A continuation of Affiliate Marketing

I had discussed the theoretical aspects of Affiliate marketing in an earlier article. In this article I’ll dwell on affiliate marketing, how it works, merits, de-merits etc.

An affiliate program, like I said earlier, is an arrangement where a merchant or trader pays the publisher ( the ‘affiliate’) for links from the publisher website to the merchant website. The affiliate is paid only when a sale is made as a result of this link. This is also called Pay per action (PPA) advertising, simply because the affiliate gets paid only when a visitor performs a certain action – visits, buys, registers, leaves contact details…).

Let me give a brief example of how it works.

Let’s assume I am an affiliate of ebay.com. As an affiliate I have an Id. Suppose my id is ‘shankar’. Suppose I have reviewed the performance of a Dell Lattitude Laptop on my website. I will link the title of my review so that it takes my visitor directly to the laptop description on ebay.com.

When the visitor clicks on the link on my webpage, my unique id will be recorded by the ebay webserver so that if the visitor makes a purchase, I’ll get credit. There are different commission models –

If the visitor buys the same laptop I have linked to, I’ll get say 20%

If the visitor browses around and ends up buying something else, I’ll get 7.5%

These commission percentages could vary from merchant to merchant.

Affiliate marketing is popular because it benefits both the affiliate and the merchant. The merchant’s cost of advertising is limited to the percentage paid to the affiliate. And, the merchant pays only when a sale is actually made. In a sense, Affiliate marketing is like CPA, because in both cases, pay out happens only on a sale.

A disadvantage of affiliate marketing is that results can’t be predicted. It’s like casting a fishing line and hoping that a fish ‘bites’. Success of affiliate marketing is a function of number of visitors to the affiliate website. To that extent affiliates will have to be chosen carefully.

From an affiliate point of view, it is a revenue stream – albeit an unpredictable revenue stream – where there is no real effort on the affiliate’s part. No complaints.

In summary, affiliate marketing can be one of many things a merchant can do to propagate his brand, increase sales etc. It has to be combined with other forms of advertising to make a meaningful advertising campaign.

Co-registration

Co-Registration, or Co-reg as it is popularly called, is about lead generation. This is in the form of a ‘tick’ in a box which the user sees when he is signing up to a website. Users opt to receive information from 3^rd party. For example, a user who is visiting a website signs up for a newsletter, is shown some other subscriptions/offers which he can opt in to. These are usually show on conclusion of the registration process. Co-reg is a subset of lead generation.

As is obvious, Co-reg is a powerful marketing tool. Typical objectives of a co-reg initiative would be -

Build a mailing list of newsletters/brochures/catalogue requests

Generation of leads for an outgoing call centre operative to make calls on

Free sample distribution

Other activity that involves capture of consumer data

Co-reg has its own pitfalls, however –

1: Some websites have already pre-checked a the box requesting for newsletter from the company running the co-reg campaign. In such a scenario, since the user does not consciously opt in, an inadvertent subscription happens

2: Websites often incentive users to go thru’ a co-reg process. Leads coming  out of such an incentivized campaign are often duds  i.e the user doesn’t really have an interest in product/service/newsletter

3: When the lead was generated is of essence. There are systems which email/sms leads as soon as they are generated. This is highly recommended. Working with brokers who sell lists is fraught with peril as such lists can be hours, days or even months old!

For a Co-reg initiative to work the following need to be kept in mind –

1: A co-reg campaign should be run a related website. Thus a co-reg lead for SIM cards generated from a website that buys old mobile instruments would make sense.

2: Response to co-reg leads – in the form of a call, email etc – should be swift. Ideally a telesales team should be at the ready to call such leads. This is a sine qua non for a successful co-reg campaign.

3: Allowing the user to tick the box is very important. It would preferable to have a ‘distilled’ list of leads rather than a list of largely disinterested users.

And finally, like every other online campaign, it’s important to optimize the campaign all the way. Weeding out non-performing websites, adding newer ‘performing’ websites is crucial to a successful Co-reg campaign.

