Practical Ecommerce

Understanding Affiliate Marketing

Editor’s Note: We welcome as our newest contributor. She is director of affiliate marketing for Groupon, the deal-of-the day site, and the recent recipient of Affiliate Summit’s “Affiliate Manager of the Year” award. Kmet’s first piece — an overview of affiliate marketing — is below.

Affiliate marketing is a performance-based marketing channel. Affiliates refer traffic to retailers and earn commissions on completed transactions or leads. Affiliates can drive traffic from multiple sources: Via websites, social media statuses, search engine marketing, even via telephone. The affiliate’s goal is simply to get qualified consumers to the retailer’s site.

The affiliate earns commission once the consumer completes an action on the retailer’s site. This action is defined by the retailer, and could be anything from signing up for a newsletter to completing a purchase. Commission also takes various forms. The affiliate could earn a fixed dollar amount for referring a lead, or a percentage of sales for referring a transaction.

Affiliate Networks Manage it All

Tracking, reporting and payouts are typically managed via an “affiliate network,” a private company in the business of affiliate marketing. There are many affiliate networks. However the major ones are Commission Junction, Google Affiliate Network, Linkshare and ShareASale. At the very basic level, each network typically charges a set-up fee — from several hundred dollars to many thousands of dollars — and a network fee. The network fee is usually a percentage — typically 15 to 35 percent — of whatever the retailer pays out in commission.

Each network has its own strengths and weaknesses, in my experience. For example, Commission Junction is one of the larger networks, geared typically for larger companies. Conversely, ShareASale is smaller and is geared more towards the small-to medium-sized business. However, all networks provide essentially the same function. They track the consumer from an affiliate’s site, to the retailer’s site, and through to the completed transaction. When the transaction occurs, the affiliate network subtracts dollars from the retailer’s account balance and deposits the commission into the affiliate’s account. At the end of the month, the network issues the commission check to the affiliate. The network also sends out any applicable end-of-year tax forms.

When a retailer joins a network, it has access to thousands of affiliates. These affiliates can apply to a retailer’s affiliate program, and the retailer has the option of approving or denying the application. With the application, the affiliate will provide a website, or multiple sites, for consideration. Most affiliates manage multiple websites, and it is not uncommon for them to develop a site specifically for a retailer if they think there is high earning potential. As such, when a retailer considers whether or not to approve an affiliate into its program, it should view the applicant’s URL as representative — rather than definitive — of its work.

Creative Advertising Materials Important

After an affiliate is approved, it gets access to the retailer’s advertising inventory. At its most basic level, the advertising — sometimes called “creative” — inventory will consist of proven text links and banners of various sizes. Banner sizes typically follow from Internet Advertising Bureau standards, and usually consist of an 88×31 pixel “button,” a 468×60 pixel “horizontal rectangle,” a 250×250 pixel “square,” a 300×250 pixel “medium rectangle,” a 120×600 pixel “skyscraper” and a 160×600 pixel “wide skyscraper.”

A wide variety of creative content in various colors and themes should be provided. At Groupon, where I serve as director of affiliate marketing, I provide a series of standard brand banners, as well as banners that focus on food, sports, moms — you name it. The goal is to ensure that there is relevant creative for all of your affiliates. A foodie blog featuring a Groupon banner ad with cupcake imagery will likely drive more traffic than a banner with basic brand messaging.

Not all affiliates specialize in driving traffic from websites. There are also affiliates who are experts at pay-per-click search engine marketing. This can be a great boon if you don’t have an internal team focused on search engine marketing. For these affiliates, banners will be of little use. They will find greater utility in keyword lists and advance notice on product launches. The benefit of working with search affiliates is that they pay the click cost. They write their own ad copy and submit their own bids to various search engines. They pay for each click from the search engine to the retailer’s site. If the traffic converts, the search affiliate earns commission. Since the affiliate pays for each click, it is typically very skilled at managing its budget. Affiliates don’t typically have the same deep pockets as the retailer, so they typically aren’t looking to compete with the retailer’s own search-marketing efforts. In most cases, affiliates will go after long-tail keywords and campaigns that are likely different from a retailer’s internal PPC team. (Of course, if you don’t have an internal search team, it is possible to collaborate with an affiliate directly on campaigns.)

Summary

Growing an affiliate program takes time and effort. If it isn’t managed well, it will have no chance of being successful. A retailer can partner with thousands of affiliates — and vice versa. So staying relevant and memorable to them is truly the biggest challenge. In upcoming articles, I’ll review best practices for recruiting and activating quality affiliates.

Carolyn Kmet

Carolyn Kmet

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  1. Kirkland Lindsay November 2, 2011 Reply

    Why was Clickbank left out of your list of affiliate networks?

  2. Carolyn Kmet November 4, 2011 Reply

    Networks mentioned above are by no means exhaustive!

  3. Benton December 15, 2015 Reply

    What is a couple of great affiliate marketing groups for a merchant that has a hot and growing product to sign-up and utilize?

  4. Carolyn Kmet December 23, 2015 Reply

    Hi Benton, I’d recommend taking a look at AffiliateSummit.com. This is an industry specific conference that not only features diverse education tracks, but also great opportunities for networking. There are also several levels of access passes, so you could find one that suits you best.