E-business Briefing: June 2005

William Cooper joined TradeDoubler at the beginning of 2000 tasked initially with setting up its UK operation. Having spent two years as Managing Director of the UK office, William took on the position as Vice President International sales where he was responsible for developing major partnerships for the company as well as co-ordinating and supporting TradeDoubler’s international sales organisation. William took on the role of CMO in November 2003.

E-consultancy: It has been a rollercoaster past few years for the affiliate networks, with major growth in the numbers of merchants (e.g. retailers) and affiliates (publishers). Can you give us a brief insider’s glimpse of how the market has developed? Whereabouts are we in 2005?

We estimate that there are over 2,000 affiliate programs currently running in the UK and that today affiliate marketing is often mentioned in the same breath as search marketing as an essential part of the online marketing mix.

The fact that affiliate marketing can generate on average between 10-25% of our advertisers online sales is a clear indication of how affiliate marketing has developed over the past 5 and a half years.

The market has developed to the extent that the majority of the major advertisers, excluding FMCG, use affiliate marketing. In addition thousands more professional publishers have realised the financial benefits of working on a CPA basis.

This growth has been greatly assisted by the functionality that affiliate marketing networks like Tradedoubler provides, but also underpinned by the rapid growth in broadband penetration and subsequent rise in e-commerce.

E-consultancy: Which merchant sectors have been the most successful at exploiting affiliate marketing?

The financial services sector has experienced huge online growth in 2005 and much of this has been derived from affiliate marketing. TradeDoubler’s monthly Tracker which provides analysis on sales tracked and generated through our European network shows that in Q1 05 this sector grew by a staggering 121%.

Other sectors which continue to benefit hugely from affiliate marketing are the consumer electronics, travel, entertainment, and telecoms sectors.

E-consultancy: Are there any sectors that have tried affiliate marketing but found that it doesn’t work for their business?

TradeDoubler runs affiliate programs for over 900 clients across Europe, with sectors ranging from financial services and clothing to gaming and health & beauty. There is no doubt that the affiliate marketing model works better for some sectors than others, however even the slow adopters such as the FMCG and automotive sectors are beginning to realise the importance of the model.

For example, the automotive sector increasingly uses affiliate marketing to generate qualified leads in the form of test drive bookings or requests for further information. 

E-consultancy: What are the common traits of the best performing affiliates (publishers)? What sort of marketing techniques work best on these sites, in terms of attracting visitors and driving relevant traffic to merchant sites?

Best performing affiliates will implement all the available online marketing techniques to attract visitors to their sites. Typically a mix of Search Engine Optimisation, Search Engine Marketing, well written useful end user copy (targeted at the merchants products and sector to keep users on the site and entice them back), value added services (e.g. price comparison, gift finder) and email marketing.

Balancing their efforts amongst these techniques will ensure that if one traffic source dries up (e.g. Google dance) then they have 3 or 4 other high traffic sources capable of driving significant visitors to the site.

In terms of what works most effectively, this depends on how competitive the sector is (for search engine rankings) and how well the merchants you have on the site convert – for example, higher conversions will result in a higher earning per exit click and therefore allows you to bid higher in Pay Per Click engines if that is your preferred method of driving traffic.

E-consultancy: Tracking user behaviour across the web is going to become much harder if rumours of cookie blocking software in new browsers like IE7 become reality. How would widespread cookie blocking initiatives affect your business? What alternatives do you have to counteract these potential problems?

Cookies have been used to track online relationships due to the straightforward merchant implementation and event reconciliation - so although cookie blocking can affect tracking (our own research puts this figure at a couple of percent at most) it is not the only available method with which to track.

TradeDoubler started re-implementing our merchants with our G2 (second generation) tracking implementation last year which does not rely on third party cookies to track affiliate referred events.

E-consultancy: What tips do you have for merchants, in terms of optimising their affiliate marketing campaigns?

There are many factors that a merchant should bear in mind when running an affiliate marketing program in order to maximise its success.

Effective communication with affiliates is key to ensuring they are kept up to date with a merchant's current offers and activity, as is ensuring your online creatives are up to date (including any seasonal promotions) and consistent with other on and offline marketing activity. 

Ensuring that the correct commission rates are set is also crucial – set them too low and affiliates will not be interested in promoting your program, but if you pay out too much commission to your affiliates, you begin to diminish your own returns.

