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Affiliate Marketing Introduction and Overview

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<ul><li>Online is more than an advertising channel or a broadcast platform for brands, services and products, it is a powerful channel of communication and exchange. Understanding customer behaviour and tailoring communications to elicit awareness, consideration, purchase and relationship is key. Our services combine advertising and consulting services aimed at generating returns from prospects and customers. </li></ul><ul><li>Consulting </li></ul><ul><ul><li>Channel Planning & Budgeting </li></ul></ul><ul><ul><li>Pay per Performance Acquisition Strategies </li></ul></ul><ul><ul><li>Site Usability & Conversion analysis </li></ul></ul><ul><ul><li>Training and Online Advocacy </li></ul></ul><ul><li>Media </li></ul><ul><ul><li>Strategy, planning, buying, optimisation & analysis </li></ul></ul><ul><ul><li>Behavioural and contextual targeting </li></ul></ul><ul><li>Creative Communications </li></ul><ul><ul><li>Planning, design, concepting and production </li></ul></ul><ul><li>Social Media Marketing </li></ul><ul><ul><li>Measurement & monitoring of consumer sentiment & consumer generated insights </li></ul></ul><ul><li>Email Marketing </li></ul><ul><ul><li>List management, deployment, segmentation and measurement </li></ul></ul>About Us > In 2006 we generated £56 million in revenue for our clients. Could your business do with a 20:1 ROI?

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<ul><li>What is Affiliate Marketing? </li></ul><ul><li>Opportunities and challenges </li></ul><ul><li>Affiliate Marketing – part of the online mix </li></ul><ul><li>Affiliate marketing process </li></ul><ul><li>Opportunities and challenges </li></ul><ul><li>Financial planning </li></ul><ul><li>Policies on affiliates </li></ul><ul><li>Affiliate Program Sample Display Program </li></ul><ul><li>Considerations </li></ul>Contents

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What is affiliate marketing? <ul><li>Online program in which site owners (publishers) display ads and links to generate sales directly into a clients site; on a cost per performance basis </li></ul><ul><li>Equivalent of having an online sales force working on a commission compensation based model </li></ul><ul><li>Build a network of financially incentivised “brand advocates” </li></ul><ul><li>Affiliate Marketing normally involves three parties: </li></ul><ul><ul><li>Merchant </li></ul></ul><ul><ul><li>Affiliate </li></ul></ul><ul><ul><li>Affiliate Network </li></ul></ul>Your brand Network

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Opportunities and Challenges <ul><li>Merchant </li></ul><ul><li>Supply terms & conditions, creative, compensation structure and growth of relationships </li></ul><ul><li>Affiliates </li></ul><ul><li>Sign-up to affiliate network, promote merchant on their sites </li></ul><ul><li>Affiliate Network </li></ul><ul><li>Manage billing and tracking of activity through proprietary platform </li></ul>Role <ul><li>Maximize volume of transactions </li></ul>Compensation <ul><li>Fixed payment per transaction </li></ul><ul><li>Commission on value of transaction </li></ul><ul><li>Over ride – based on between 20% to 30% of affiliate payments </li></ul><ul><li>Total transactions </li></ul><ul><li>Cost per transaction </li></ul>Key success metric <ul><li>eCPM – number of impressions to generate one transaction </li></ul><ul><li>eCPC – number of clicks to generate one transaction </li></ul><ul><li>Volume of transactions and affiliate payments </li></ul>Growth Tactics <ul><li>Increase compensation and provide flexibility on the terms of the program </li></ul><ul><li>Increase traffic through natural search & PPC </li></ul><ul><li>Design sites that fulfil consumer missions </li></ul><ul><li>Increase number of affiliates through aggressive recruitment </li></ul>

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Affiliate Marketing - part of online mix Affiliate Network <ul><li>Provide reach by aggregating hundreds of small sites (tier 2 and 3 sites) across different content categories </li></ul>Reach Fragmentation

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Affiliate Marketing Process Affiliate www.bestflights.com Merchant Affiliate Program Merchant Booking Confirmation Page Merchant Site Tracking of transactions Commission Payment Over-ride Network Payment Affiliate Network Terms & Conditions Creative Assets Affiliate Network Console Tracking codes Payment system

