How Top Brands Ensure Affiliate Revenue is Incremental


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This presentation is from Affiliate Summit East 2013 (August 18-20, 2013) in Philadelphia, PA). Session Description: Successful affiliate programs create incremental revenue and don’t cannibalize other channels. Presenters will show case studies of how top merchants focus on quality affiliates who enhance the brand.

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How Top Brands Ensure Affiliate Revenue is Incremental

  1. 1. How Top Brands Ensure Affiliate Revenue is Incremental Affiliate Summit East 2013 August 19, 2013 | Philadelphia, PA Robert Glazer, Acceleration Partners Wesley Brandi, Ipensatori David Naffziger, Brand Verity
  2. 2. Where Affiliate Programs Have Been
  3. 3. 1. Management: Whoever was available in-house & network based management. <2 years. 2. Metrics & Payout: “Revenue” and number of affiliates. More volume equals more $ and >% 3. Affiliates: 95% loyalty/toolbar and coupon sites 4. Networks: Multiple, often redundant networks 5. Transparency: Little to none, no referring url First Generation Affiliate Programs The result is a expensive retention program masquerading as a new customer acquisition channel.
  4. 4. And Where Affiliate Programs are Going
  5. 5. 1. Management: Experienced in-house managers or specialized third party firms partnering with in-house 2. Metrics & Payout: Incrementality; new customer acquisition & conversion rate. Pay for quality. 3. Affiliates: Bloggers, platform tools, shopping sites, more relevant content focused sites 4. Networks: Fewer networks, big not necessarily better 5. Transparency: Knowing who your affiliates are and how they are promoting Second Generation Affiliate Programs The result is a smaller new customer acquisition program organized in business development
  6. 6. How Affiliate Program Economics Often Work • Acme Corp has $100M in annual online revenue and an “unhealthy” $15M affiliate program. They pay a 10% commission to affiliates plus 3% of affiliate revenue in fees to the network, totaling $1.95M or 13% of revenue. • However, 75% of their affiliate revenue is non- incremental, from coupon sites and other low-value sources targeting existing customers. • Acme is actually paying $1.95M for $3.75M in incremental revenue or 52% of sales, not 13%. Almost $1.47M in costs are being paid out unnecessarily. 6
  7. 7. Cost Center or Revenue Generator? • 80% of affiliate revenue across the industry is from coupon, incentive, and other low-quality sites. • Many of these affiliates convert at 20% or more,10X+ times a normal site average. These numbers are achieved through targeting customers already committed to buying. • This results in little incremental affiliate revenue to many retailers. However, there are real and significant costs - commissions, network fees, management fees, etc. 7
  8. 8. Total Company Revenue: $2MSEO: $1M Affiliates: $1M PPC: $1M Email / CRM: $1M Display & Re- Targeting : $1M Social Media: $1M When 1+1+1+1+1+1 = 2 Everyone is taking credit for the same sale, each channel acts like the others do not exist
  9. 9. Email PPC Affiliates Organic Search Display & Retargeting Social Incremental Affiliate Sales See What Analytics Can Show You
  10. 10. “Affiliate Revenue” is a Misrepresented Metric 10 • It does not describe revenue solely from affiliates – it counts revenue where an affiliate was involved in the transaction • Healthy programs try to attribute affiliate revenue appropriately • Unhealthy programs count all revenue touched by affiliates, distorting overall marketing picture Organic search Paid search Affiliate Transaction
  11. 11. Demand Generation vs. Interception 11 Scenario 1: Customer Buying Commodity Product Customer wants a toaster, they research and look for the best deal for the chosen model. Loyalty/coupon sites can add value by affecting merchant selection.
  12. 12. Demand Generation vs. Interception 12 Scenario 2: Customer Buying Differentiated Product Customer goes directly to the chosen merchant with purchase intent. They are either intercepted along the way or hop out of the cart before purchasing to look for an offer that may or may not exist. For many branded, custom & differentiated products, coupon/loyalty sites likely do not play a role in the purchase decision. • Forced Clicks • Cookie Stuffing • Incorrect Offers • SEO or PPO Trademark • Toolbars • Spyware
  13. 13. Multi channel attribution allows for performance pay outs based on the value of each channel in the customer funnel. Valuing The Entire Funnel 13 Sale! ($100) Closing $25 Engaging $25 Introducing $50 Introducers: Content Sites Bloggers Shopping Sites Engagers: Social Media Closers: Toolbars Coupon sites CRM
  14. 14. How would it work for a baseball team that only valued a closer? Overvaluing Last In Is Expensive & Misleading 14 Starting Pitchers • Content Sites • Bloggers • Shopping Sites Bullpen • Social Media Closers • Toolbars • Coupon Sites • CRM $6,000,000 Last Place NL East No Playoffs Heath Bell $11,000,000 3rd place NL East No Playoffs Jonathan Papelbon $1,650,000 Most Wins Regular Season Tyler Clippard $1,570,000 World Series Champions Sergio Romo Vs.
