A leading affiliate-marketing specialist has restructured its business model in a bid to increase its appeal over conventional online advertising.
US-based Commission Junction (CJ), which has been operating in the UK for the past six months, claims to be introducing a “new and innovative model for affiliate marketing that has never been done before”.
Affiliate marketing works by pay-for result, rather than paying for the opportunity to target a particular audience. But there has been much debate about how affiliate marketing’s results are best measured.
Called Open Marketplace and slated to take effect from July 1, the model allows CJ affiliates to see merchants’ Internet results as performance percentages – earnings per 100 click-throughs (EPC) – and in terms of real cash distributed from its websites.
Merchants can also search affiliate sites and see the EPC generated for merchants with whom they are associated, as well as traffic demographics. CJ vice-president of strategic alliances Todd Crawford says: “The system reveals the ‘cash’ results.”
CJ’s hope is that Open Marketplace will set a precedent in transparency in this emerging area and accelerate its growth by doing away with the need for merchants or affiliates to test one another out before committing long term.
CJ is also scrapping the commission paid for basic clicks, on the grounds that this area is too vulnerable to abuse and fraud. Crawford says this type of consumer behaviour is “effectively not an action as there is no qualification or earnings generated”.
But, CJ will be increasing its commission rates to 30 per cent – or a minimum of 30 cents (23 pence) which it claims is in line with other marketing solution providers.
Crawford says continuing confusion among online advertisers and publishers has prompted the move.
He says: “Advertisers often receive excellent pay-for-performance results, but lack the information and knowledge to expand their programme. But many questions go unanswered, such as how much commission should I offer? How many leads and sales can I expect. How do I reach more publisher sites?”
However, Crawford maintains that publishers can make significantly more revenue than that offered via a conventional CPM (cost per thousand) model. The problem is that they cannot predict the amount of revenue they receive up front.
Crawford says: ” When CJ thinks the challenges its customers face, the vision it gets is of advertisers and publishers wandering around a big dark room, trying to establish effective partnerships.”
The Open Marketplace “turns the lights on so advertisers and publishers are no longer in the dark” by publishing payment and conversion statistics on advertisers, ads and publishers in an “open environment”.
Crawford is confident that his revamped business model will “further erode the demand for CPM banner advertising”.
Internet research firms have made some bullish predictions for the future of affiliate marketing: Jupiter sees it accounting for 21 per cent of e-commerce by 2003; and Gartner Group predicts that more than 50 per cent of all online sales will be generated by affiliate marketing by the end of 2002.