Money for Nothing, Clicks for Free - An Exploration into Affiliate Marketing

Adam Boettiger
Money for nothing
Clicks for FREE
(With deepest apologies to Mark Knopfler and Dire Straits)

today
Affiliate Marketing 101 – The Basics
Myths & Misperceptions
Building Blocks
Roadblocks & Landmines
Real-Life Examples
Q&A

Affiliate marketing 101 – the basics
WHAT is Affiliate Marketing?

What is affiliate marketing?
“Affiliate Marketing is an Internet-based marketing practice in which a business rewards one or more affiliates for each visitor or customer brought about by the affiliate's marketing efforts.”
“Affiliate marketing is the equivalent of having an online sales force working 24/7 to sell your product or service and being compensated only if and when actions occur.”

“Affiliate Marketing is paying for advertising based solely on the end result generated.”

1800Flowers.com
ForgetfulHusbands.com

Commonly used terms
Pay-Per-Sale
Pay-Per-Lead
Pay-Per-Click
Pay-Per-Action
Bounty – Affiliate Payment
“Your offer is not converting for us.”

Early roots of affiliate marketing

Cdnow circa 1994

Amazon.com circa 1999

Who uses affiliate marketing?
Adult
Retail
Personal Finance
Gaming and gambling
Travel
Telecom & Mobile Phone
Education
Publishing

Why affiliate marketing?
Low Risk
Incredible Reach
Establish a larger footprint in search engines
Quantified ROI
Scalable (under the right conditions)

Is affiliate marketing right for my business?
It depends…
Yes, everyone wants to pay only for results
Yes, most brands online can benefit from one
No, not everyone has what it takes

Building blocks
Core Program Components
Merchant, Retailer or Brand
Network
Publisher or Affiliate
Customer

Core program components
Internal
Program Manager
Creative / Development
Technology
Billing & Payments
External
Affiliates
Affiliate Networks
Brokers

roles
Merchant
Empower affiliates to succeed
Provide the tools they need to do so
Affiliate
Create volume (leads, sales or actions)
Make money
Affiliate Network
Create volume by aggregating reach
Make money

Measuring success
Merchant
Cost Per Transaction
Total Transactions / Total Revenue
Affiliate
eCPM / eCPC
Total Revenue
Affiliate Network
Volume of Transactions / Total Revenue

compensation
Merchant – Incremental sales
Affiliate - % sale or bounty per action
Affiliate Network - % aggregate sales/actions
Agency
Retainer (T&M)
Hybrid (T&M + % bounty)
Performance (% bounty only)
Creative / Dev

Types of affiliates
Search affiliates
Comparison shopping websites and directories
Loyalty websites
CRM sites that offer charitable donations
Coupon and rebate websites that focus on sales promotions
Content and niche market websites, including product review sites
Personal websites
Weblogs and website syndication feeds
E-mail list affiliates
Registration path or co-registration affiliates
Shopping directories
Cost per action networks
Websites using adbars

The right mindset
Media Buying
We’re the client/agency
We have the gold
We make the rules
If you don’t like it, tough
Don’t call us, we’ll call you
Publishers sell us
We eat rate cards for breakfast
Adversarial (almost)
Affiliate Marketing
Fundamental differences
Inverse of power
Publishers & networks hold the gold
Far more collaborative
True partnership
Publishers assume 100% of risk
Publishers can (and will) fire agencies & clients

Myths & misperceptions
“We can build an affiliate program with little or no budget or resources.”
“We can turn an affiliate program on and off.”
“Publishers will compete for our ad budget.”
“If we build a program, they will come.”
“We’re Brand X. Everyone wants to do business with us.”
“Affiliate marketing is a waste of advertising dollars.”
“An affiliate program will run by itself, just like cruise control on a car.”

Newsflash: it’s all about the benjamins
Does your site convert well?
How does your offer compare to others?
Do you have killer creative?
Are you using a known tracking system?
How does your offer back out?
Is your program capped or uncapped?
Is there a real opportunity for your partners?
Are you imposing too many restrictions?

Where do we begin?
Four Phases:
Pre-Program Evaluation
Strategic Planning
Pilot Program
Rollout / Growth

Pre-program evaluation
Is your client or company a good fit for an affiliate program?
How would you know?
Do you have the right resources?
If no, can you secure them?
Do you have the authority to effect change if needed?
Is your company willing to change if needed?
Do you have the right mindset?

Strategic planning phase
Outline a short-term pilot program and long-term plan
Identify key internal/external resources & decision-makers
Secure a budget and program manager
Deploy & test a tracking/reporting system
Outline how billing and AP will be handled
Involve core affiliate partners in your strategy
Establish KPIs & define success
Develop ad creative and landing pages
Consider A/B & split testing options
Set policy

Key performance indicators
Volume - Actions per day, week or month
Gross revenue generated (CLV x actions)
ROAS
Cost Per Action
Cost Per Visitor
Value of branding/awareness as a side benefit
How do these compare to our other channel costs?

Pilot program
Goals
To prove efficacy
To identify speed bumps and road blocks
To measure & benchmark KPIs
Allow a minimum of 120 days
Test a variety of ad creative and landing pages
Engage with a handful of affiliates / networks
Build a solid foundation that can be scaled
Report successes visually to executive team
Plan for a rollout

Rollout / growth phase
Capped or Uncapped?
Involve affiliate partners in growth planning
Partially automate the recruitment process
Consider additional creative development
Review how your offer and bounty compares to competitors
Solicit input from affiliate partners
Roll up your sleeves and grow your garden
Continually quantify success to executive teams

Challenges, land mines & roadblocks
Tier 2 & 3, not so much Tier 1
Ongoing management & optimization
Commission 20-30% of sale
Signal-to-Noise Ratio of Affiliates
Client (individual) or Brand not a good fit
Program not a priority to brand
Minimal allocation of resources
Often difficult to secure corporate buy-in

considerations
Long-term investment
No brand loyalty
Requires careful nurturing
Can’t be switched on and off
Control works against you
80/20 rule applies
Terms & Conditions

Real life

Jenny craig

results
250% ROI on pilot program
Lowest Cost Per Click, Cost Per Lead and Cost Per New Customer of all media channels, online and offline
Growth Phase began July 2009
High six figure revenue generated in 2009
425% ROAS
Growth continues
On target to generate seven figure revenue in2010

Resources
www.abestweb.com

Resources
www.affiliatesummit.com

QUESTIONS?
Adam Boettiger
Digital Strategist
The New Group
Adam.Boettiger@thenewgroup.com
503.989.2668
@AdamBoettiger

Money for Nothing, Clicks for Free - An Exploration into Affiliate Marketing

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