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Affiliate Marketing in a Digital World

by Affiliate Summit

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Affiliate marketers face challenges making money on lower priced items such as MP3’s and eBooks. We’ll present best practices and some tips and tricks that work. ...

Affiliate marketers face challenges making money on lower priced items such as MP3’s and eBooks. We’ll present best practices and some tips and tricks that work.

Experience level: Beginner
Target audience: Affiliates/Publishers
Niche/vertical: Digital

Zahid Khan, Senior Product Manager, Amazon.com (Twitter @AmazonAssociate)

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Hi everyone. I’m Zahid Khan. I’m a product manager at Amazon.com. Today, I’ll be talking about selling digital goods online. Selling digital content online poses some unique challenges for affiliate marketers, but also opens up new opportunities. I’ll be going over what we’ve learned at Amazon marketing and selling digital content. Before I get started, can I get a show of hands. How many of you are already Amazon Associates today?
But before that, a quick overview of Amazon Associates. This audience already knows about about Amazon Associates so I won’t bore you too much with the details. ‘ Associates’ is Amazon’s own Affiliate marketing program We’re one of the world’s oldest and most successful online affiliate programs. So how does it work? In a nutshell, you place links or widgets on your site, your website visitors click on those links and land on Amazon.com => As a result, You, the Publisher, get a referral for any purchases made within a 24 hour time period after that first click. The exact referral %age depends on the type of product you’ve sold: Electronics will get you 4% whereas digital products like MP3s or Video on Demand make you upto 20% in referal fees!
First off, what exactly are digital products? Well, we can define digital products as those that an end user can download electronically. This is mostly via the internet but could also be via cell phone networks (for example, ring tones and mp3 songs). Currently, these are the most popular digital product categories: 1. Music (mostly in mp3 format, but also available in wav/real media/quick time formats etc.) 2. Video (available for permanent download or rent for a limited time) 3. eBooks (available in a variety of formats ePub, mobi, PDF) 4. Software (available for most operating systems) 5. And increasing in popularity, digital video game downloads. These are mostly PC based games, but also include non-PC games to a lesser extent 6. And Virtual Turtles? With casual online gaming becoming more widespread, there’s an increase in the quantity of virtual goods sold online. Virtual goods are non-physical objects that are purchased for use in online communities or online games. They have no intrinsic value and, by definition, are intangible. For instance, Fishville let its players buy virtual turtles and part of the proceeds went to help with the Gulf Coast oil spill activities. So in the coming years, you can expect to see an increasing volume of virtual goods being exchanged online.
Most retail categories are experiencing growth in online channels. If you look at this chart from forrester, you’ll see that by 2012, nearly 20% of Apparel will be bought online and nearly 30% of all books will be bought online.
That trend holds for digital products as well. For instance, by 2011, nearly half of all music will be sold online and digital downloads will surpass physical CDs by 2012 when it will be nearly $5billion dollar business * At Amazon, the vast majority of albums are now available in both Audio CD and MP3 formats. * Wider selection is an important criteria for digital consumers.
Similarly, consumption of video content online will continue to grow as well, albeit at a slower pace than digital music. If trends hold, digital video will be a billion dollar business by 2012 * As a data point, 60% of Netflix users now use streaming video content
Similarly, customers are downloading PC games online in record numbers. The NPD group measures online and retail video game sales and points out that in 2009 digital downloads pulled nearly even with physical sales for PC games, signifying an important shift in purchasing habits of gamers.
Finally, sales of digital books is on the rise as well. With the introduction of the Kindle followed by several competing ebook readers, this space has seen massive innovation in product and pricing. Driving more and more readers to experiment with digital books. Recently, Amazon announced that sales of digital books outpaced hardback sales, selling 143 ebooks for every 100 hardbacks sold. Again, this signifies a shift in purchasing habits of customers highlighting both, a challenge and opportunity for affiliates that market books online.
Consumers can get their digital content from a variety of different providers. As compared to mature categories such as Books and Electronics, the digital marketplace is still in flux and key players are still competing on value proposition and price to gain market share. Of the various digital categories, music is the most mature with iTunes the clear leader and other players like emusic and Amazon MP3 providing competing offerings. In Digital Video, there’s no clear winner yet with iTunes/Amazon Video on Demand and BestBuy’s CinemaNow. And in Digital Books, Amazon’s Kindle is competing with Barnes&Noble’s Nook, Apple’s iBooks and a plethora of smaller players.
In parallel with the online retailers, there are a variety of programs that allow affiliate marketers to create links and earn commissions from digital sales. Networks like Clickbank, RevenueWire and, to an extent, DigitalRiver offer affiliate programs that almost exclusively promote digital products Broader programs such as Amazon Associates, Commission Junction and LinkShare let affiliates create links to digital and physical products across retail categories
