Affiliate marketing is a type of performance-based marketing in which a business rewards one or more affiliates for each visitor or customer brought by the affiliate’s own marketing efforts. The industry has four core players: the merchant (also known as ‘retailer’ or ‘brand’), the network (that contains offers for the affiliate to choose from and also takes care of the payments), the publisher (also known as ‘the affiliate’), and the customer.”
Weinberg and Mares in their book Traction defines an affiliate program as an arrangement where you pay people or companies for performing certain actions (like making a sale or getting a qualified lead).
Companies like Amazon, Zappos, eBay, Orbitz, and Netflix use affiliate programs to drive significant portions of their revenue. In fact, affiliate programs are the main traction channel for many ecommerce stores, info products and membership programs. To illustrate this area in their Traction book Weinberg and Mares interviewed Kris Jones, who grew Pepperjam to become the fourth largest affiliate network in the world. At one point, they had a single advertiser generating $50 million annually through their network.
Value of Affiliate Programs
“Whether you’re the brand manager at a Fortune 100 brand or the marketing director/everything else at a startup, setting up a solid affiliate program can open a revenue avenue without much of the hassle usually associated with setting up new marketing initiatives.” says Steve Olenski on Forbes blog.
- An affiliate program is only going to help bring traffic to your website or business; you are in charge of turning that traffic into conversions.
- Affiliate Program Strategy give the ability to use affiliate programs effectively but, it depends how much you are willing to pay out to acquire a customer. After all, with this channel you are paying out of pocket for the lead or sale.
Well-established affiliate programs like those run by Amazon or Netflix have figured out exactly how much to pay their affiliates for each lead. As a startup, you are going to be less sure of your underlying business and should start with a simple approach. The basic approaches are to pay a flat fee for a conversion (e.g. $5 for a customer that purchases something) or pay a percentage of a conversion that occurs (e.g. 5% of the price a customer pays). from Traction book
Why is affiliate marketing a good option for Startups?
- According to eMarketer, 46% of marketers consider affiliate marketing to be “very cost effective” as it relates to customer acquisition, second only to email.
- You only pay for results – unlike traditional advertising methods, affiliate marketing is the most cost effective one. If your affiliates don’t perform and bring leads, they simply don’t get paid.
- You don’t spend time on advertising – let others do the work for you so you can worry about other, more important issues, or focus on other skills. You don’t need to be a marketing expert or have to learn any marketing methods to run an affiliate program. Simply setup your affiliate program and then payout your affiliates once a month. That’s where your job ends.
- Get lots of traffic and improved SEO – lots of affiliates generate helpful of backlinks.
- Find Super affiliates and you’re golden – you don’t need hundreds of affiliates to succesfully run an affiliate program. In general, most of businesses have 3-5 Super affiliates who generate more than 50% of the revenue from their whole affiliate program.
How does the Affiliate marketing work? from Affiliate Marketing for Startups-Yes or No?
At its very core is about relationships, a relationship between three parties:
- Advertiser can be a company selling a product like electronics, airline tickets, clothing or car parts, or an advertiser could also be an insurance company selling policies. The most important thing to remember is that you are an advertiser if you are ready to pay other people to help you sell and promote your business.
- Publisher is an individual or company that promotes an advertiser’s product or service in exchange for earning a commission. Advertisers contractually agree to work with a publisher, then provide the publisher with creative – in the form of links, banner or text ads or even unique phone numbers – that the publisher incorporates into their website.
- Consumer is the one who actually sees the ad and then makes an action (either by clicking a link or by submitting their information via a form) that takes them from the publisher’s website to the advertiser’s to complete the action, which we call a conversion.
Affiliate by Conversant in their article What is Aflfilate Marketing? explains:
Technology, especially the internet, can be pretty daunting to try to grasp, and with terms like malware, cursor and spam, it also seems pretty dangerous. So kudos to the guys who decided e-commerce and affiliate marketing should rely on an innocuous technology called a “cookie.”
