Crossing the Line – the line between performance and traditional advertising has been breached and the best days of affiliate marketing are ahead.
By Greg Shepard
In the early days of e-commerce, when NASDAQ was high, and banner advertising was still flourishing, pioneering companies like Amazon.com and CDNow took the bold step to partner with content-focused websites to enhance their revenue stream. This innovative approach involved paying commissions for every referred sale and was soon christened “affiliate marketing.” As per Forrester Research, by the beginning of 1999, affiliate programs were already surpassing banner advertising as the most effective technique for driving traffic.
Fast forward to September 1999, just three years after Amazon’s inception, the landscape had over 1,000 merchants offering affiliate programs. By 2000, Amazon’s Associate Program had exploded to include over half a million affiliates. What began as a modest concept by Jeff Bezos, Amazon’s founder and CEO, had mushroomed into an entirely new industry. The advent of affiliate networks, directories, newsletters, consultants, and other innovations was a testament to this growth. Today, affiliate marketing is recognized as an essential part of the Web’s DNA, often hailed as the most cost-effective online marketing channel.
However, the journey of affiliate marketing hasn’t been without challenges. We must remember that affiliate marketing is not about inexpensive advertising but fostering profitable strategic relationships.
Recent advancements now offer an opportunity for a win-win situation for merchants and affiliates. Improved technologies allow for the merger of the traditional Cost Per Sale (CPS), Cost Per Acquisition (CPA), Cost Per Lead (CPL) models with Cost Per Mille (CPM), Cost Per Click (CPC), and flat advertising models. This convergence has given birth to a new hybrid model – the Cost-Plus-Performance (CPP) model.
The CPP model marries a paid campaign with a performance campaign, giving us the best of both worlds. I envision this as the future of affiliate marketing, where CPP snatches back the inventory lost to Google’s AdSense and advertisers. This shift is expected to unlock a plethora of opportunities for merchants, affiliate managers, and affiliates.
The introduction of CPP is slowly converting traditional CPM and CPC enthusiasts into advocates of affiliate marketing. For many leading websites, affiliate marketing now represents an opportunity to break free from the shackles of pay-per-click search engines and expensive advertising. The biggest challenge, however, is finding affiliates with considerable traffic. But if you can negotiate a Cost-Plus-Performance payout with a high-traffic site, an array of valuable opportunities start to unfurl.
Merchants are also coming to understand that affiliates need better tools. Innovations such as data-feeds, site and shopping cart abandonment (exit traffic) techniques promise to boost Earnings Per Click (EPC) and Earnings Per Mille (EPM) without compromising the visitor’s experience, thereby enhancing monetization. Offering additional products or services at or after the point of sale can increase revenue without diluting the sales process.
The boundaries separating performance and traditional advertising have been crossed. The catalyst for this change was Google’s entry into the market. Google’s AdSense competed for valuable affiliate program inventory, forcing the flexible affiliate marketers to adapt once again. Their response was to grapple with the paid advertising segment of the market, competing for the same ad space previously occupied by affiliate marketers. This shift changed the Web publisher’s expectations and decreased the available inventory.
The clear distinction between performance and traditional advertising has been blurred. As the frustrations with the current processes rise, new ways to connect buyers and sellers are emerging, making the affiliate community more vibrant and dynamic. As competition in organic search heats up and the need for cost-effective online inventory intensifies, the affiliate space continues to expand.
The race is on! In just one year