Affiliate Marketing

Affiliate Marketing is a revenue sharing venture between a website owner and an online merchant. The website owner will place advertisements on his websites to either help sell the merchant’s products or to send potential customers to the merchant’s website, all in exchange for a share of the profits.

There are three ways to earn money through affiliate marketing:

Pay Per Click — Every time a potential customer leaves the affiliate website by “clicking” on the link leading to the merchant’s website, a certain amount of money is deposited in the affiliate’s account. This amount can be pennies or dollars depending on the product and amount of the commission.

Pay Per Sale — Every time a sale is made as a result of advertising on the affiliate’s website, a percentage, or commission, is deposited into the affiliate’s account.

Pay Per Lead — Every time a potential client registers at the merchant’s website as a result of the advertisement on the affiliate’s account, a previously determined amount is deposited into the affiliate’s account.

For many website owners, this is a great way to earn some extra money without actually having to “do” anything. All it involves is placing an ad on the affiliate’s website. There’s no selling or promotion of any kind. The affiliate can just sit back and wait for the profits to roll in.

It’s also beneficial to the merchant. By placing affiliate marketing advertising on websites all over the Internet, he has free advertising and doesn’t need to do much selling on his own. The more websites a merchant is affiliated with, the more exposure his products get, and all he has to do is allow ads for his products to appear on someone else’s website.

While affiliate marketing has its benefits, there are also a few cons. For instance, the merchant has to share the profits with an outside party. If an affiliate uses unsavory means to bring customers to his website and sell the merchant’s products, the merchant will also have to contend with doing a little damage control on his reputation.

The affiliate has to do thorough research on the merchant before agreeing to affiliation. To not do so can mean ending up with a merchant who refuses to pay commission fees or packs up his business and moves on without informing any of his affiliates. This is rare, however, and most merchants and affiliates have a pleasant and profitable business arrangement.

It’s important to choose wisely. In some cases, an ad can be placed on an affiliate’s website for months before a potential customer “clicks” or purchases something. If the commission is only pennies, this can lead to a frustrating relationship. Both the affiliate and the merchant are well advised to ensure the relationship will be mutually beneficial.

Affiliate marketing is considered one of the best ways to earn money online. If this is an avenue you wish to pursue, you’d be well advised to research each merchant thoroughly. After that, there’s not much else to do except wait for the profits to roll in!

Targeting of online campaigns

The most obvious targeting types that one hears of are geographic – based on which city/country you live in – or demographic – based on criteria such as age, sex etc. Virtually every online campaign as a geographic and demographic targeting element.

This is the undergird of most online campaigns. To make campaigns for focused, advertisers often add other layers to sit on a geographic and demographic targeting. Examples of such targeting are

Contextual targeting

Behavioral targeting

Re-targeting

Let’s examine each of these in detail.

Contextual targeting

In contextual advertising, ads are served in context to what the visitor to a website is doing. Typically, a contextual system looks out for keywords and displays ads to the webpage that the user is visiting. Ads may be displayed as pop-ups. For example if a visitor is using a website pertaining to bikes and if this website uses contextual advertising, the user may see ads for mountain bikes. Another form of contextual advertising is used by search engines. Ads relevant to the keywords are displayed on the search result pages.

Contextual advertising is quite an effective form of advertising. Simply because, it serves ads relevant to user interest. Possibilities of click-thru’s, registrations, sales etc are higher than in a CPM/CPC campaign.

Behavioral Targeting

In behavioral targeting, ads served are based on user behavior, such as pages they have visited, searches they have made. This type of targeting allows site owners or networks to display ads relevant to visitors to the page. Behavioral targeting tends to be at a premium because being more sharply targeted, such campaigns will invite more consumer interest.

Retargeting

Retargeting is just what it says – targeting a particular user repeatedly with the same product/service. This is best explained with an example.

Let’s take a user who does a Google search on ‘Dell Laptops. This leads the user to a Dell page which tells you about the latest Dell Latitude laptops. You take a look at this page and like most users, you spend time on this page and navigate away to another page.

Without the user knowing, a Dell cookie is installed on your PC. A cookie is a small piece of data which says something like ‘ this person is looking for a Dell laptop’. This is a small piece of data which can follow you for weeks and even months. The user surf around but will find an increasing number of Dell ads popping up.

