Affiliate Marketing: What Every Online Business Needs

With the advent of the Internet, the business world has seen an explosion of new ideas, products, and opportunities. It seems we can acquire most everything online, from groceries to wedding gifts, investments to trades. In this mix, affiliate marketing has grown almost in-step with the growth of the Internet.

The Basics, the Background

The term “affiliate marketing” also refers to the entire industry built upon the eponymous marketing strategy. When the World Wide Web established itself in 1994, the business world was primed to capitalize on the new technology's breadth, even though at the time there was no way of gauging just how global the Internet would become.

The First Affiliate Marketers

However, it was actually CDNow's BuyWeb program that went public first, launched in late 1994. In fact, its program (in conjunction with Geffen Records) was perhaps the first online site to offer an associate program built upon the concept of "click-through purchasing" via independent, online storefronts, i.e. affiliates.

Being a seller of music, CDNow’s think tank suggested that affiliates could review or promote CDs they felt their readers would be interested in and at the same time, provide a link-back that would take them to the CDNow retail site to buy the music should they be so inclined.

While this concept today is commonplace; at the time, it was revolutionary. The cost for the merchant was relatively small; the work was done primarily by affiliates; and the potential reward was mutual. Within a year of its BuyWeb program, CDNow had a force of a few hundred affiliates, each one helping to drive traffic (and subsequent sales) to the music retailer.

The Power of Compensation

Each model has its pros and cons, with CPS and CPA methods offering greater rewards, yet are dependent on the referred visitors doing more than just “visiting” the advertiser’s website. As the terms “cost per sale” and “cost per action” suggest, an action on the part of the visitor is required in order for the affiliate to reap the full reward.

By contrast, with a CPC model, the referral is the main objective. Once the visitor clicks-through, the affiliate's part is complete. However, keep in mind that cost-per-click programs reward far less than their counterparts. Thereby, a CPC affiliate typically focuses on sheer numbers while a CPA or CPS affiliate, concerns itself with targeted referrals and/or leads.

Not surprisingly, affiliate marketing relies on performance. Much like a sales force, affiliate marketers help grow a company's potential buyer base. However, unlike a sales associate, an affiliate is unable to influence the visitor once he/she leaves the referral site. Once this step takes place, it's up to the merchant to "close the deal," by sustaining the interest peaked by the publisher.

This speaks to one of the factors that affiliates should look for when choosing merchant partners: quality of products/services and effective sales pages, as these invariably help maximize conversion. For most programs, successful affiliate marketing is the definition of cooperative effort.

For Merchants: The Pros and Cons

This said, the merchant also enjoys a wider potential customer base. With each participating affiliate, the merchant expands its reach to sell products and services and as noted earlier, in the online world, traffic is key.

With affiliates, the merchant creates further avenues in which to drive traffic, leads, and sales. And in fact, many merchants actively seek affiliates that would be a good fit for their business. Just as the affiliate tries to find the best niche in which to focus his/her energies, so too does the merchant: which third-party seller, blog, forum, or directory has the type of targeted traffic we need? Once found, a partnership can be broached.

Sounds like a win-win situation all around, doesn't it? Yet, as with any business, there are cons to consider as well. If it were so simple to "win" at affiliate marketing, then every online entrepreneur would be a millionaire, every start-up a success. There are some disadvantages to consider, but nothing that can’t be negotiated. Bottom line: it’s best to know about the pros/cons from the start, so as to best plan your affiliate approach.

In addition to the initial cost of an affiliate program, one other disadvantage could be the merchant’s inability at times to monitor the validity of clicks, leads, or even sales. In such cases, a dispute over metrics may arise. What's more, unlike an employee, it's not always possible to enforce how one’s product or service is represented.

In order to increase commissions, some affiliates may exaggerate copy to convince visitors to click-through. While it's up to the merchant to close the deal on its side, it's also the merchant who will receive customer complaints should the product/service not live up to the promise made by the affiliate. Reputation is therefore always a concern for a merchant when it comes to affiliate marketing.

For Merchants: Ready to Begin?

However, to do so, it's not as 1-2-3 as creating a program and opening the door to affiliates. Indeed, affiliate marketing works best for merchants who have an integrated online-marketing program too, one that makes use of search-engine marketing, contextual advertising, and targeted (or vertical) media.

