Affiliate roundtable

New Media Age

18/10/2007

Agencies, affiliates and networks discuss how the affiliate marketing sector has developed as a discipline and its changing role within the marketing mix.

What are the interesting trends in affiliate marketing from the last 12 months?

Jamie Harwood, UK Web Media: In the last year we've seen a lot more media plans, because brands can see it works.

Chris King, BT : We're working harder to understand how all our online channels interact and getting a lot smarter about budgets. We're working very closely with our PPC, SEO and CPM teams to make sure we're optimising our acquisition channels. Bringing them all together into one acquisition team gives better economies and a lot more learning.

Neil Ranatunga, uSwitch : Affiliate and search teams don't traditionally talk to each other. We're looking at how to implement an overall search strategy that encompasses both the affiliates and the in-house search team. We wouldn't have dreamed of this a year ago. Affiliate marketing was just some traffic that came to our website and transacted.

Alison Guise, Commission Junction : As affiliate marketing has become more significant, it has come under consideration by boards. And that has meant there has typically been an agreement from the top down to invest more significantly in the channel.

Kevin Edwards, Affiliate Window: There are a few big brands that still don't run transactional sites or affiliate marketing activity. But over the last year we've seen Next's transactional site launch. And then there's Travelodge. Its understanding of affiliate marketing was very different: it was working with people that carried feeds for it. It has taken a year for it to remove the cap on the budget. Now we've rolled it out to the whole network.

How much further can CPA go?

King, BT : From a merchant's perspective, we want to extend the CPA model. Highly trafficked sites that traditionally worked on a CPM basis are trying to morph into a CPA model. As they realise they can partner with big brands and build up a long-term relationship through this model, some CPM areas are under threat.

Guise, Commission Junction: From our perspective, Google's move into CPA endorsed the whole affiliate model. The days of easy money are gone. Search arbitrage isn't the way forward, building quality content is. Price-comparison sites are playing a bigger role than affiliates because of their user-generated content.

How has Google's relationship with affiliates changed over the year?

Harwood, UK Web Media : It has upped the game. Some of the things Google has done recently have actually been detrimental to how it makes money, but the user experience is better. We've had to change from being a bunch of guys who can create websites to having design-rich content writers and specialists.

King, BT : Sometimes Google is obviously trialling stuff. For example, I was looking for a holiday recently and all of a sudden these drop-down boxes turned up in my results. It wants to be very protective of what it's doing in search, but it would be better if we could get more visibility and help to drive revenue.

Edwards, Affiliate Window : When we talk to Google about how we can help some of our brand PPC affiliates, it says, "You need to have more relevant content in that area." Traditionally that was from an SEO perspective and paid search was more about money.

Ranatunga, uSwitch : Google is criticised for lack of service and that's where networks can make a difference. As advertisers and agencies take on resource, they're looking to get more from affiliate networks.

Edwards, Affiliate Window : That's the difference with Google. Its account management has never been considered particularly strong. If it moves more towards a CPA model, then that's where the kind of micro-management that affiliate marketing demands becomes interesting.

Looking ahead, what are the important trends emerging in the sector?

Guise, Commission Junction : At the moment everyone knows their role. It'll get interesting as soon as an agency or a big media owner acquires a network. I think we'll see a lot more of that over the next 6-12 months.

Harwood, UK Web Media : In some cases we're being told we're doing more traffic and more sales than these large aggregators. At what point do we stop becoming an affiliate company and become an aggregator?

Cashback sites are taking away some of the hard work for users. Some provide huge opportunities to bring niche stores in. You can't find these with search engines but as an affiliate we've managed to get them on a cashback site.

Edwards, Affiliate Window: Affiliates will merge into brands. They've already started to do this. We've been working closely with The Sun for it to carry CPA deals. It's a fantastic opportunity for certain advertisers to associate themselves with a brand in its own right.

How does affiliate marketing now fit into the overall marketing mix?

Harwood, UK Web Media : Everyone is saying, "This isn't marketing," but a lot of companies are struggling with that. I had a conversation with one recently that said, "Can you guarantee this will be happening for the next six months because we're going to stop doing TV?"

Ranatunga, uSwitch : We did an offline campaign in January to optimise our affiliate channel, and that kind of halo effect really saw a huge increase in sales as a result. If you did that in isolation, it wouldn't work as effectively.

Guise, Commission Junction : Don't depend too much on one channel and give as many tools as you can to attract new publishers from new business models. Use the tools that you employ across other digital media. So if you do very sophisticated ad messaging, put that across your affiliate channel.

What's holding things back on the advertiser side?

King, BT : Lack of resource. Last year we did 30% of broadband sales through this channel. At the moment, we don't sell traditional lines and a lot of the new value-added services that BT is doing on top of broadband. We've yet to start selling BT Vision. There are two-and-a-half people in my team, and if I had a team of five we could be selling a huge volume. Yet I'm pushing back all the time. I don't want to crash relationships with networks or affiliates by bringing on ropey products that won't sell.

Ranatunga, uSwitch : There are so many things I would love to do in terms of providing technological capability to our affiliates, but I have to compete with other parts of the business.

Edwards, Affiliate Window : A lot of it comes down to the knowledge that advertisers have. A lot of them haven't even drilled down to see what's a sale through an affiliate channel.

Ranatunga, uSwitch : You have to be in it for the long term. The days when you just gave an XML link and a banner have gone. You have to invest time, money and resources to integrate with your affiliates, to add more value. It's not just a case of who gives the most CPA.