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<ul><ul><li>Challenges </li></ul></ul><ul><ul><li>Affiliate advertising provides reach across tier 2 and 3 sites and excludes tier 1 sites </li></ul></ul><ul><ul><li>Attracting quality high traffic sites to affiliate programme </li></ul></ul><ul><ul><ul><li>High worth product </li></ul></ul></ul><ul><ul><ul><li>Low bounty payment </li></ul></ul></ul><ul><ul><li>Require on-going management and optimisation </li></ul></ul><ul><ul><li>Commission payment to network owner – ranging from 20% to 30% of sale </li></ul></ul><ul><ul><li>Mid to long term investment </li></ul></ul><ul><ul><li>Opportunities </li></ul></ul><ul><ul><li>Performance based results </li></ul></ul><ul><ul><li>Complete control of affiliate recruitment and management (quantity ad quality) </li></ul></ul><ul><ul><li>Establish strong commercial relationship with best performing affiliates - “super affiliates” </li></ul></ul><ul><ul><li>Maximise reach and exposure at minimal cost </li></ul></ul><ul><ul><ul><li>Free ad exposure – only pay for results </li></ul></ul></ul>Opportunities and Challenges

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Affiliate payments (commission or fixed) Network over ride payments Internal resource Financial Planning + Total investment / Total transactions Gross bookings – cancellations & no shows = stays Cost per transaction - Example of affiliate programme. Thomas Cook payment structure > through Commission Junction affiliate network. Generates 18% to 20% of all transactions.

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<ul><li>Google policy on affiliates: </li></ul><ul><li>Affiliates allowed to use AdWords advertising. </li></ul><ul><li>Google will only display one ad for affiliates and merchant sharing the same Display URL per search query. </li></ul><ul><li>Google restricts the following: </li></ul><ul><ul><li>Redirect URLs: Ads that contain Display URLs that automatically redirect to the merchant site. </li></ul></ul><ul><ul><li>Bridge Pages: Ads for webpages that act as an intermediary, whose sole purpose is to link or redirect traffic to the merchant site. </li></ul></ul><ul><ul><li>Framing: Ads for webpages that replicate the look and feel of a merchant site. </li></ul></ul>Policies on Affiliate Marketing

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Affiliate Program Sample PPC Program BT Affiliate PPC listing BT PPC listing

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Affiliate Program Sample Display Program

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<ul><li>Affiliate marketing requires on-going nurturing and relationship building > Affiliates have no loyalty to brands </li></ul><ul><ul><li>How to differentiate program from competitors? Combine financial incentives with flexibility. </li></ul></ul><ul><li>Evaluate the metrics to pay affiliates on. Bookings or completed stays? </li></ul><ul><ul><li>Decision should be lead by internal financial objectives and overall market dynamics </li></ul></ul><ul><li>Affiliate marketing can become a self-funded program. Bookings can be charged back to hotels (dependant on franchise/ownership contracts) </li></ul><ul><li>Affiliate Network programs cannot be switched “on and off” </li></ul><ul><ul><ul><li>In 2004 Thomas Cook was force to close down their first affiliate program for lack of funding – set budget run out </li></ul></ul></ul>Considerations

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<ul><li>Affiliate Marketing delivers the 80/20 rule – 80% of all transactions will be generated by 20% of affiliates </li></ul><ul><ul><li>How to differentiate program from competitors? Combine financial incentives with flexibility. </li></ul></ul><ul><ul><li>Have the network focus on quality of affiliates as opposed to quantity </li></ul></ul><ul><li>Establish strict terms and conditions with affiliate network and affiliates related to: </li></ul><ul><ul><li>PPC bidding </li></ul></ul><ul><ul><ul><li>Usage of brand on PPC copy </li></ul></ul></ul><ul><ul><ul><li>Bidding on brand and generic terms </li></ul></ul></ul><ul><ul><li>Use of URLs </li></ul></ul><ul><ul><li>Length of cooling period between recording of transaction and payment for transaction </li></ul></ul><ul><li>Assign a third party or internal resource to validate transactions attributed to program – track all transactions through an order id </li></ul>Considerations