October 2, 2009, 12:00 AM

Affiliate marketing will remain strong but will evolve, study says

Marketers will keep looking to affiliate networks for help with large programs but will seek direct relationships with top-performing affiliates, Forrester says.

Affiliate marketing is holding its own as a low-cost, high-return customer acquisition strategy among online marketers, who will spend an estimated $4 billion on it annually by 2014, according to Forrester Research Inc.’s U.S. Affiliate Marketing Forecast, 2009-2014. But the landscape will shift over the next few years, with marketers increasingly looking to cultivate independent relationships with top-producing affiliates.

Marketers will keep looking to networks for help in administering large programs, according to Forrester analyst and report author Patti Freeman Evans. “Marketers are reluctant to build an in-house service that will administer to all affiliates they work with, due to the high cost of such an initiative,” she says. “Marketers will continue to appreciate the benefits derived from the collaboration and knowledge transfer that affiliate networks offer.”

But overall, the share of affiliate payments to networks and network fees–versus direct payments to individual affiliates-will drop over the next several years. About 50% of all spending on affiliates is projected to go to networks and fees to networks this year, but that will drop to a projected 43% by 2014, according to Forrester’s projection.

To keep transaction volume growing on their platforms, affiliate networks have started enabling online marketers to become more closely acquainted with the individual affiliates that comprise their program, better enabling them to share experiences and pool knowledge. They also have begun to negotiate more flexible fee structures with marketers, such as tiered pricing for their services, Forrester says.

Forrester’s report also predicts that social networks won’t surpass search as a key driver of traffic to affiliate sites anytime soon. Activity on affiliate sites is still largely driven by paid or natural search, according to the report. Forrester’s data show that social network sites don’t yet drive purchases.

“Affiliate sites currently experimenting with social networks may be getting traffic from these sites but they are sending very few qualified leads to marketers,” the report says. Because affiliate sites are typically paid by marketers on the sales they drive and not just on click-throughs to the marketer’s site, few affiliates are finding that their experiments with social networking sites are producing much revenue for them at this point, the report adds.

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