Affiliate marketing is attracting greater attention as more advertisers get to grips with the digital age. Sir Martin Sorrell, chief executive of the WPP Group, has said that within ten years he expects digital to make up 30% of his business; it currently stands at about 15%.
According to Econsultancy, an online publisher of reports and analysis, the affiliate marketing industry in the UK is estimated to have grown 60% in 2006 to £2.16bn compared with £1.35bn in 2005. The measurability and accountability of internet advertising, and particularly affiliate marketing, makes it an attractive proposition for marketers.
In the digital landscape, the aim is to drive traffic – ultimately customers – to your website; affiliate marketing generates that traffic by driving users from one website to another. The site from which the traffic was driven, known in the business as a publisher or affiliate, earns revenue on a "pay-for-performance" model for customers. A website owner or publisher displays an online ad as a banner, button or link on their site on behalf of a brand or advertiser, known as a merchant. When a user visiting an affiliate’s site clicks on an ad and performs an action (usually a purchase) on an advertiser’s site, the affiliate is paid commission.
It is a sector that online retailer Amazon is credited with inventing when it launched its "associates program" in 1996. If it is done well there are many benefits for everyone involved. But while Amazon paved the way ten years ago, some sectors still have not made the most of its benefits. One sector that has been quick to embrace the medium, however, is travel, which moved into the sector in the late 1990s.
David Hall is head of communications at Affiliate Window, an affiliate network that develops and manages affiliate strategies on behalf of publishers and merchants, and counts Ebookers, Next and Vodafone among its clients. The networks help merchants create the commission structure to be offered to the affiliate advertisers, while also providing content and management tools so affiliates can manage the advertising content they publish on their websites. He says the travel sector’s past was key to its early adoption of affiliate marketing. "As consumers, we have always seen big travel brands sit alongside each other in privately owned high street travel agents, that sell holiday packages on a commission model. Travel brands’ early move into the affiliate sector was a natural progression; they already had the mindset. The travel sector was familiar with paying commissions to an external salesforce, and that’s what affiliates are."
Andreas Bernstrom is managing director for the UK & Ireland at fellow affiliate network TradeDoubler, which numbers travel brand Ebookers, Expedia, Opodo and P&O Ferries among its clients. He agrees that history played a part in travel’s swift move into the affiliate sector, but points out that consumers’ eagerness to buy travel online has also helped. "For many consumers, flights or accommodation are the first purchase they make online. It is a phenomenon that has spread through the generations/ it’s easy and offers freedom of choice. Consumers can compare products, destinations, check flight times and prices with ease. They can visit several sites or an aggregator, they can also check reviews and find information on a company’s performance and customer service." This can, of course, be translated to many other sectors and products.
Like Affiliate Window’s Hall, Bernstrom likens affiliates to a network of "mini travel agents", but says many other sectors can also benefit from a virtual salesforce. He agrees with Hall that there is much to learn from the travel sector’s approach to affiliate marketing, but says other sectors are beginning to wake up to its benefits as a sales tool. High street brands Dorothy Perkins and Woolworths have signed up to Affiliate Window, and TradeDoubler has Natwest and Royal Bank of Scotland on its books.
"Expedia adopted affiliate marketing in 1998. Travel brands realised the reach affiliates could provide them with. It’s not a complicated sell and is a great call to action. It is also cost-effective to execute and a great revenue stream," explains Bernstrom.
While it has value for advertisers/merchants, it is also a sound revenue stream for publishers/affiliates too. But Bernstrom says the pure online travel brands such as Expedia and Opodo, were quicker to realise the capability of search and the value of affiliate advertising within that – and search is intrinsic to affiliate marketing. In an effort to boost their results on search engines, affiliates, especially those with bigger budgets to invest, roll out keyword campaigns on major search engines, bidding on terms relevant to your business, so their sites are viewed in the results and can then drive customer traffic to your site. They are seeking to drive their commissions on a cost-per-click (CPC) or cost-per-acquisition (CPA) basis. And this is where the affiliate marketing industry has suffered knocks to its reputation.
