March 24, 2006, 12:00 AM

The changing landscape of affiliate marketing

When it comes to online marketing, the spotlight is definitely on techniques other than affiliate marketing. But that doesn’t mean affiliate marketing doesn’t deserve some of the spotlight. Evidence: 19% of e-retailers in a recent survey report that 31% or more of their online sales come through affiliates. That same survey, by affiliate consultants Shawn Collins Consulting, reports that 20% of e-retailers have paid a single affiliate a commission of $20,000 or more in one month. 22% of respondents report that their affiliate programs create conversion rates of 5% or more, reports Collins’ survey, AFFStat 2005.

With affiliate marketing initiatives performing well, retailers are facing higher stakes with their affiliate programs, and that means they should be paying closer attention to what their affiliates are doing. “The focus today is on quality of affiliates and transparency,” says Stephen Messer, president of affiliate management company LinkShare Corp. “Marketers today want to know that their partners are doing things that they know about.”For instance, he says, marketers want to make sure that their affiliate partners are not using spyware or pop-ups that their customers and prospective customers might find annoying.Keeping control of networksIt wasn’t always the case that retailers knew their affiliate marketers or what they were doing. Affiliate marketers operate web sites that promote others’ brands and earn a commission when a consumer clicks a retailer’s link on the affiliate’s web site and makes a purchase at the retail site. Retailers once thought the more, the merrier, welcoming anyone who wanted to sign up as an affiliate. But today many are exercising control over who signs up. In fact, American Eagle Outfitters Inc., retailer of apparel to teens and 20s, keeps a tight lid on its affiliate program, signing only sites that it believes reflect the qualities of the American Eagle Brand, says Laurie Barkman, marketing manager.American Eagle approves every affiliate that’s added to the program, and affiliates must agree to specific terms and conditions, such as agreeing not to bid on search engines on American Eagle trademarked material, Barkman says. Affiliates join by invitation only.Manually reviewing all applications is one way of knowing affiliates. In addition, vendors are developing programs to help retailers understand who they’re doing business with. For instance, LinkShare recently launched an identity checking service to ensure that affiliate marketing companies are who they say they are. The service assures that marketers are operating under their real names and it ensures that all sites operated by a single marketer are identified as being part of the same organization, Messer says.Before the launch this spring of Project Athena, as LinkShare has named the service, after the Greek goddess of wisdom, retailers and other online marketers using affiliates often didn’t know details about their partners, Messer says. “Marketers didn’t always know that they could trust the entities they were doing business with,” he says. Masking identitiesLinkShare verifies identity by comparing applications for affiliate partner status against certain business and individual databases. Since the service began, Messer says LinkShare and its marketers have been surprised to find that some companies that appeared to be large corporations were simply individuals trying to appear bigger than they were. Conversely, the new service has also uncovered individuals operating a number of web sites under different names as a way to mask the fact that they were earning a lot of money from certain retailers. Although retailers often reward their biggest producers with larger commissions, Messer says some of the most successful affiliates try to mask their identity so as not to tip off retailers to the success they have achieved. “Some of these affiliates have come up with really ingenious ways to make money and they were afraid of losing that if others learned what they were doing and copied their techniques,” Messer says. Interestingly, in another example of how the Internet blurs distinctions, affiliate marketers are also big users of search engine marketing and e-mail marketing as a way to promote their own sites to consumers, as well as leading edge forms of marketing, such as blogging, Collins notes. And that creates further challenges for their retailer partners. “Retailers can’t rely on standard size ads if they want to get their ads into blogs,” Collins says. “They have to provide more diverse creative.”Affiliates may be out of the spotlight, but that doesn’t mean retailers shouldn’t be shining their own light into affiliate practices to keep up with rapid change.
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