A cookie is a technology that works with web browsers to store information like user preferences, login or registration information, and shopping cart contents. Have you ever opted-in to have a website “remember” your password and username for one of your online accounts? That’s a cookie. Ever notice while searching the web for “travel deals” and you suddenly start seeing travel display banners on other websites? Those ads are appearing for you because you’ve been cookied (it’s okay, you won’t get hurt).
In affiliate marketing, one task that cookies manage is to remember the link or ad the visitor to a website clicks on. Cookies can also store the date and time of the click, they can even be used to remember what kind of websites or content you like most. There are many different types of web cookies and uses, but the kind of cookie affiliate marketing relies on is called a first-party cookie.
The affiliates that join these programs vary widely, but generally fall into the following major categories: (from Traction book)
- Coupon/ Deal sites These sites (e.g. RetailMeNot, CouponCabin, BradsDeals, Slickdeals) offer discounts to visitors and take a cut of any sale that occurs.
- Loyalty programs Companies like Upromise and Ebates have reward programs that offer cash back on purchases made through their partner networks.
- Aggregators These sites (e.g. Nextag, PriceGrabber) aggregate products from retailers.
- Email lists Many affiliates have large email lists they will recommend products to, and take a cut when subscribers make purchases.
- Vertical sites There are hundreds of thousands of sites (including individual blogs) that have amassed significant audiences geared towards a vertical (e.g. parenting, sports, electronics, etc.).
Key Affiliate Companies
Using a network makes it easier to recruit affiliates (because so many are already signed up on these sites), therefore it allows you to start using this traction channel immediately. Setting up an affiliate program on an existing affiliate network is relatively easy, though it requires an up-front cost.
- Clickbank is by far the largest affiliate network for information products is , where affiliate commissions often reach 75%. ClickBank has over 100,000 affiliates and millions of products.
- Rakuten LinkShare Corporation, now Rakuten Affiliate Network, provides eCommerce businesses with affiliate marketing services. Rakuten Affiliate Network clients include Macy’s, Walmart, Vince Camuto, Sportscraft, and Viator.The Rakuten LinkShare network is touted by the company as the largest pay for performance affiliate marketing network on the Internet.
- Commission Junction/Affliliate by Conversant Independent survey recognizes CJ Affiliate by Conversant as the top affiliate marketing provider to America’s top 1,000 e-retailers for second year in a row.
- Shareasale— has over 2,500 merchants and allows advertisers to be flexible in determining commission structures. It costs about $500 to get started.
- Adknowledge – offer traditional ad buying services in addition to affiliate campaigns. They also work in mobile, search, social media and display advertising, giving advertisers access to affiliate and CPC outlets through one platform.
- MobAff – is mobile affiliate network that companies can use for both CPC and CPA. Mobaff utilizes SMS, push notifications, click to call, mobile display and mobile search to drive conversions for their advertisers.
- Neverblue –is targeted toward advertisers that spend more than $20,000 per month. They also work with their advertising partners on their advertisements and campaigns. They count Groupon, eHarmony, and Vistaprint are some of their clients.
- Clickbooth – Clickbooth uses search, email, and many websites to promote brands like DirecTV, Dish Network, and QuiBids.
- WhaleShark Media – This media company owns some of the most popular coupon sites in the world, including RetailMeNot and Deals2Buy.com. Companies can partner with them to drive coupon-based affiliate transactions through their sites, which often appear near the top of Google for any “term + coupon” search.
The other option is to build your own affiliate program independent of an existing network. With such a program, you recruit partners from your customer base or people who have access to a group of customers you want to reach.
“For startups that don’t have a lot of money, where you can’t just open a PPC (pay-per-click) account and start throwing darts, affiliate marketing seems to me to be a logical place to start, “says Kris Jones of Pepperjam. ” There’s really no guarantee on that if you spend 10k on Google AdWords you’ll make more than that. If you were to compare affiliate marketing and PPC, the advertiser assumes the risk in PPC. If you set up poorly written and poorly developed campaigns on AdWords, you’re going to have to pay for the click whether or no matter how good or bad your ads are, or whether or not they’re converting well. With affiliate marketing, you get to define what the transaction or the conversion is, as well as have tools available to mitigate low quality.