I once sat in a meeting with the CEO of the company I was working for, and the senior client of the large electronics brand we represented.
The CEO proudly proclaimed to our client that we were now going to discuss “the dark art of Affiliate Marketing”, adding, “I mean, no one really understands it do they?”
I’d like to think that after a dozen years in the Affiliate Marketing industry, I get the gist of what it’s all about.
So, what is Affiliate Marketing?
At its most basic level, Affiliate Marketing is essentially a digital version of something that’s been happening for centuries - referral marketing.
A says to B “if you tell C about my shop and he buys something, I’ll make it worth your while”.
It’s a bit like a giant, online Tupperware party. The difference is that now, rather than getting your friends around your house so Sally can sell them some quality kitchenware, and you can bag some freebies for your troubles, it’s all done through websites and tracked digitally.
You probably already know, and use affiliate websites without even realising it (shoop.de, quidco.com, moneysupermarket.com, uswitch.com etc).
Online it works like this - a website (Publisher) will advertise a company’s (Advertiser’s) products on their site through a copy (that’s ‘words’ to us normal folk) or images, and the user will be able to click through a special tracking link to the Advertiser’s site in order to purchase the products.
Once the purchase has taken place, the Publisher will receive a reward (Commission) from the Advertiser for directing the user to the site in the first place.
There are several things you can do that make it more complicated, but it is possible to run an Affiliate Marketing programme at its most basic level and for it to be very successful and relatively efficient.
I say relatively efficient because the first thing I want to do here is nip a bit of a myth in the bud. It can be a very cost-efficient channel, but over the years many unscrupulous salespeople for various companies have used the line “It’s all done on a CPA, so you only pay for sales you make!” when selling the concept to Advertisers.
There are several things you can do that make it more complicated, but it is possible to run an Affiliate Marketing programme at its most basic level and for it to be very successful and relatively efficient.
In reality, this is bending the truth somewhat; most costs will be based on a CPA model (that’s to say that you pay a commission based on every sale or pre-defined action), but there are also other costs to consider such as network override fees, flat fee exposure costs, funding voucher codes, and annual or monthly site subscription fees in order to feature on certain sites.
However, it’s still likely to be one of, if not the, most cost-efficient digital marketing channels because you’re not simply buying traffic or impressions.
As I’ve always told all of my clients, and I would hope people running other channels are telling their clients, you can run a single digital marketing channel in a silo, but they all tend to work better if you have a well-thought-out digital marketing strategy with a mix of channels that support each other and your consumers throughout the whole funnel.
What types of Publishers work in the Affiliate Marketing space?
As mentioned above, there are lots of sites you probably use in everyday life that are affiliate publishers. For example, anywhere you see a voucher code on offer, or anywhere offering cashback will be affiliate publishers.
A publisher is an important part of how affiliate marketing works – a publisher is the source of traffic, engagement, and sales.
Austria is an interesting market because lots of the online commerce does come from Germany, so the two are intrinsically linked, and lots of Austrian Publishers will promote German websites because they all ship to Austria, and use the same language and currency. By the same note, lots of Austrian consumers will utilise German Publishers and are able to take advantage of the offers and brands they promote.
Austria is an interesting market because lots of the online commerce does come from Germany, so the two are intrinsically linked, and lots of Austrian Publishers will promote German websites because they all ship to Austria, and use the same language and currency.
There are a wide variety of publishers within the affiliate marketing network, each making a valuable and unique contribution, but I want to talk about the ones we’re most likely to encounter as consumers or work with as Advertisers:
Cashback / Loyalty
Every market has one or two dominant cashback or loyalty sites. In the UK it’s TopCashBack and Quidco, in German it’s Shoop, in France it’s iGraal, and in the US it’s Ebates/Rakuten. Austria has Benefitworld.at, but the biggest player in the market is probably Payback.at. However, if you live in Austria, you can also use Shoop.de.
These sites work by incentivising people to complete their purchases by offering them money back when they spend. They do this by passing the commission they earn back to the user, and they make their money through selling ad placements on their site, email inclusions and membership fees.
They’re often accused of being ‘non-incremental’ meaning that by using them, you’re not adding any additional sales that you wouldn’t have got elsewhere, they’re just stealing the click and the commission at the end. However, any study I’ve seen has said this isn’t the case – they always show up as being around 75% incremental, and these sites aren’t just a stop on a purchase journey – they’re a way of shopping.
Take my mother, she doesn’t look around, do her research, go through several different blogs and then finally decide to go and get some cashback. No, her first port of call is the cashback site, where she logs in, looks at the brands, the offers, and the level of cashback and then makes a purchase – she uses it almost as a shopping portal in its own right, and many other people do the same.
Voucher / Coupon
If you’re an advertiser, and you want to retain customers or acquire new customers, then a good way to do this is to offer discounts or vouchers. You can do this by offering a certain percentage off a purchase, an additional gift, a promotional code, free postage and packing, or any other perk that will encourage people to buy your product.
You don’t necessarily need to have a voucher to be featured on site (although the sites have become fussier about this), and sometimes a really strong offer is good enough. Voucher sites also tend to have large email lists that can be segregated to target certain verticals and send out offers and promotions.
Much like Cashback, they’re always under scrutiny for being ‘non-incremental’ and they don’t tend to stand up to that scrutiny quite as well, because a lot of people do just go and search for a voucher, but there are methods that can be used to try and avoid this – like not displaying a voucher box in the purchase unless they’ve previously visited a certain site, or keeping your vouchers from going viral by making them one-time codes.
