? When it comes to CTR, what exactly constitutes successful online marketing?
There is clearly no easy solution; 78% of CMOs admit affiliate marketing to be their least mastered area of digital marketing. Advertisers and publishers can argue the toss, and doubtless will, for ever.
What is clear, however, is that well-designed, carefully placed, digital advertising works. Get the advertising right, get the brand right and give the buyer the chance to visit your beautifully-designed E-commerce website when they’re ready to do so, and they will. If you’ve got the product, got the brand, got the advertising and have the perfect destination for your customer in terms of the website, you’re on track for great success. Careful placement and good judgement in terms of destination for your brand’s ads and you’ll see a consistent ROI against spend, even if you choose not to force publishers to dance to the affiliate tune.