These ads will keep following you till the user revisits the Dell website and take some action- registers, downloads some information or any other action which Dell would like the user to take.

Conventional methods of targeting combined with a contextual, behavioral or retargeting piece can considerably increase ROIs on online campaigns.

Is Online Advertising a God send?

In the print advertising era, brand building involved publishing half page to one page ads in prominent newspapers promoting a brand. Brand building also happened through point of sale outlets – give a brand of toothpaste free to every customer who visits the outlet. Such campaigns were run on a sustained basis to impinge the brand message upon the mind of the consumer.

Such brand building campaigns were very time consuming and demanded huge advertising budgets. Campaigns were planned well, well in advance and different entities involved in the campaign would spend months in the campaign roll out.

Once the campaign was on , changes were hard to make. A media plan would be drawn up , which would involve advertising in different newspapers, magazines, etc.. Advertising space was booked and campaigns were committed to run to the plan. Such a ‘committed campaign’ could not be modified easily. It would take time for the results to be collated and analyzed. The measurement metric was complicated.

Enter online advertising.

Online advertising is similar to print advertising in a few respects. The advertising agency needed to be on board early on in the campaign, campaign details needed to be hammered out, the brand message finalized and the creatives generated. But in the most critical part of the campaign, the actual running of the campaign and measurement of performance, online leaves print advertising far behind.

Online advertising can be rolled out at 24 hours notice. Reports / Statistics – Number of impressions, number of clicks could be available from day 1 of the campaign. Number of clicks could be correlated to number of registrations/sales from day 1 of the campaign. Campaigns could be optimized through the campaign. Website-wise performance reports would help the advertiser deliver more impressions on ‘performing’ websites. And weed out non-performing ones. If there are major concerns on the campaign, it could be halted almost immediately. Results could be analyzed and the campaign re-launched with more creatives, over different inventory….

Seems like God send! The flexibility online advertising offers is unparalleled! Online offers us opportunities all the way to ensure that the campaign succeeds. Changes can be made to the campaign mix time and time again until it starts producing results. No wonder then that online advertising has taken off the way it has!

ROI Calculation of Online campaigns

Online campaigns help increase your visibility online. But as in any investment situation, one must ensure that investment both money and time pay off. Return on Investment (ROI ) is profit made from money spent. ROI helps determine whether an investment was a good one and helps decide whether one needs to adjust investment on specific outlays.

In online/keyword marketing, ROI can help determine which ads and keywords to continue using providing a steer to develop future marketing campaigns.

To calculate ROI the following information is required –

Ø Ad Cost – Amount spent on paid search campaigns(keyword bidding costs could be one example)

Ø Clicks – Number of Clicks generated from your campaign. A measure of clicks is Click thru’ rate ( number of clicks/number of impressions x100)

Ø Number Sales – Sales generated from a particular campaign

Ø Revenue – The total income generated from paid listings for a product

How is the effectiveness of a campaign calculated? Some fairly elementary formulae can be used to calculate Campaign ROIs

Ø Profit generated from an Ad – Total Revenue – Cost

Ø CPA – Number of sales generated from a campaign. This can easily be calculated by dividing Ad cost by number of sales

Ø ROI - Profit %age /ad cost x100

Online marketers are looking for ongoing relationships with clients. Relationship longevity happens out of consistently performing campaigns.

In performance based campaigns - CPL or CPA – the marketer’s sole goal is to ensure regular lead or sales generations. The CPL or CPA on a campaign needs to be weighed against the CPM cost of running the campaign. Over a period of time, revenues generated from a CPL/CPA initiative need to be stacked up against campaign costs to determine profitability of a campaign from the marketer’s perspective. If the campaign proves to be profitable, fine. Else the marketer needs to re-negotiate CPL/CPA rates with the client to make it win-win for the marketer/ advertiser. Often, this process of determining campaign profitability can be a losing proposition for the marketer ( Read my article Online Marketer and Advertiser - A win-win model)

An advertiser is quite happy to continue a CPL/CPA campaign in the face of non-performance, because his payout happens on generation of a lead or, better still, on a sale happening. The onus in this instance is on the network owner to monitor, optimize the campaign and get it to perform. And, if necessary, re-negotiate rates.