  15. 15. • Trademark SEO • Forced Clicks • Trademark Poachers • Trademark + Coupon PPC Bidders • Trademark PPC Hijackers • Loyalty and Affinity Sites Understanding Low-Value Affiliate Tactics 15 Affiliates have developed a number of ways to go after a merchant’s existing traffic through demand interception.
  16. 16. Trademark SEO 16 80% – 90% of users come to coupon sites through a landing page that is optimized with a merchants trademark + coupon keywords.
  17. 17. Coupon Sites Using Forced Clicks Trademark optimized landing pages use forced clicking tactics to set the affiliate cookie (often for inaccurate offers), forcing a commission. 17 Click to Reveal Code Not a Real Offer Six Month Expired Offer
  18. 18. Trademark Poachers 18 Affiliates incorporate the company trademark into their primary URL to target customers who know the brand or are in the cart
  19. 19. Trademark + Bidders 19 Affiliates bid on the trademark plus the word “coupon(s),” targeting existing users and also driving up the company’s branded PPC costs
  20. 20. This PPC ad is not from Blurb, it is from an affiliate. It is impossible to detect without advanced software that most merchants don’t use. This turns a high ROI brand PPC campaign into an expensive and unnecessary affiliate payout. Trademark Hijackers 20 Affiliates pretend they are the company in PPC, “laundering” the original source of traffic through another thin website or blog
  21. 21. This box popped up unsolicited after typing in the browser with the Upromise toolbar installed. Clicking it gives Upromise affiliate credit even though we came directly to this site. Over 14M people have used the Upromise toolbar shown above, and millions more use the Ebates and other toolbars. Loyalty & Affinity Sites Large loyalty affiliates offer toolbars that, once installed, override direct visits and some search results, loading an affiliate link instead. 21
  22. 22. Methods to Identify Low Value or Fraud Research new affiliates and their promotional methods Look for sudden spikes in traffic, transactions or conversions (8%+ is suspicious for non coupon sites) If network displays referring url, check this frequently with new or high volume affiliates Compare first referrer to last referrer cookie Beware of conversions that come through proxies or thin sites with very high Alexa rankings (no human traffic) Use resources like BrandVerity, AffiliateFairPlay, RiskIQ, and Fraudlogix
  23. 23. Who is a Value Added Affiliate? Ability to affect a purchasing decision or vendor, not after the decision has been made Ability to develop brand loyalty in a new audience They have the traffic or mindshare that you want 75%+ new customer referrals 2%-3% conversion rate Promotion is often at the product level
  24. 24. Tiny Prints Example 24 • Individual order based attribution • Lowered commission for partners with high channel overlap and cart based clicks • Overwrite protection for content affiliates from coupon affiliates • Increased commission for affiliates who drive top of funnel and brand awareness • No toolbars = High performance and loyalty from quality affiliates
  25. 25. Best Practices: Finding High Value Affiliates • Who Likes You Already • Customers, partners, social media, and reviewers • Tools: Radian 6, google analytics, CRM • Who Should Like You • Has the traffic you want, potential partners, complimentary products/services • Tools: SEM Rush, Alexa • Reaching the Affiliate Community • PR announcements, conferences, and competitive research • Tools: syntryx, abestweb, affiliate summit Run your affiliate program like business development 25
  26. 26. • Force themselves into potential transactions between a buyer and a merchant • If the buyer happens to make a purchase within a certain period of time, rogue affiliate is paid an unearned commission • Merchants lose • Honest affiliates ALWAYS lose • Buyers don’t know it, but they lose too Rogue Affiliates
  27. 27. • Three techniques are covered fairly regularly: Cookie- stuffing, Adware & Typosquatting • Cookie-stuffing: trend on the rise is to defraud merchants through advertising networks. Google ads has a flaw here that allows for third party pixel tracking. Very large adult advertising network has the same problem • Adware: use PPV to force a cookie onto the machine. It’s easy, and cheap too • Typosquatting: launder typosquatter traffic before sending it to the merchant • Technique seldom mentioned: attacking other affiliates in an effort to hijack their traffic and steal their leads Techniques
  28. 28. • When was the last time you shared intricate details on a fraudster that burnt you? Collaboration
  29. 29. Collaboration
  30. 30. Example 1 – PPV displays, cookie-stuffs an Amazon Associate cookie then tries to collect email
  31. 31. Example 2 – ad on merchant site stuffs cookie from merchant’s affiliate program. No click required!
  32. 32. • Your affiliate program is in an arms race against unscrupulous, sophisticated and motivated individuals • Unsure of where you stand:
  33. 33. Robert Glazer | Founder @affiliatemgr Wesley Brandi | Founder David Naffziger | CEO @BrandVerity Questions & Contact Info