Lead generation continues to grow as a significant subcategory of affiliate marketing, with marketplaces like Azoogle gaining attention apart from traditional affiliate networks. As the landscape continues to change and grow, merchants are finding more and more options to choose from. While the new players take the lead in the latest trends, traditional networks continue to thrive with the more familiar. Together, they can comprise a well-rounded affiliate program designed to maximize reach and potential customers.

When looking into affiliate networks, consider flexibility, competition, cost, and type of traffic: targeted versus non-targeted, legitimate leads versus numbers. As is typical, each affiliate program will have its good points and bad: each of which should be considered in respect to what you have to offer, your niche, and your hopeful return.

Also, while there's certainly potential for big returns, be realistic when you first start out. Given that every online business should have an affiliate-marketing campaign in place, it's safe to say that competition is fierce. However, the right combination of affiliate network, payout scale, and promotion, could prove profitable sooner than you think.

For Affiliates: Types of Affiliate Websites

Should you use such tools, you will undoubtedly learn of keywords and key phrases quickly. Search engine optimization (or SEO) should be applied, which is basically finding ways to optimize the content on a website to make it searchable in search engines and indexes.

To achieve this, affiliates should focus on keywords, terms, and phrases that people will likely use to find the promoted product/service. For instance, an affiliate of CDNow who’s trying to promote a CD by Norah Jones, would want to create a review or description that’s optimized for the artist's name, her album, and her songs. What keywords best capture this?

Finding a niche remains key to standing out in affiliate marketing. With this said, what are the different types of affiliate websites once can partner with? Web 2.0 has delivered a few new entries into the fray, such as blogs and social networks, but old standards like shopping directories remain. The predominant affiliate websites in effect today include:

• Price-comparison sites or aggregators: Where affiliates direct traffic to brand names or large retailers (like Zappos for shoes), with the hope of converting sales (pay per sale).
• Loyalty sites: Often a cash-back site (such as a shopping site) that rewards "action" or "sale." In addition to cash-back, loyalty sites also reward points and donations.
• Coupon sites and/or discount (code) sites: Draws in visitors looking for discounts on popular products, with direct links to merchant stores. Requires constant updating due to expiration dates, but the odds of conversion are good (given that the coupon was specifically sought out).
• Blogs: A result of Web 2.0, weblogs typically focus on content-rich marketing, such as product reviews and news releases. A subset of blogs is the “product-review site,” which is very similar to what the first CDNow affiliates were.
• Personal websites: Blogs and social-media sites are becoming more popular and are off-shoots of the personal site in affiliate marketing. CPS or CPA are good fits for personal sites, as traffic volume is typically lower than straight affiliate sites, rings, or networks.

For Affiliates: Where the Programs Are

For those who do have a website, such as a music site, you may find yourself contacted directly by merchants who find you. If so, consider the pros and cons of their offer, as well as weigh it against other opportunities you've come across during your initial (re)search. Is it a good fit for you? To help, look for these qualities in an affiliate partner:

• The product/service: Is it quality? What's the market demand?
• The merchant's record in customer service (you'll want the overall experience to be positive for your visitors).
• Is the merchant's site well-written, user-friendly?
• What are the commission rates? How competitive are they?
• Is tracking available? How long before a lead expires? Meaning, if a person clicks-through from your site, how long will the potential customer have to make a purchase (or take action). A good program will offer at least 90 days.

For Affiliates: Success is Relative

A key to success is finding a way to keep your content fresh, while establishing a core that your visitors will come to rely upon. To be successful at affiliate marketing, you'll want to:

1. Decide on the right affiliate program(s).
2. Combine affiliate marketing with other online-marketing methods, such as search engine optimization and smart web design. Tip: First impressions do matter, as do easy navigation and outreach efforts, like posting on forums or social networks.
3. Update your site/blog. Be consistent with updates so that expiration dates don't pass and the latest, is always readily available.

Combined, these efforts should help any affiliate site grow and be competitive. Albeit, this is what every affiliate marketer (and merchant) wishes to achieve, but it's nonetheless accurate. In order to win at the game of affiliate marketing, an affiliate needs to play it well. To do so, the first order of business is to study the rules (research) and then, devise a winning strategy (see above).

Best of luck!