In a CPM / CPC campaign, however, the tables are turned. Payouts happen for number of impressions/clicks, as the case may be. Given the intention to have long-term relationships, the network owner has to , at the outset, agree campaign goals with the advertiser. Very rarely do we have simple brand-building campaigns where delivery of impressions over quality inventory is all that matters. Typical goals that an advertiser would set for a network are –

Click Thru’ rates – The advertiser would like to agree a CTR %age with the network. Having the experience running campaigns in the past, the advertiser would know what kind of CTRs would get him maximum sales/registrations. The CTR is the pre-cursor to an actual sale happening. Which brings us the next goal an advertiser would have for the network.

Campaign CPAs – Even for CPM/CPC campaigns, the advertiser would have a $ CPA goal. For example, the advertiser could decide that for the campaign to be profitable, he needs to generate one sale for every $ 40 spent on the campaign.

The network owner needs to know these goals upfront. Once the campaign is live, he’ll need a continuous feedback from the client on how many sales/registrations are happening. Based on these statistics network owners need to optimize the campaign to ensure CPA goals are met, thereby ensuring customer satisfaction and possibility of a long-term client engagement.

Keyword Advertising

Keyword advertising is a form of internet advertising that is linked to specific words, phrases etc. The idea is to deliver advertising content to people who are interested and hence likely to respond. While banner advertising is about flashing banner ads on different websites as part of a campaign, keyword advertising is more focused and hence could result in higher CTRs. For example, therefore, if I am looking for a holiday in Italy and I enter this search string in google, I’ll be directed to landing pages of a chain of Italian hotels for example. The likelihood of a click thru’ is higher in this situation because of an interest in a stay in Italy.

Keyword advertising is often run along with banner advertising to get maximum results. One the one hand you have a banner ad campaign that directs the ‘clicker’ to a landing page, a simultaneous keyword campaign also achieves the same result. The CTR on a keyword campaign is likely to be higher because of a real interest in the product/service.

The most popular keyword advertising is ‘google’ keyword advertising. Google being the most visited search engine globally is, for obvious reasons, very popular with keyword advertisers.

In keyword advertising, the advertiser buys ‘keywords’. Thereafter as and when a netsurfer types in a keyword, he / she would be directed to the advertiser landing page or the advertiser website.

Keywords can, like other forms of advertising, suffer from the ‘latency’ factor. Different advertisers bidding for the same keyword/s, could result in many advertisers vying for the attention of the netsurfer. Keywords in their infancy get more hits and hence CTRs. But as more and more advertisers jump on a ‘keyword’ bandwagon, number of hits / CTRs could gradually decline.

The advertiser has to periodically come up with a new set keywords in an attempt to maintain campaign efficacy. Choosing a keyword can be challenging. Generic keywords may not be quite effective. For example a basic word like motorcycle is too general. The company might think about what differentiates its products and the types of markets it wishes to attract. A company that specializes in bikes that are suitable for competitive riding, for example, might come up with a suitably unique set of keywords.

Campaign optimization

Campaigns are like marriages. Marriages ail from the 7 year itch. The ‘itch’ catches up with campaigns much earlier.

A campaign itch is when performance goes into a decline. Number of clicks and CTRs go into a gentle decline. And consequently, registrations / eCPAs show a downward trend.

Campaign performance is dependent on the following factors -

Inventory

How relevant is the inventory to the type of campaign one is running? If one runs a teeth whitening campaign on inventory which has visitors in the 50 + age bracket, it’s a recipe for disaster. Admittedly many a campaign is Run of Network (RON). Whether a campaign is RON or Run of Site (ROS), its success is going to be measured on an eCPA metric. Even an RON campaign, therefore, has to have a healthy number of ‘relevant’ inventory.

Creative

As a thumb rule, the more the creatives on a campaign, the better the CTR. The possibility of a click on one or two banners is much, much lower than on multiple banners. Visitors to websites often know whether the information they’d be looking for would be. If the banner appears, therefore, in different parts of the website, possibility of the ‘focused’ visitor clicking thru’ would be higher.