Blog / Content / Influencer
Many of the bigger influencers want to be paid to post and they charge a lot, but there are lots of other influencers out there who maybe aren’t quite as big and are willing to work on a CPA basis.
If you can recruit enough of these influencers and create a long tail influencer network (a term they use in the Affiliate industry to describe a big group of small publishers who don’t all regularly drive sales each and you don’t work with closely, but between them will contribute a decent amount.
For example, if you have a thousand publishers in your long tail and each week a quarter of them drive one sale, then that’s 250 sales for little effort) then it could work very well for you.
Blogs and content sites probably aren’t given the credit they deserve, financially speaking, because of the common last-click model in the channel, but they are vital components of the purchase journey and are often used as a stopping point for research if you look at a pathway to conversion report. Because they’re not the last site, lots of these sites now look to work on a flat fee structure to create content because they know they’re not going to ultimately be credited with many sales.
Shopping Comparison / Aggregator
Shopping comparison sites or Aggregators as they tend to be called these days are very strong in the utilities and finance space because what they do is take very similar offerings and then lay them out in a way that people are able to compare them side by side.
Do they present things in a list fairly, with the best offer to the consumer at the top? In my experience no. They base it on what’s going to make them more money and then say it’s down to a mysterious ‘algorithm’, but they still work pretty well and if you’re not using them to switch your energy supplier or broadband network every couple of years and taking advantage of their incredibly strong vouchers and offers exclusively made for them, then that’s something you might want to look into.
I don’t want to talk about things like PPC (Paid Search), CSS (Comparison Shopping Service) or Email, because they’re specialists that tend to work in those fields and utilise that knowledge to generate traffic, so they’re not ‘Publishers’ in the sense that they don’t put something on a website that people go to and are interested in, but they’re still very legitimate and solid partners for Advertisers in the space.
I sell my products online; can I take advantage of Affiliate Marketing?
Probably. A lot will depend on your budgets, target audience, strategy etc, but there are a multitude of different product verticals that sell through the Affiliate channel – travel, fashion, electricals, home & garden, food & drink, groceries, arts & crafts, shopping, utilities, to name some of the most popular.
If you sell your products through a shopping gateway on your own site, and you’re able to place pixels and tracking throughout the user journey and point of conversion, then it’s highly likely you’d be able to start an Affiliate Marketing program.
Some things you might want to take into account before starting are your profit margins – you will need to give a commission on items, so how much would you be able to give? Don’t give the maximum you can, because you’ll want to leave yourself a margin for when you’re doing offers or giving increased commission rates in exchange for additional exposure and things like that.
Don’t give the maximum you can, because you’ll want to leave yourself a margin for when you’re doing offers or giving increased commission rates in exchange for additional exposure and things like that.
If your products are subscription based rather than having a definitive monetary value, then you might want to think about giving a fixed commission rate (for example, 30 Euros for someone taking the subscription out). Whereas if your products have a monetary value then you could look at a % based commission – and this is good because if you have the right sort of product level tracking setup, you can give different percentages for different types of products that may have higher or lower margins for you.
There are also some safety features you can look at putting in place so you’re not paying out commissions for returned or cancelled sales – generally known as an approval period, or something similar, you don’t approve the commissions in the network to be paid to the Publisher until after a certain period such as the return period has expired, and you put a process in place with the Affiliate Network to make sure that any returned or cancelled sales are rejected in the system so no commission is paid.
If your product uses the subscription model, it might be that you need them to have been subscribed and paying for at least 3 months before they become of value to you and you pay the commissions out (and you’d detail that in your program terms and conditions, of course). Some verticals like travel will have approval periods of 365 days in some cases and not pay a commission out until the consumer has actual travelled, even if they’ve booked it a year in advance.
The best thing to do if you want to start an Affiliate Marketing program is to talk to a few Affiliate Networks, such as Webgains, Awin, Tradedoubler who have reach across multiple regions and markets, and see what they can offer in terms of override, assistance, forecasts etc. That should give you a really good idea about whether the Affiliate Marketing channel is a good opportunity for you as an Advertiser.
I have a website; can I get in on the act?
Again, probably. In fact, almost definitely assuming you’re not providing illegal streams of sporting events or graphic pornography.
If you have a website or social media presence, and you have an audience then you can sign up to an Affiliate program and promote items.
The bigger your audience, and the more ability you have to segment and target them, the more likely you are that the bigger Advertisers will want to work closely with you, but that usually takes time and building relationships with them is key.
The bigger your audience, and the more ability you have to segment and target them, the more likely you are that the bigger Advertisers will want to work closely with you, but that usually takes time and building relationships with them is key.
If you had a lot of money and wanted to create a specific site such as a voucher or a cashback site, then you could do that, but to compete with the current crop of sites that have risen to the top will be very hard as they’re now multi-million-pound companies with huge marketing budgets that are capable of driving massive traffic volume numbers to their site.
To give you an idea of just how big some of these sites are – one of the top Aggregator sites in the UK holds blind auctions for their most popular onsite placements which can go for £50,000+ a week.
In conclusion… Affiliate Marketing has low barriers to entry from a financial PoV and depending on your strategy and what you want to realistically get out of it, it could provide a very solid and cost-efficient additional line of revenue for your company or website.
It’s used by some of the biggest companies in the world such as Apple, British Airways, Amex, Sky, and Expedia because it’s such a valuable channel that can provide an in-market audience that isn’t available through any other channel.
It’s also used by loads of small companies that you’ve probably never heard of because you can stick it on, and pretty much just leave it to do its thing and let some sales trickle in if that’s what you want to do.
No matter what size your company is, or how niche, there is usually an opportunity within the Affiliate Marketing space.