Companies need to protect their brands online, from both rival and sometimes unscrupulous partners. Advertisers must set the ground rules and decide on who can bid on their brand names to prevent cannibalisation, and they must also ensure their brand is being linked with appropriate websites and content. Both merchants and affiliates have found themselves victims of fraud.
Fraudulent affiliates effectively steal from merchants by engineering false leads or sales. Meanwhile, affiliates can suffer as their affiliate identities in links are altered, so that when a consumer completes a transaction, the credit for that transaction goes to a fraudulent link and not the affiliate who actually acquired the buyer. To prevent such malpractice it is up to the search engines, affiliate networks, advertisers and publishers to work together.
Affiliate Window’s Hall says the way to combat this is by working closely with the affiliates, monitoring them and ensuring good practice. However, he says the industry still has to work harder to ensure merchants and affiliates alike are protected and that some networks must pay more than lip service to ensuring good practice among affiliates is assured.
"It is essential that networks screen all affiliates who sign up to their programmes; check bank details and history," he says. "That way merchants can be confident in who they are working with and what they are getting."
While there is the risk of brand hijack, complacency has led to aggregator sites – price comparison sites or holiday booking sites – and affiliates appearing higher in the search rankings. This is because of poor search management says Warren Cowan, chief executive of search agency Greenlight. He warns against "bricks-and-mortar short-sightedness".
He argues: "There is too much misplaced corporate security that their offline brand presence would translate as a sterling Web presence. Pure online travel brands realised that in terms of acquiring new online customers, this had little equity. Airlines and banks have been particularly bad at this. There was a time when you searched for an airline or credit card, the aggregator sites came up before the brand. They realised the benefits of niche search terms and shored up the market."
Nonetheless he says affiliates are excellent avenues to achieve sales as they can be used to reach the long tail of the market. While there are "super affiliates" that dominate – these include Nectar and Air Miles – aggregators, smaller sites and blogs can be an excellent route from which to drive traffic.
Among this network of big-name affiliates to individuals, brands must also look to protect the content and manage the creative, so networks offer content tools and guidelines for how the creative should be displayed. But while advertisers want to ensure compliance, the affiliates also want to ensure they are getting the content and data that is relevant to their site visitors and likely to generate revenue for them. "This is one area where travel has proven its mettle in the affiliate sector," says Cowan. "Providing white-label and reskinable (rebrandable and adaptable) solutions. Providing relevant content, up-to-the-minute data and feeds on offers and deals."
Nicky Iapino, managing director of Affilinet, agrees that providing affiliates with the content they want and need is crucial to success. "The travel sector understands that unless you have access to product data and inventory, you’re not going to get a booking. Many affiliates build tailored content and webpages for merchants, so it’s important to keep your data relevant." she says.
Iapino says that while travel has led the way others, such as retailers, are looking to follow. She adds that while the channel has been predominantly used as a sales tool, increasingly brands from other sectors, such as packaged goods, are exploring its benefits for advertising and brand-building. "People want to interact with your brand and content on your site. The pay-per-view model has a long way to go, but the tide is turning and the opportunities are there."
However, Bob Salmasi, partnership director at The Marketing Store, says: "Travel lends itself to affiliate marketing through associated products: a click from one partner for an airline ticket could naturally lead to a click through to a hotel partner, to a car rental partner, to a travel insurance specialist, to a ski wear provider and so on. But in other sectors it is hard to identify partners with associated but non-competing products and services. Travel is a high volume business so the investment in affiliate marketing is worth the return on investment. This might not be the case in other sectors and therefore not cost-effective ."
But whether you want to achieve sales as a merchant or drive traffic as a publisher, success in affiliate marketing is about giving users the content they want and the end product they are searching for in a relevant and mutually desirable environment.