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The effectiveness of affiliate marketing

It is predicted that by the end of this year, nearly 25% of all internet retail sales will originate on affiliate sites.

Affiliate marketing can be an effective traffic-building and marketing tool. Other sites carry your links for reward. There are many revenue sharing models, the most popular being:

  • cost per click
  • cost per lead
  • sale
  • CPM / cost per ad view / cost per impression

    Cost per click

    Cost per click is when a visitor clicks on an advert (a text link or a graphic link) that takes them to the merchant site. Rates per click across the internet range from as little as 1 cent or 1p to over $3.00/£2.00. It is believed that the US re-mortgage companies are currently paying the highest rate to very highly selected targeted websites.

    Cost per lead

    Cost per lead is typically when a visitor provides information to the visited site for future marketing purposes. It could be when a visitor fills out a survey, downloads trial software, enters a competition, requests further information, asks for a quote or joins a newsletter.

    Sale

    The sale model requires a product or service to be purchased (and not subsequently returned for refund) for a predefined amount or percentage of the sale price (not the profit).

    CPM / Cost per ad view

    CPM is usually regarded as mainstream advertising and therefore outside the realm of affiliate marketing, but you may find the following information useful.

    Cost per ad view is sometimes known as cost per impression. An impression is when an advert is shown to a visitor. The visitor doesn't need to click on the advert for the host site to earn money. Rates vary considerably depending on the target match from the site or the reputation of the site where the ad resides. Prices range from 50p/75c per 1000 views to £60/$90 per 1000. Sites such as AOL, The Wall Street Journal and Yahoo can command the higher rates. It is mostly the very high trafficked, well branded web-sites that use this model.

    1. CPM = Cost per Mil.
    2. Mil. = Latin word millesimus
    3. Millesimus = thousandth
    4. CPM = ad buy of 1000 impressions (ad views)
    5. Therefore $5 CPM = $5 buys 1000 impressions

    Affiliate tracking and statistics

    The clicks, views and sales are usually tracked by third parties, mostly advertising agencies and, depending on the company, statistics are usually available either real time or on a once daily basis.

    What's in it for the affiliates?

    Affiliate marketing can be an attractive avenue for affiliate host sites as they have no responsibility for customer service, collecting the money, packaging or shipping. Already there are over 2 million webmasters (Amazon.com's affiliate program accounts for half a million alone) who participate in affiliate programs and this figure is set to rise dramatically.

    If you are selling a product or service and considering becoming an affiliate host site yourself - or are already one - make sure that this doesn't depreciate your main purpose. You could be distracting customers from the primary goal - their purchase. Try your site with and without affiliations for a set test period and do the sums. If you find that after testing you are earning less money when including your affiliations, consider only using them on the thank-you page. When your customers' transactions are safely completed, you could use this page not only to try to cross-sell them another of your own products, but also give them opportunity to purchase from an allied company in which you share the revenue.

    You should test several different affiliations, you could be losing money. For instance, ed-u.com's sister site, Highstreetcentral.com, ran a campaign for one of the largest credit card providers in the world and gave them over a quarter of a million advertisement views resulting in no revenue whatsoever. A similar campaign for one of its competitors earned over $1000.00 (UK£670).

    What you should know

  • You should also be aware that in the majority of affiliate programs, it is just 5% of the affiliates that generate the lion's share of the sales.

  • Avoid companies that only pay once a quarter. These companies have historically proven to be the worst payment defaulters. You could potentially be giving free advertising to a company for as long as five months before you realise that the payment is never going to arrive. With companies that pay monthly you can bring that period down to two months.

  • Text advertising nearly always works better than banner advertising.




    Click here for the next page, which explains why you should dissuade some people from clicking on your on-line advertising banners...




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