Message on the creative

Very obviously, the more catchy the message on the banner, the higher the probability of a click. In this respect a banner ad is no different from an ad appearing in the newspaper, TV etc.

Inspite of taking these and other precautions, campaign performance does drop over time. Reasons for such a dip could be –

Banner Latency

The same banner appearing time and time again, results in banner latency i.e. users getting used to seeing a banner and not clicking thru’. This is especially true of regular visitors to a website.

Keyword latency

Much the same as in banner latency, keyword latency can also result in fall in CTRs. Users find they are not getting the right results with a set of keywords – they therefore start experimenting with new keywords.

Inability to tap into new users

Running the campaign on a set of websites would get results in the short /medium –term. But we must remember that different websites will have a faithful set of visitors. Once the ad has run its useful term on a set of websites, there is a possibility of ennui creeping in – users stop clicking on banners as they have already clicked thru’ anyway.

How does one overcome campaign slowdown and maintain consistent CTR resulting in even eCPA for the customer?

Revamp inventory

Within a certain demographic, there would be a number of websites. And each website, notwithstanding the same visitor profile, would have a different set of ‘loyal’ visitors. By rotating inventory, therefore, the advertiser is able to tap into a newer set of visitors.

Change Banners/Keywords

Banner/keyword latency mentioned earlier in this article can be best addressed by adding new banners/keywords. Campaign CTRs have actually improved by constantly revamping the creatives and keywords.

Optimization of campaigns is ongoing. A constant eye needs to be kept on different elements of campaign performance. By doing so, corrective action can be taken as soon as first signs of slowdown are detected ensuring consistent CTRs. Bottomline? A happy customer who has achieved eCPA goals!

Is being a broker a sensible option?

I know of a lot of networks that do not recruit their own publishers – they function as brokers i.e. they get campaigns and run them on networks. This seems to be a simple, hassle-free option. But does it make long-term sense?

Let’s explore the merits and de-merits.

When one is making a foray into the online advertising business, we are starting out cold. We only have a company name, a few key people. Period. No track record, no brand, nothing. In such a situation, hiring publishers could be a daunting task. Publishers usually wish to know a bit about the company, types of campaign run etc. In any case, in its infancy a company is looking to get traction in the market – propagating the company brand, getting new campaigns going, getting the cash registers ringing etc.

In such a situation, working with other networks is a very sensible option. Benefits of such a strategy are –

Quick go-lives

Your campaign can go-live within hours of the contract sign-off. Provided you have given a campaign brief to the supplier in advance, the campaign can be online in hours and the first set of statistics available at the end of the day.

Spreading Risk

If the campaign is a ‘big’ campaign, it can be apportioned over different networks. Campaign performance can be monitored over the different networks and upweighted/downweighted on performing/non-performing networks. Campaigns can thus be very quickly ‘optimized’ , getting good CTRs and a happy and satisfied customer!

Better Profitability

It is generally easier to negotiate hard with networks, getting better CPM, CPC rates and hence better margins. Since the network is under pressure to deliver, they are able to mobilize relevant inventory at better costs.

Insulated from the actual publisher

By insulating oneself from the actual publisher, one is protected from risks of ‘bad’ creatives. Whether we like it or not, we do encounter creatives with malaware. In such a situation, it is useful not to have to face the wrath of the publisher and the likelihood of being blacklisted.

However, working with other networks is always a short-term strategy.

If one is looking to build a business in the long-term and create ‘value’, it is important to create a proper ecosystem. Using a good adserver, getting publishers on board, building publisher goodwill and creating a track record on successful campaign delivery are key to creating value. Another very effective way of building value is to build the adserver inhouse. This creates IPR which further enhances the value perception of the business. Revenuemantra (RM)is a case in point. RM has built the adserver ground up.

The bottom-line on this discussion is – yes it is worthwhile using other networks in the short to medium term to get revenues going. But there should a simultaneous plan to hire publishers and create IPR in the form of a robust adserving solution. The result in a ‘valuable’ business.