Affiliate Marketing, is it right for your business?

Friday, 1 June 2007

Affiliate marketing is arguably the most powerful internet marketing system available to website owners. It can bring tons of free, targeted traffic to your website, and increase your sales.

Sounds perfect. So what is it? And how do you make the most of it?

US-based Amazon put affiliate marketing on the online marketing map in 1998. The online retailer realised that there was no way it could dominate the search engine rankings for every single product it offered through its site. So Amazon turned to other methods to drive (targeted) traffic to its website. Creating an affiliate (or associate) program filled the bill perfectly.

Affiliate marketing works like this: Merchants (website owners who have something to sell or offer) invite other website owners (affiliates) to send traffic to their website (with an ad link) in exchange for an agreed commission on any sales/leads/signups generated as a result.

All visitors from affiliate websites are tracked through the merchant’s website, and if they convert, the affiliate earns an agreed share.As Amazon quickly discovered there were terrific benefits to this system:

• Unlike PPC and CPM banner ads, Amazon didn’t have to pay for all traffic delivered by affiliates.
  
• Amazon only had to pay affiliates when a sale was made (pay on sale), so it was in complete control of costs (and revenue sharing model).
  
• Amazon’s brand suddenly enjoyed incredible reach (or online penetration) because affiliate banners and links began appearing all over the internet, in all sorts of places.
  
• The traffic delivered by affiliates was often highly targeted; website owners with “nichey” topics could deliver “pre-sold” visitors to Amazon ready to buy relevant products related to their interests.
  
• Finally, Amazon also enjoyed literally millions of new link partners, helping promote its web pages and products at the search engines.

The system provided a great way for website owners (the affiliates) to make money just by displaying merchants’ advertisements. They could finally monetise their website, to help fund their online interests (their website). Today, there are millions of website owners worldwide who make a great living from affiliate income.

One of my colleagues knows a doctor who gave up his day job to manage his site and collect affiliate income. He’s making several thousand dollars a week.

Online entrepreneurs have developed online enterprise systems and created portals to bring merchants and affiliates together.

They make affiliate marketing accessible to smaller merchants who could never afford the huge cost of a custom-built affiliate-tracking back end.

Merchants make their pitch to affiliates and hope they’ll sign on to their program. Portals take care of all the tracking, payments and administration (for a fee) so that affiliates are paid and merchants can analyse the performance of their affiliate campaigns.

In the US, examples of the biggest portals include (but are by no means limited to) Commission Junction, LinkShare and ClixGalore.

In Australia http://www.clixgalore.com.au/ and http://www.commissionmonster.com.au/ are probably the largest.

The industry could be about to go through a big shake up, because Google is interested in this business. There’s talk around the traps that Google is about to launch its own portal. (See our news story for details.) It is a massively logical step for it to take. I’m almost tempted to buy some shares now, before it’s announced!

If you’re interested in trying out an affiliate program, there’s very little risk if you go with an affiliate portal, so dip a toe and have a go. Below are a few tips I’ve picked up over the years (from both the perspective of a merchant and an affiliate).

Pitch hard to win affiliates. Look at the offers being made by your competitors and beat them if you can. If your competitor is offering 5% per sale, then offer 7.5%. You want affiliates working for you, not your competitors. See a great example of how to pitch here.

Give your affiliates lots of well-designed banners and text ads to put on their website. Make it as easy as possible for them to promote you.

Email your affiliates regularly, telling them of your new promotions, showing new banners, and offering tips on how they can make more money promoting your site. The Sharper Image in the US does an amazing job of promoting its new products to affiliates via email.

Finally, you’ll find as a merchant that only a handful of your affiliates will generate the vast majority of sales. Some affiliates work harder than others to generate income. And always remember, your affiliates are your partners in business, so look after them well and they’ll do the same for you. You might even consider hiring Reseo to perform affiliate program management on your behalf.