Affiliation Program Study: definition, KPIs, 5C critical factors for affiliates, top publishers & networks


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In the US, out of the 100 online retailers ranked by Internet Retailer as the “Hot

100 Retail Web Sites”, 75 had an affiliate programs.
If you're looking to increase your ROI, this research identifies key insights that

will sharpen your marketing decisions.

Throughout the presentation, you will learn more about:
- Why an affiliate program?
- How affiliate network is working?
- EPC (Earnings Per Click)
- 5C affiliate reasons to choose you
- Top networks & top categories by revenue generated
- Affiliate Network comparison
- Affiliate Network top publishers
- Potential leaking points & 3rd party cookie issue

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Affiliation Program Study: definition, KPIs, 5C critical factors for affiliates, top publishers & networks

  1. 1. Affiliation Program Study Thoughts about the model Definition, KPIs, 5C critical factors, top publishers & network study
  2. 2. Presentation Overview <ul><li>Why an affiliate program? </li></ul><ul><li>How affiliate network is working? </li></ul><ul><li>Key factor - EPC </li></ul><ul><li>5C affiliate reasons to choose you </li></ul><ul><li>Top networks by revenue generated </li></ul><ul><li>Top categories by revenue generated </li></ul><ul><li>Affiliate network – comparison </li></ul><ul><li>Affiliate network – top publishers </li></ul><ul><li>Affiliation – Leak in affiliate visitors </li></ul><ul><li>Affiliation – 3rd party cookie </li></ul>Follow us on Twitter:
  3. 3. Why an affiliate program? 1/ Expand reach – sell your products & services via a wide range of websites (PPC, SEO, Blogs & Forums, CashBack, Reward Program, Coupon, Email, etc). According Commission Junction, merchants increased revenue by 15% to 40%. 2/ Brand exposure – raise perceptions of brand w/ exposure on quality 3rd party sites 3/ Measurability & accountability – tracking tools combined with our web analytics & sales data to see the big picture and mesure ROI 4/ Reduce costs/financial risks – affiliates offer merchants a virtual sales force. The CPA (Cost Per Action) performance model is very cost effective in this respect. 5/ Inform Marketing Activitives – learn from affiliates about what is working in terms of pricing, offers, product, propositions, LP. Can also check PPC ads from them… In Dec. 2008, out of the 100 online retailers ranked by Internet Retailer as the “Hot 100 Retail Web Sites” , 75 had an affiliate programs. 38% of the 75 top Internet retailers chose CJ, 23% went with Google Affiliate Network, 18% with LinkShare, 13% run their programs on in-house-based platforms and 3% market through ShareASale. ADVANTAGES: Source: The Internet Retailer Hot 100 Retail Web Sites - December 2008
  4. 4. How affiliate network is working? A transaction fee (also sometimes call an “affiliate override”) is what you pay your affiliate network. It is normally calculated as a percentage of each affiliate payment subtracted from your account. You can think of it as of a credit card processing fee. The affiliate network’s transaction fee is normally a percentage of what you pay your affiliate The exact percentage varies from 20% to 30% depending on the network. If you agree to pay affiliates 10% of each referred order, on each $100 order sent in, you pay them $10, the affiliate network charges you addition 20-30% of the $10 that you pay your affiliate.
  5. 5. Key factor - EPC Definition: EPC (Earnings per Click) is an important metric used by affiliate networks for reporting merchant or affiliate performance. Most of affiliate networks provide merchants and affiliates with an EPC figure (see below). This indicator represents the earnings per one hundred clicks sent by affiliates to the merchant's website. For example, we can tell that over the period of the last 3 months, an average payout to AT&T affiliates has amounted to $88.65 per every 100 clicks sent to AT&T, while Adobe's affiliates have been earning an average of $27.49 on every 100 clicks referred. Source: ShareASale – May 2009 Source: Commission Junction – May 2009 Interestingly enough, Apple affiliates have been earning $37-38 per 100 clicks, regardless of the incredibly low 1% commission that this merchant is paying, which indicates that the brand converts extremely well (another example is, of course, Air France).
  6. 6. 5C affiliate reasons to choose you <ul><li>Commission - it has to be more attractive </li></ul><ul><li>than that of your competitors. </li></ul><ul><li>2. Cookie life - same as above. </li></ul><ul><li>3. Competitiveness & Conversion - not only on the product/service cost front, but also about LP design and overall website usability, customer service and after-sales support, etc. </li></ul><ul><li>Suppose, that we market the same product that Amazon does, but since we are the manufacturer, we can sell for only three-quarters of the Amazon’s price. Amazon’s price is $12, while ours is only $9. Additionally, we can pay better commission (8% vs. Amazon’s 4%), and support longer cookie life (90 days vs. Amazon’s 24 hours). However, Amazon’s landing pages (with all the reviews, better product images, detailed description, etc) convert at 5%, while our pages convert at 2%. What does it mean for the affiliate? </li></ul>Traffic sent to your website Traffic sent to Amazon 100 hits * 2% = 2 sales 2 sales * $0.72 ($9 * 8%) = $1.44 100 hits * 5% = 5 sales 5 sales * $0.48 ($12 * 4%) = $2.40