So now that I’ve covered the potential of digital categories, let’s now take a look at the key challenges in advertising digital products. First and foremost, you run into the problem of a significantly lower selling price for digital goods. For the same real-estate, affiliates would rather promote physical products that cost more and pull in higher affiliate fees. Second, things like reading ebooks and streaming movies are relatively new experiences for consumers. Lots of users just don’t know enough about the pros and cons of digital content and thus stay away from that first digital purchase. This presents the second challenge for affiliates marketing digital content. Third, some consumers are sensitive to buying products protected by digital rights management software and would rather buy the more ‘open’ physical variants. And then there’s the costly matter of buying a dedicated device to read your content. For example, you’d need a Kindle or Nook for reading ebooks, an ipod or zune for listening to digital music and a Roku player to stream netflix movies. Finally, internet bandwidth constraints hamper the user experience for some types of media such as streaming video or streaming music. This applies mostly to consumers from countries that don’t have decent broadband speeds. I’ll now go over some practices that we’ve seen Amazon Associates employ, to successfully tackle the challenges above.
Let’s take low selling price first. Just browsing through Amazon, you’ll notice that digital content is cheaper than it’s physical equivalent. For example, here’s a bestseller from this year “The girl who kicked the hornet’s nest”. The hardback costs $18.48 whereas the Kindle ebook is nearly half the price at $9.99
Here’s another example from music. The Soundtrack CD from the movie inception costs $11.99 whereas you can purchase the same album in DRM-free, MP3 format from the Amazon MP3 store for $8.99. You can also buy individual tracks for 99 cents each.
And finally, here’s an example from Amazon’s Video on Demand store. The DVD for this movie costs $17.49 whereas you can purchase the same content for $11.99 or rent it for a limited time for $2.99.
So how do you overcome a low selling price for digital? The answer is: By selling more of it. You need to up-sell and cross-sell to your customer. Digital content is delivered and consumed almost instantaneously. This feeling of instant gratification makes it more likely that users will purchase digital products in volume and make up for the lower selling price. Here are some specific tips: Drive traffic to the MP3 album instead of the MP3 track. Albums have a higher selling point and users are just as likely to buy the entire album having listened to just a couple of tracks. Similarly, when promoting digital video, encourage video buying instead of renting. Similar to non digital categories, surface and promote products similar to the one the viewer is currently considering. For example, if your user was viewing “The girl who kicked the hornet’s nest”, it’s worthwhile to also link to other books in the Millenium trilogy by Stieg Larsson. Again, the lower price point for digital products makes it more likely that users will bundle their purchases You can also promote relevant products from higher selling price categories. For example, you may want to promote media readers such as the nook, kindle or ipad when showcasing ebooks.
Here’s another tip: Add links to the physical product whenever you are promoting a digital product. On one hand, this allows your viewer to make a more informed buying decision. On the other hand, we’ve noticed that many users like to buy both physical and digital versions of their favorite content. The bottom line here is: Highlight the Price advantage and the Convenience factor for digital products and you’ll sell more units making up for the lower selling price.
Now let’s talk about trying to change user perceptions about using digital products. With the exception of digital music, all the other digital categories haven’t gone mass market yet. While early adopters might be willing to test and experiment, your average user is still cautious about digital content. For one thing, they might miss the tangible feel of the physical product. For example, eBook skeptics feel that they cannot give up the tactile feel of a physical book and so choose not to try ebooks
Similarly, there are concerns over ownership. The question ‘Who owns your book collection or your music collection’, is easy when the books or CDs are physically stacked up in your bedroom shelf, it’s You! However, users that have never bought digital products, have a nebulous idea of who actually owns the content that they buy. Where does it reside? Is it tied to a single reading device? Or is it there somewhere in the virtual cloud, not complete owned by you even after you’ve paid for it.
Most of this uncertainty arises from a lack of understanding digital products. So educate your user. For example, to explain the issue of ownership and accessibility, you might point out that once you’ve bought a book on your Kindle, you can never ever lose it. No one can steal it and you can’t lose it to a fire. You can always re-download it and then read it on any device you own, on your Kindle, on the PC or even on your smartphone. Similarly, to convince your users that an eBook reader offers a great reading experience, you might want to quote customer reviews from popular products like the Kindle or the nook.
Another great way to convert digital skeptics is to let them sample the content. Here’s an example: Polyvore is an interactive style magazine. Polyvore users can add products to their sets. When they add a music album, there’s an MP3 widget embedded in the set that let’s users sample the music and optionally buy the digital album.
There are lots and lots of great widgets that you can use to add digital samples to your site. Here are 3: The first is a widget from Random House that lets your readers sample books right from your site. Next is the Amazon MP3 Clips widget that lets viewers play music samples from your site. Finally, Hulu’s video widget lets you stream popular TV shows from your site.
Beyond adding digital samples to your site, marketing free items and free trials leads to a change in user behavior. Users that have never bought a digital product before, are usually open to trying out a free mp3 or free eBook. Once they see the simplicity of the process, they are then more likely to pay for digital content. At Amazon, we’ve seen this works incredibly well. When customers download free music, we see a 10% lift in subsequent sales and a significant lift in repeat customers.
