This presentation is from Affiliate Summit West 2015 (January 18-20, 2015 in Las Vegas, NV). Session description: An in-depth look at metrics and profitability. Learn the importance of running detailed profit analysis reports.

1. Understanding Profitability
in the Affiliate Space
Presented by:

2. Introduction
Paul Schroader: President – PS Web Solutions

5. Easy Money

6. Experience tells a different story

7. Breaking down program costs
2013 Totals September October November December 2014 Totals
Year 4 Month 50 Month 51 Month 52 Month 53 Year 5
REVENUE
Product Sales
Total Affiliate Sales 3,213 479 580 308 259 4,195
Average Cart Size $373.85 $518.41 $710.91 $371.78 $428.70 $5,207.41
Commissions $169,580.21 $25,752.03 $44,603.17 $10,722.89 $10,503.28 $210,546.95
Network Fees $46,570.27 $7,393.08 $12,133.02 $3,361.44 $3,233.19 $63,192.66
Management Fees $112,202.34 $14,885.18 $24,722.63 $6,863.76 $6,655.56 $124,501.59
Coupon Discounts $70,658.42 $12,404.32 $20,602.19 $5,719.80 $5,546.30 $102,890.11
Vendor Costs $5,100.00 $750.00 $750.00 $750.00 $750.00 $9,000.00
Total Cost $404,111.23 $60,434.60 $102,061.01 $26,667.88 $25,938.33 $501,631.31
Total Sales Revenue $1,413,168.38 $248,086.39 $412,043.88 $114,395.97 $110,926.01 $2,057,802.31
Total Gross Profit $1,009,057.14 $187,651.78 $309,982.87 $87,728.09 $84,987.69 $1,556,171.00
Channel Payout Percentage 28.60% 24.36% 24.77% 23.31% 23.38% 24.33%
Total Affiliate Channel ROAS 3.50 4.11 4.04 4.29 4.68 4.39
Total Revenue Per Visitor $8.85 $14.01 $40.20 $8.66 $6.81 $12.74
Total Affiliate Generated
Revenue
$1,521,963.45 $248,086.39 $412,043.88 $114,395.97 $110,926.01 $2,168,728.32

8. Breaking down program costs (cont.)
2013 Totals September October November December 2014 Totals
Year 4 Month 50 Month 51 Month 52 Month 53 Year 5
REVENUE
Product Sales
Total Affiliate Sales 3,213 479 580 308 259 4,195
Average Cart Size $373.85 $518.41 $710.91 $371.78 $428.70 $5,207.41
Commissions $169,580.21 $25,752.03 $44,603.17 $10,722.89 $10,503.28 $210,546.95
Network Fees $46,570.27 $7,393.08 $12,133.02 $3,361.44 $3,233.19 $63,192.66
Management Fees $112,202.34 $14,885.18 $24,722.63 $6,863.76 $6,655.56 $124,501.59
Coupon Discounts $70,658 $12,404 $20,602 $5,719 $5,546 $102,890
Vendor Costs $5,100.00 $750.00 $750.00 $750.00 $750.00 $9,000.00
Total Cost $404,111.23 $60,434.60 $102,061.01 $26,667.88 $25,938.33 $501,631.31
Total Sales Revenue $1,413,168.38 $248,086.39 $412,043.88 $114,395.97 $110,926.01 $2,057,802.31
Total Gross Profit $1,009,057.14 $187,651.78 $309,982.87 $87,728.09 $84,987.69 $1,556,171.00
Channel Payout Percentage 28.60% 24.36% 24.77% 23.31% 23.38% 24.33%
Total Affiliate Channel ROAS 3.50 4.11 4.04 4.29 4.68 4.39
Total Revenue Per Visitor $8.85 $14.01 $40.20 $8.66 $6.81 $12.74
Total Affiliate Generated
Revenue
$1,521,963.45 $248,086.39 $412,043.88 $114,395.97 $110,926.01 $2,168,728.32