King, BT : Affiliate marketing is definitely strategic because you don't just switch it on and suddenly you're at 100% volume. It takes a while to build that up. You have to get things in place. You have to work with your network, build your relationships. And you can't just turn round to maybe ten big partners or 3,000 affiliates and say, "Sorry, I've run out of budget. I'll be launching it again in January."

How is the role of networks changing?

Edwards, Affiliate Window : There hasn't been enough innovation in the last couple of years. Networks have a real role to play in facilitating reporting in the easiest, most convenient way possible. The big challenge everyone faces now is how to monetise Web 2.0.

Guise, Commission Junction : Technology is absolutely key, but most important is the engagement of the affiliate community.

King, BT : One of the biggest challenges in the network area is finding where the incremental volume is. I don't think any of them are standing still, but the ones that are still relying on their PPC affiliates are going to lose out. I'm looking for new channels to market from my network, outside of what I'm currently doing.

Edwards, Affiliate Window : I think all networks have to justify their existence. It's much better that you approach an advertiser and say, "I can get you sales from this channel and this channel," rather than just saying 90% of the sales are going to come from PPC.

Harwood, UK Web Media : We'd recommend two networks. A specialist for your key super-affiliates, the guys you want to work closely with, then a secondary network for the long tail.

And how are affiliates themselves changing?

Harwood, UK Web Media : We've gone from being a kind of handyman who can knock up a shed to having specialised experts, content writers and designers. We're honing our skills so that as margins drop we're there to the penny.

King, BT : We've noticed consolidation in the number of quality PPC affiliates. That means we've started to work with them more closely. I think you're also going to see more bigger companies having a go at this. Another big aggregator or comparison website will launch. A lot of merchant PPC advertising really started kicking off about 15 months ago, so you're really going to see a lot more of that.

Ranatunga, uSwitch : We've talked a bit about the possibility of consolidation within the PPC industry, but it's also the case with merchants.

In the comparison industry, for example, we've seen market share going to merchants and also crossing over from industry to industry, like MoneySupermarket coming into energy.

Harwood, UK Web Media : This year we've been doing offline advertising and buying space in specialist magazines. We don't have millions of pounds to put into TV advertising, but in terms of technology, usability and the stuff we know we're good at, we can play on a level field.

King, BT : We're seeing a lot of big affiliate brands and companies that are very big above the line expecting to receive a commission level that we don't think is fair. Super-affiliates deserve a certain commission level because they bring in a certain volume. But just because you're a big brand and you're doing loads of above-the-line advertising, you can't come knocking on my door.

Is regulation making enough progress?

Guise, Commission Junction : The IAB Affiliate Council has started with the right approach, which is to agree some basic rules of engagement. But has it got the support across the board? There needs to be more publishers, some merchants and some agencies.

Edwards, Affiliate Window : One of the problems is that you're dealing with so many groups. It's not just an affiliate network having a code of conduct. If you're looking for consensus from so many people, it becomes so watered down that it's effectively meaningless.

King, BT: You may get some sort of consensus, but not when you're talking regulation and legal frameworks. Who's governing what Google does? If you're going to regulate the affiliate industry, you have to regulate search.

Guise, Commission Junction: Will Google continue to regulate brands? What other media owner does that? Does Rupert Murdoch regulate brands in his newspapers? No.

Harwood, UK Web Media: It's really hard. There could be a guideline that says, 'If a merchant does this, then affiliates won't work with it,' but there would still be some that did.

What more could clients be doing?

King, BT: You try to keep your fingers in every pie but I only have a finite budget. Some bigger affiliates may not think we're paying them enough or their earnings per click aren't enough. But if I have ten big affiliates, I can't keep them all happy. As an affiliate manager, it feels like you're always juggling.

Edwards, Affiliate Window: We're running a campaign for clothing at Tesco, so it has been looking to create an email database and has signed off a huge budget with us to drive email sign-ups. We were paying a small amount for a valid email address. Tesco has used that well.

Ranatunga, uSwitch: Where it becomes really interesting is if an advertiser is willing to engage with one or two of its affiliates. If it's running a general campaign but works with Jamie or whoever and trials something for a month or two, then assesses the ROI.

Edwards, Affiliate Window: Some merchants will just give back one sales figure for your entire traffic. How can I optimise my campaign with that? It can be extremely frustrating if you're not sure, especially if you're a multi-channel affiliate with multiple sources of traffic, trying to understand where you're doing really well and where you're not.

What are the issues surrounding brand bidding, when affiliates target specific keywords?

King, BT: Networks will have to get a lot savvier. If I accept an affiliate on my programme and I look at its website and it looks clean, but then later I find it's running 50 sites and my brand's compromised, where does the responsibility lie? I'd say with the network.

Edwards, Affiliate Window: I always tell advertisers they can't control their brand 100%. If you find an affiliate that you're not happy with, you can speak to it and ask it to remove the ad. But you can't force it to. For paid search, we have a brand-monitoring tool that scrapes Google, Yahoo! and MSN and alerts us if people are bidding on brands. But again, it's getting all networks to agree to the same thing.

Harwood, UK Web Media: You have brands bidding to get enough CPA to drive your generic sales, which seems a bit back to front at times. The other aspect is brand protection. You have your long-term keywords. Put your brand there with paid search, then you can get a couple of other affiliates to control the space.

It's about everyone working together rather than the search company saying, "We don't want any more because our prices have gone up." It's about control in the group and not letting affiliates fight between themselves for the top spot.

An example of getting it wrong would be to say, "Affiliates can bid on our brand." You'd have 100 affiliates squabbling for a spot. What then happens is the price just goes up and up for the search agency or for the client.

Edwards, Affiliate Window: It's the exception rather than the rule. We advise the vast majority of our advertisers that there's no value in allowing affiliates to get on their brand.

 

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