Another great way to introduce digital products to your viewers is to insert the digital product, whenever you are marketing its physical equivalent. For example, here you see a Search widget from Amazon that lets viewers search the DVD catalog for titles. When the user hovers over the Avatar DVD, a popover comes up with additional details and buy options. You will notice that in addition to the Buy DVD option, we also have a ‘Watch Now’ option that lets the user rent or buy the same movie from the digital video store.
Here’s another example from Music. This is a Carousel widget showcasing new releases. When a user hovers over an album, you get a popover with additional information. In addition to the Buy CD option for 12.99, the user is also presented with the option to Download the album from the digital music store for 10.99.
But does this actually work? How does linking to digital products affect sales of the physical product? At Amazon we A/B tested this scenario. We showed half the users links to the digital content and removed the digital link from the other half. The results were unanimous: Adding digital links improves the overall performance of the widgets by around 22% And even increases physical sales by about 12%. One plausible explanation is that viewers are checking out the free samples from the digital content and then going back and purchasing the physical product. ** Sales of music on Amazon bears this out: CD store drives a double digit percentage of sales in the MP3 store as customers cross-shop across formats
Based on these results, we’re thinking of adding digital samples to all our linking tools. Here’s one example: Product Links are a very popular way to advertise books. These are small ad units with a product image and title. When you are advertising a physical book, we’ll add a ‘Get a sample’ button that allows users to read sample chapters in a 1-click manner. We predict that this will not only drive adoption of digital books but will result in higher conversion for hardback books as well.
One final tip on trying to change customer purchase behavior. If you’re trying to get repeat customers, then dedicate a section of your site to deals and discounts. This is especially true for digital products. When we examined customers shopping on the MP3 store over a 30day period, users that entered the store through an album deal were several times more likely to return as repeat customers than a control group that did not see a deal initially. From a recent survey, we found that customers valued ‘Price’ and ‘Ease of Use’ as the top two factors when deciding where to purchase their digital music. So make sure you highlight price and convenience when marketing digital products.
Next I want to spend a few minutes talking about how you can influence digital users at each stage in the marketing funnel. In traditional categories, you don’t need to do much work in the awareness and consideration stages of the funnel. People already know the value proposition and are usually trying to make a purchasing decision. With digital content, you need to work hard at every stage of the funnel. For example, to drive awareness, you can use social channels like twitter or regular blog post entries highlighting digital products. You also need to engage your audience better. I already showed you what polyvore does to let its users sample digital music.
Here’s an example from the music wiki SoundUnwound. SoundUnwound has a music quiz on its site that’s pretty popular. Users get to hear a short digital sample and then need to select the album corresponding to that sample. Scores are stack ranked on a leaderboard and this keeps user engagement up.
Btw, here’s a tool from Amazon that lets you quick post digital products to your twitter stream. If you are signed in to your Associates account and browsing Amazon, you’ll see a small stripe at the top of the page. There’s a share on twitter button at the top. When you are on a digital product page and click this button, it will automatically post a short message to twitter including a short url with your affiliate id. You can alter the message before posting the tweet.
In the consideration phase of the funnel, you can influence your customers by allowing them to sample your digital content. You can also quote customer reviews for popular products to have them consider digital as an alternative.
Here’s an example from HarperCollins, the publisher. HarperCollins has a ‘BrowseInside’ widget that lets users sample chapters from upcoming releases. Adding this feature increased pre-order rates for new releases by 30%. So adding digital samples is definitely very effective.
You can influence your customers at the Conversion stage of the funnel, by allowing them to download digital content for free. Trying free content makes it more likely that users will later pay for digital content. Also, make sure you take users to the right landing page. For instance, take them to the MP3 album page versus the MP3 track page and you’ll get better conversions.
And finally, to build customer loyalty and encourage repeat purchases, highlight Price and Convenience on your site copy Relationships matter Listen, understand, respond Own your readers and their minds Reach out to share news and updates Word of mouth works and Social Media is best channel to do that http://www.slideshare.net/nzl/viral-marketing-with-widgets
So that’s basically it. Following some of the tips that I’ve mentioned, will have a multiplier effect on the volume of digital products that you sell. To recap, here are the five basic principles that you want to follow: First, lots of users are still on the fence about digital content. So educate your viewer about the pros and cons of going digital. Second, digital content is usually cheaper than physical products. So up sell and cross sell to your customer to make up with larger volumes. Third, adding digital samples to your content using widgets is usually a good way to get to that first time digital user Beyond adding digital samples, make sure you market free items and free trials on your site. Once users have sampled free products, they’re more likely to pay for digital content And finally, if you want customers coming back to your site over and over again, then highlight price and ease of use on your website copy

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