9. Breaking down program costs (cont.)
Understanding actual costs:
Commissions – Dynamic?
Network Fees – Multiple Networks?
Management Fees – Retainer, % or Hybrid
Coupon Discounts – Dynamic?
Free Shipping
Vendor Costs

10. Determining profitability
Affiliate Program Gross Profit:
Affiliate Program Revenue - Total Program Cost
i.e. $250,000 - $50,000 in Costs = $200K GP

11. Determining profitability (cont.)
Channel Payout Percentage:
Another way to look at ROAS
CPP = Percentage of Sale paid to Channel

12. The value of an Affiliate Sale
$0
$1,000,000
$2,000,000
$3,000,000
$4,000,000
$5,000,000
$6,000,000
2010 2011 2012 2013 2014
E-commerce Revenue thru December 2014
Untracked
E-mail
Social
Retargeting
Paid Search
Affiliate
Dealers
45% CPP 45% CPP 45% CPP 45% CPP 45% CPP
28% CPP
28% CPP
24% CPP
27% CPP
27% CPP
26% CPP
24% CPP
20% CPP
27% CPP
28% CPP
29% CPP
31% CPP
33% CPP
35% CPP

13. Dynamic Payouts
Publisher Impressions Clicks CTR Sales CR Revenue AOV EPC Commission
Rate
Discount Commission
+ Discount
ROAS Type
SearchPros 69,854 1,874 2.68% 31 1.65% $1,785.00 $57.58 $13.34 14.00% $249.90 7.14Search
WavePoint 2,666 78 2.93% 10 12.82% $1,525.25 $152.53 $234.65 12.00% $183.03 8.33Search
InterWebs, Inc. 8,542 431 5.05% 14 3.25% $1,142.52 $81.61 $31.81 12.00% $137.10 8.33Search
QuadMax Media 2,669 112 4.20% 5 4.46% $1,937.25 $387.45 $207.56 12.00% $232.47 8.33Search
ClickMasters 8,542 452 5.29% 8 1.77% $691.24 $86.41 $18.35 12.00% $82.95 8.33Search
YourPoints 2,542 102 4.01% 21 20.59% $1,214.25 $57.82 $214.28 8.00% 10.00% $218.57 5.56Loyalty
WeMoney 6,532 135 2.07% 6 4.44% $423.54 $70.59 $56.47 8.00% 10.00% $76.24 5.56Loyalty
ShopTilYouDrop 35,452 1,458 4.11% 42 2.88% $5,354.00 $127.48 $66.10 8.00% 10.00% $963.72 5.56Loyalty
CouponPig 3,548 203 5.72% 15 7.39% $365.00 $24.33 $28.77 6.00% 10.00% $58.40 6.25Coupon
BigCoupons 15,243 1,025 6.72% 21 2.05% $1,254.00 $59.71 $19.57 6.00% 10.00% $200.64 6.25Coupon
CouponSummit 8,586 321 3.74% 8 2.49% $423.54 $52.94 $21.11 6.00% 10.00% $67.77 6.25Coupon
DiscountDeals 25,435 1,154 4.54% 29 2.51% $1,854.00 $63.93 $28.92 8.00% 10.00% $333.72 5.56Coupon
WhereWhenWhy 54,520 1,457 2.67% 22 1.51% $1,254.00 $57.00 $12.05 14.00% $175.56 7.14Content
DailyStuff 2,354 142 6.03% 6 4.23% $342.14 $57.02 $28.91 12.00% $41.06 8.33Content
BuzzBrain 6,548 248 3.79% 11 4.44% $658.25 $59.84 $31.85 12.00% $78.99 8.33Content
Totals: 253,033 9,192 3.63% 249 2.71%$20,223.98 $81.22 $33.73 15.33% $3,100.11 6.52

14. Dynamic Payouts (cont.)
Commissions must be flexible in order to
not only maximize Affiliate Sales, but
also maximize Profitability

15. Dynamic Payouts (cont.)
Use various commission rates and
discount incentives based on
understood Value of Affiliate’s sales

16. Q & A

17. Contact Info
Paul Schroader: www.linkedin.com/in/paulschroader
@pswebs
pauls@pswebsolutions.com