06.02.2007

Rule of three in online advertisement

Interactive trends 2006/ 2007

Rule of three in online advertisement

Affiliate marketing is a virtual marketing system. The webmasters of portals or other websites refer directly to a merchant’s web presence or to the range of products offered in an online shop. For this redirection to his website the online merchant pays a commission. Some readers will ask themselves: Why can a less innovative topic such as Affiliate Marketing be found in the yearbook of the German Multimedia Award?

It’s just that simple: Affiliate marketing is definitely one of the most important trend topics of the last months. And it will stay like that for sure. So far, the principle of affiliate is particularly important to online merchants. After all, the user is only a few clicks away from purchasing a product or service. But also branded companies realise more and more that they can take advantage of the affiliate principle. Reason enough to give advertisers an understanding of the topic.

Success-based online marketing became a constant, particularly for the marketing measures of online shops and there is hardly another marketing form proving it more explicitly than affiliate. About 155 million € of advertising funds have been invested in Affiliate Marketing in 2006, according to an estimation of "Online Vermarkterkreis" - which is a plus of some 50 per cent in relation to the previous year. The most important reason for this is, as already mentioned, a concentration on performance and success. You only pay for things that work or which entice the user to interact, at best to purchase goods and services. It is exactly this feature which makes affiliate so calculable for advertisers and thus so attractive. The large potential of E-Commerce is optimally tapped and it helps individual online shops to a large, sometimes even international scope.


Affiliates act as a gateway
Affiliates are participants in an Affiliate program, which is mostly online. They usually don’t offer own products or services. They interact with both advertisers and customers, by promoting the advertiser’s products to the user who is visiting the affiliate’s website. In case of success, which is to be defined by both advertiser and affiliate, there will be a commission for the affiliate. Compared to the merchant (advertiser), who offers goods or services, the affiliate acts only as a gateway between merchants and potential customers. Advertisers, but also providers or operators of affiliate programs are called merchants.

While in the real world agents document their activities by sales contracts or other confirmations, in the online world this is done via a so-called affiliate links. This link contains a special coding that clearly identifies the affiliate. Based on this link which includes partner recognition, the advertiser is able to see, which affiliate sent the customer. Commissions are paid for just clicking the advertising medium (click), for generating a contact with customers (lead) or for a sale (sale).

There is a multitude of different combinations. Basically there is this rule: You only pay commissions for actual conversion or measurable success. But the advertiser’s meat is the affiliate’s poison: A not exactly small amount of the advertiser’s business risk passes over to the affiliate, depending on the choice of condition models. Few black sheep among the affiliates try to exclude this risk using unfair methods, for example by performing different forms of click fraud. Hence here applies the same maxim that also applies in traditional selling: Please exercise care when selecting affiliate sales partners!


Defining first objectives
In the beginning however, you should define your own objectives and goals. It is a good thing for advertising companies to regard and attend to their affiliates like they were classical sales partners. The ideal way is a cooperation with affiliates that have a topical connection to the corresponding target groups. Most important of all is the content of web pages, newsletters and other online offers.

But one should also pay attention to legal framework, because jurisdiction is not yet standardised regarding the liability of merchants. It can be an advantage to act with the help of own affiliates and internally developed software solutions, since this offers a more personal and immediate contact to your affiliates. On the other hand, costs are minimized by cooperating with partner platforms like affili.net, Zanox or Trade Doubler. Some shop software solutions already integrated the interfaces of the most important affiliate networks.

Basically, there are no costs for acquiring suitable affiliates and the whole administration (control, accounting and payment of commissions) when working together with a network. The advertiser also profits from long term developed technologies as well as a large know-how of these partner platforms. In order to give interested companies an orientation guide for the selection of a suitable network, the working group "Affiliate Marketing" of the "Bundesverband Digitale Wirtschaft" (BVDW; Federal Association of Digital Economy) provides an extensive comparison between different networks in form of a matrix. Among other interesting topics you find information on services, technology, data security, transparency and quality management of the networks.


Selecting merchants carefully
A maximum of professionalism should be most important for merchants. It helps to compare to the real world: Who would assign dubious representatives to the selling of own products or services? References, length of market presence, modes of payment or available tracking and reporting tools provide sound information of an affiliate network’s reliability. Since it is a question of performance based, i. e. measurable online advertisement, it is obligatory to be measurable and performance based! Here as well, an appropriate shop software should be able to help. Either way: Who abandons appropriate tools, in order to control the success of the own web page, e. g. using so-called tracking tools, may not be surprised when there is a bad aftertaste after settling accounts with his advertising partners.

Nevertheless: There is not much thwarting the way of affiliate marketing’s success. Anybody selecting this advertising model and pursuing his interests will quickly realise that hardly another marketing instrument is able to tap the potential of E-Commerce to such extent. Even if there is more creativity demanded in organising the sales network than organising the web presence.