Providing your affiliates with product feeds and allowing them to deep link through to the relevant page of your site will also help to significantly increase conversion rates. Affiliates need to be incentivised to promote your products over those of your competitors, higher commissions or bonuses for top performing affiliates can greatly help.

E-consultancy: Keyword bidding on Google Adwords has become a thorny issue with many merchants concerned about affiliates bidding on trademarked terms. But we know of major retailers that openly endorse this, since there is a branding benefit and they’re not paying for it, so it extends reach. What are your thoughts on this?

While many retailers are concerned about allowing affiliates to bid on their brand name and trademarked terms, advertisers who do not allow their affiliates to do this run the risk of allowing their competitors to do so without any challenge.

Allowing affiliates to bid on trademarked terms and brand names means that an advertiser will ultimately receive more listings in the top search engine rankings linking to their products / services, increasing the chance of a user eventually clicking through to their site rather than to a competitor website.

At TradeDoubler we clearly specify what the keyword buying policy is with any program. Advertisers can either restrict their publishers from bidding on certain terms and keywords or if they are happy to do so, give affiliates free reign to bid on all related keywords. We can discuss and advise on the implications of their chosen policy prior to the launch of their program.

E-consultancy: Amazon gives affiliates a tiny 24-hour window in which to generate commissions (a one-day cookie), so if a referred user purchases something after 5 days the affiliate earns nothing. However, research has shown that the buying cycle can take up to 12 weeks. I think this is a little tight for a pureplay online retailer (albeit a low-margin one). What advice do you give to merchants about setting cookie timeframes?

A competitive cookie length is extremely important in affiliate marketing, especially when you consider there are over 2,000 publicly available UK programs giving sector specific affiliates a wide choice over who to partner with. TradeDoubler advises all merchants to offer a cookie length of at least 30 days, but we strongly recommend they offer a 45 day cookie to prospective affiliate partners.

Some sectors have a longer "lead time" than others, entertainment and finance for example, therefore no matter how well an affiliate "pre-sells" a merchant and its products the longer cookie length protects their time and resource investment whilst at the same time giving the affiliate constant feedback in to the ROI they generate from that merchant.

E-consultancy: CPA deals do not factor in the branding benefits that an affiliate with a high Google ranking can deliver. How do you think merchants should reward their more visible vs. better performing affiliates. Is it just about sales, or is there more to affiliate marketing than conversions?

Many of our merchants are aware of the branding benefits associated with some of their key affiliate partners, and special commission arrangements are often facilitated by the account manager between the merchant and the affiliate.

Generally an affiliate who has excellent placement for sector related searches in the search engines will also generate the most traffic and are therefore rewarded with higher commission, and bonuses, due to their performance.

Affiliates who believe their site offers particular branding value to a merchant are always equipped with the necessary site statistics and case studies to confirm the value of their inventory. Affiliate marketing has evolved beyond the "trial and error" technique and comprehensive industry knowledge and experience allows all 3 parties to weigh up opportunities, value them accordingly and implement the best fit solution - partner flexibility is key.

TradeDoubler can also track "post impression" events, so for merchants who are keen to improve the value of their affiliate program and cater for premium affiliates whose inventory is more expensive allows the merchant and the affiliate to benefit from impression based events (such as impression, sales and leads).

E-consultancy: How will affiliate marketing develop over the coming 24 months? Will affiliate networks diversify into vertical sectors, like search / price comparison engines?

I cannot comment on other affiliate networks, however within affiliate marketing, we will continue to raise our level of service both towards the advertiser but just as importantly towards the publisher.

We constantly aim to provide the best functionality and therefore user experience for all parties involved. In addition, over the past three years we have diversified our offering by introducing different products such as the Media Toolbox (our tracking and ad serving technology) and running short-term campaigns often using the CPC and CPM payment metrics.

E-consultancy: B2B affiliate marketing remains a small part of the mix. I guess it is harder to accurately track sales that close offline, although this happens with high street retailers too. Is this part of a bigger issue with the CPA model? How can you grow B2B affiliate activity?

Regarding tracking offline sales, we are currently trialling a coupon-based method of tracking offline sales. The B2B sector remains a more complex area, however dependent on specific sectors we have achieved success with this as well. There is no doubt that a more targeted approach forming a select network of publishers is the preferred route to achieving results for B2B advertisers.

Will was interviewed by Chris Lake, editor, E-consultancy. Send word to chris@e-consultancy.com .

Agree? Disagree? Have something to add? Then discuss it on our forum.

Five for today:

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