  7. 7. 5C affiliate reasons to choose you 4. Communication - according E-consultancy US Affiliate Census report , among the top reasons for not promoting a merchant, US affiliates pointed to “slow acceptance to program” (17%), and “bad follow-up communication” (10%). Poor communication has also been mentioned by 12% as the reason for dropping affiliate programs. UK affiliates have also stated that “merchants do not communicate a variety of issues to them,” and whatever communication does exist, “ranges from bad or impersonal contact” to “failure to convey important information.” US affiliates mentioned that “merchants do not communicate enough with them,” and when they do, it is performed in a generic, mass-mailing style. Maintaining a healthy and consistent 2-way communication channel (i.e. personal e-mails, newsletters, blog posts, Twitter updates, etc) is extremely important. 5. Campaign support - offering affiliates a wide creative inventory (banners & text links), running bonus campaigns (to reward highly productive affiliates), activation campaigns (to reward affiliates that put up their links and/or start referring sales/leads), going out of your way to provide affiliates with personalized attention (be it in providing them with custom size/color banners, exclusive coupons or anything else), and proactive affiliate program management.
  8. 8. Top networks by revenue generated According E-consultancy US Affiliate Census report, 50% of all affiliates surveyed say Commission Junction is one of their top-three networks by revenue generated through merchants. The next most significant networks are Linkshare (32%), ShareASale (21%) Google Affiliate Network (also 21%), Pepperjam (18%), Neverblue (11%), and MediaTrust Advaliant (7%). Just under a third of responding affiliates (30%) indicated other networks not listed in the chart below (Ads4Dough, Azoogle, ClickBank, Convert2Media, COPEAC, eBay Performance Network, etc). Source: Econsultancy - US Affiliate Census - March 2009 336 affiliates could check up to 3 networks & 76% of which were US-based
  9. 9. Top categories by revenue generated Paid search or pay-per-click advertising (PPC) is the most significant category for US affiliates (48%), marginally ahead of true content (SEO) on 46% in terms of the amount of revenue they help to generate. Just under half of affiliates surveyed say that each of these methods is among the most important to them. Blogs and forums are an important category for 40% of affiliates. Social networking (24%), cashback & reward (23%), email marketing (20%) and coupon codes (19%) are the next most important methods. Source: Econsultancy - US Affiliate Census - March 2009 337 affiliates could check up to 5 networks & 76% of which were US-based
  10. 10. Affiliate network - comparison <ul><li>The different types of charges for merchants can broadly be broken down into the following areas: </li></ul><ul><li>Set-up/technical integration costs - The up-front cost of setting up an account with a network typically varies from $500 to $5,000. </li></ul><ul><li>Transaction fee (over-ride charge) - The majority of networks charge a transaction fee from 20 to 30% for their services. This means that for every commission fee payable to an affiliate, the network must receive x% on top of this payment. </li></ul><ul><li>Monthly Management charges - top networks generally impose management charges on their merchants between $50 to $1,000 a month. </li></ul>
  11. 11. Affiliate network - top publishers Continued rise of the super-affiliate. 34% say that five or fewer affiliates are driving 80% of their affiliate sales or sign-ups. A further 23% say that between six and 10 affiliates account for 80% of sales. Forget the 80:20 rule – behold the ‘super’ affiliates. It’s more like 1% of affiliates drive 99% of sales. So when you stumble upon a high performing affiliate you need to make sure they stay on your team. The long tail is very long in affiliate marketing. Multiple networks work for merchants and affiliates. From an administration perspective, dealing with one or several networks is far easier than dealing with a multitude of different affiliates.
  12. 12. Affiliation – Leak in affiliate visitors Some merchants list builk-and-mortar shops, but overlook the fact that once the affiliate-referred visitor &quot;leaks&quot; to those websites, there is no chance the affiliate could earn any commission on his/her purchase in that other store:
  13. 13. Affiliation – Leak in affiliate visitors This is by far the most frequently recurring leak. Unless the merchant offers a solution to track phone orders, every affiliate-referred customer that places the order over the phone means lost commissions for affiliates. Here are two examples:
  14. 14. Affiliation – Leak in affiliate visitors Vast numbers of merchants are running these on their websites not realizing that by monetizing the affiliate traffic in this way, they are cashing in on affiliate efforts that are really geared at marketing their main product/service. Here is just one example (I've picked this one because of the prominence of banner ad on this merchant's website):
  15. 15. Affiliation – 3rd party cookie These cookies are called third-party cookies if the server sending them is located outside the domain of the Web page. 3 potential cases: 1/ Software - spyware (Ad-aware, Spybot) - cookie deletion (non-3rd party) = no DR 2/ Privacy blocking - no cookie get set by 3rd party = no DR & GO 3/ Firefox - flush my cookies at every session = no DR & GO * * or original cookie session if specified in Analytics system
  16. 16. <ul><li>Questions? </li></ul>
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