Are affiliates friends or foe?

Most articles about online affiliate marketing start by stating that it was invented by Jeff Bezos, the founder of Amazon.com. It wasn’t – there were a number of legitimate sites which were using affiliate marketing two or three years before the launch of Amazon’s version.

And predating these sites were a host of anonymous porn sites which Web historians say really invented affiliate marketing.

The problem for affiliate marketing today is that while it can be a hugely effective – and cost-effective – weapon in the digital marketing arsenal, most marketers are using it badly and are either paying too much for the clicks they are getting or, worse, are risking damage to their brands by allowing them to be associated with sites and content they should be steering well clear of.

Affiliate marketing’s effectiveness is underlined by recent research carried out by E-consultancy and sponsored by affiliate network BuyAt. E-consultancy found that 95% of brands say affiliate marketing is “very cost-effective” or “quite cost effective”. On average, 18% of the online marketing budget is spent in the affiliate channel. Affiliate marketing is also a highly effective channel for driving volume, with three-quarters of respondents (73%) saying that it drives either “high volume” or “medium volume”.

However, many marketers still think affiliate is a short-term tactical tool, and there is an argument that the affiliate industry has done nothing to correct this view.

Hedley Aylott is managing director of digital agency Summit Media, which helped mobile phone network operator 3 take its affiliate management programme in house.

Aylott says: “A lot of merchants think it’s as simple as signing up with a network. But people are beginning to realise they need to be thinking in terms of the quality of the sites they are associated with, and the fit with their brand.”

Furthermore, Aylott questions what exactly many affiliate networks are doing for the commission they charge their clients: “Most of what networks do is tracking and billing. Clients shouldn’t have to pay 25-30% [of the amount paid for traffic] if that’s all they’re getting. A network has to provide value.”

Networks also need to be working harder to get rid of the rogue elements in the industry, Aylott argues: “Affiliates have got away with murder because of poor policing by the networks, at a huge cost to merchants.”

Idle rumours
Robert Barker, commercial manager of online incentive scheme iPoints, agrees. He says: “The winners and losers in terms of affiliate networks are changing as clients become more conscious that these networks cream up to 30% of the sales they drive, for not doing very much. Over time, some of the older networks have become rather lazy in terms of their customer service.”

While the recent media furore over online ads for reputable brands appearing on sites that featured violent and depraved images, or on webpages promoting extremist viewpoints, related mainly to blind buying of online display advertising, the same problems can and have affected affiliate marketing.

The fact that the Internet Advertising Bureau UK has not yet delivered on promises to set up a charter of conduct for affiliate marketing – in the same way that it has for search marketing – will not help matters.

Code of conduct
In March 2007, the IAB named Affiliate Window communication director David Hall as chairman of newly formed Affiliate Marketing Council: his first task was supposed to be setting up a code of conduct, which should have been in place by now. The IAB has admitted that it will not be published until 2008.

The issues around the area mainly relate to the way affiliate marketing works.

Affiliate marketing involves three parties – an advertiser with a product or service which it wants to market; a website owner or publisher who wants to generate revenue from taking advertising; and, between them, a specialist affiliate network, which acts as a broker and clearing house, bringing together brands with ads to place and places with space to sell.

The advertiser or agency creates a selection of online ads for a brand; the affiliate network puts those ads into an online library; affiliate sites which are members of that network then browse the ads and select the ones they want to have on their pages.

The affiliates – the actual websites carrying the ads – will get commission from the advertisers. Sometimes commission will be paid for sales made, sometimes for © leads generated and sometimes just for traffic to a website.

At first site, it looks like a win-win-win situation. Marketers get click-throughs they might otherwise not get, site owners get revenue without having to sell advertising space, and networks get commission for bringing the two sides together.

Unfortunately, the whole system is open to abuse – either accidental or deliberate. Critics point out that few client marketers have the technical expertise to manage an affiliate programme in house, while many affiliate sites have little or no understanding of the advertising sales world. Furthermore, networks have historically had little incentive to police affiliate activities and clamp down on rogue traders because the more affiliate traffic there is, the more revenue they get. The same, arguably, applies to the search engine companies themselves.

Finally, there are those affiliate sites which aggressively pursue clicks by bidding on search terms they think are likely to convert into commission from client marketers. While there is nothing wrong with that, and while some marketers are happy to have someone else take on some or all of the burden of maximising their presence on search engines, some affiliates will use tactics that are distinctly underhand, including bidding on marketers’ brand names, so driving up the price for the marketers themselves.

Others have been known to create websites that incorporate well-known brand names, so they can suck in searchers and pass them on to the brand owner’s own sites for commission. Often, the searchers themselves think they have gone directly to the brand owner’s site.

Some brand owners have become very disillusioned about affiliate marketing: for example, Nick Robertson, chief executive at online fashion retailer ASOS.com, very publicly pulled out from affiliate marketing activity, on the grounds the company was paying commission on traffic that it would have got anyway.

Trademark tactics
Unfortunately, search engines can have completely different rules for how they treat trademarks – some even have different rules depending on which country they are operating in. So simply owning a trademark does not mean that search engines will automatically stop others bidding for that trademark as a keyword for searching.

The more sophisticated marketers now have the sense to build in rules on if and when their affiliates can bid for their trademarks or other words and phrases which are associated with their brands. But, some industry figures argue, those rules seem to apply only when someone is around to watch – so around 5.30pm on weekdays, when most clients leave work, some affiliates have been known to forget the rules and start bidding on keywords again.

James Quint, head of digital at specialist media agency Mike Colling & Co, lists a number of issues that marketers must discuss with their affiliates, the networks they use and any digital agency that helps them with affiliate work.

These include: “Do you allow affiliates to bid on your brand term or not? There are arguments for and against. You need clarification on guidelines relating to the use of a client’s brand that may feature as part of an affiliate owned domain – for example, www.oxfam-help-a-child.co.uk. Is this allowed or not? Do you allow affiliates to link directly though to your site? Some merchant do, others don’t.”

Quint argues: “The best way to manage affiliate campaigns without compromising any of the involved brand identities is through clear terms and conditions set up from the outset of an affiliate programme. Also, regular communication is key in terms of maintaining good relations and keeping a programme up to date and topical.”

IPoints’ Barker points out another potential issue: whether repeat traffic still attracts commission. He says: “Some big retailers such as Tesco only pay affiliate networks for the first visit a new purchaser makes to their website, refusing to pay for any subsequent visit from the same purchaser through the same affiliate merchant. Obviously, not many merchants have the same clout as Tesco to dictate these kinds of terms, but I’m sure that commission rates on repeat purchases are going to come down.”

Developing fast
However, as with many marketing services sectors, affiliate marketing is evolving into something much more sophisticated.

Much of that evolution is being driven by the larger networks, such as TradeDoubler. Sarah Escott, head of consultancy at TradeDoubler, argues that marketers must take affiliate marketing much more seriously than they have in the past, and should use it strategically, not tactically: “Affiliate marketing constitutes long-term online sales generation activity and is not like campaign activity that can be switched on and off like display or search advertising.”

Furthermore, marketers need to be involving their affiliate networks and their affiliate partners much more. Escott adds: “If affiliate marketing gets boardroom buy-in, it is far more likely that the network and its affiliates will be entrusted with timely, forward planning [and] above-the-line marketing information.”

It is that sort of trust and forward planning that is needed for marketers to get the most out of their affiliate programmes, she says.