Channels: Maximising your mix

bedrooms. E-commerce web resource E-consultancy estimates that the
sector grew by 60 per cent last year, with advertisers now dedicating up
to 30 per cent of their online marketing budget to affiliate
programmes.

In the past, the growth of the industry has been largely driven by
affiliates exploiting two relatively simple techniques. The first
involves setting up a web site carrying text links or banner ads aimed
at driving traffic to an advertiser's e-commerce portal. The second sees
the affiliate bid on a series of pre-arranged search terms in order to
expand the number of paid-for listings on which an advertiser's brand
name will appear.

Things are changing rapidly, however. Consumers are growing intolerant
of web sites that fail to add value to their online experience.
Meanwhile, the cost of keyword bidding continues to rise as an
increasing number of advertisers exploit paid search. These factors are
forcing affiliates to look towards new channels to drive traffic on
behalf of their clients. "Five years ago, the affiliate marketing
industry was characterised by guys living at home and running web sites
in their spare time for pocket money," says Kevin Cornils, chief
executive of Buy.at. "Now, the sector comprises big publishers with
content-rich web sites."

The first signs of change came last year when Google decided to alter
its search technology to improve the quality of web site landing pages.
The move helped weed out irrelevant search results in favour of more
content-rich sites. As a result, affiliates have started to become more
like established online media owners, re-inventing themselves to focus
on user-retention and offering advertisers benefits beyond simple sales
leads. "Affiliates are concentrating much more on content so they can
build repeat visits and maximise their commission," says Oli Matthews,
managing director of Online Media Group. "They are rapidly becoming
brands in their own right."

By establishing themselves in vertical content sectors, such as finance,
gaming and travel, affiliates can target consumers with relevant text
links and display ads. However, e-commerce advertisers need to ensure
that they provide affiliates with high-quality creative featuring a
strong call to action. It is also recommended that brand-owners open up
their application programme interface so their affiliates can make use
of relevant content from the destination site. Affiliates need to think
about how to engage consumers in order to drive them through to an
advertiser's site with minimum wastage. "The majority of internet users
are fatigued by banners and are not easily persuaded to click through to
merchant web sites," argues David Hall, head of client services at
Digital Window.

The proliferation of content-rich web sites aimed at improving the
consumer experience has put increasing pressure on affiliates
specialising in search engine optimisation (SEO). Rather than just
buying large volumes of traffic through paid search, affiliates are now
focusing on highly optimised landing pages that can push their
advertisers up the natural listings. SEO affiliates can also reinforce a
brand's organic search efforts by squeezing out competitors that would
otherwise site alongside them on the results page. "SEO affiliates need
merchants to help them do their job by providing a good flow of
information and creative with which to populate their site," adds Alison
Guise, UK country manager at Commission Junction.

Price comparison

A growing number of affiliates are going down the price comparison
route. Sites including Kelkoo, Moneysupermarket and PriceRunner allow
advertisers to display brand ads or links at an advanced stage in the
purchase process with a high click-to-conversion rate. "Using price
comparison sites as part of your affiliate marketing programme will
increase reach and ultimately drive transactions," says Maz Darvish,
chief executive of Affiliate Future. "It will also help to raise brand
awareness."

Loyalty sites are also an effective way for affiliates to drive traffic.
Cash-back co-operatives work by passing on part of the commission they
earn on online purchases to the consumer. These sites allow advertisers
to target a cross-section of customers who have a deep level of trust
for the brands they interact with. Paul Nikkel, co-founder of the Quidco
web loyalty scheme, believes cash-back co-operatives fill a necessary
intermediary role between retailers and consumers. "Internet users are
placing a higher premium on honesty from the companies they engage with
online," he says.

A large number of affiliates are turning to email to drive traffic for
their clients, but merchants must provide their affiliates with an email
template containing official branding and pre-approved copy to maximise
the chances of success. "Email is the perfect format in which to
generate traffic for clients, providing that the activity is on message
and on brand," says Kenneth Lillie, head of search and affiliates at TBG
London.

The growth of the affiliate marketing sector looks set to continue
unabated. Forrester Research predicts that online spending by UK
shoppers will reach in excess of £52bn by 2011, compared with
£29bn last year. The pay-per-acquisition model developed by
affiliates is also in increasing demand across the online industry,
leading many to claim there has never been a better time for affiliates
to diversify. "There are a lot more ways for affiliates to drive traffic
to merchant web sites than there used to be," says Matthews.

This is good news for advertisers, with affiliates now able to offer a
more comprehensive service potentially spanning paid-search, web
content, SEO, price-comparison sites, cash co-operatives and email.
LateRooms, the discount hotel

booking service, is one of a growing number of brands keen to make its
affiliate programme as diverse as possible. In an effort to drive online
bookings from consumers, the brand works with a wide range of affiliates
across a number of disciplines. "We realised straightaway that we needed
to be flexible in our use of different channels to make our affiliate
programme a success," says Duncan Barraclough, affiliate marketing
manager at LateRooms.com. "A one-size-fits-all approach just isn't
feasible." LateRooms claims its affiliate programme now generates
between 12 per cent and 15 per cent of its online bookings.

As the affiliate marketing sector expands beyond text links and paid
search, the onus will be on advertisers and networks to examine the
performance of each individual channel within their affiliate scheme.
Once a brand owner has a view of the overall cost per acquisition of its
affiliate activity, the marketing team can look to optimise the
programme by increasing spend on the channels that are performing well,
and reducing investment in those that aren't. "It's crucial that
advertisers take advantage of as many different publishing models as
possible," says Guise. "Using different channels minimises the risk of
your programme falling flat."

The benefits of combining channels to maximise web traffic and drive
online sales are clear. However, the growing complexity of the affiliate
sector increases the need for advertisers to put strict guidelines in
place to prevent their brand being abused. The industry has done a lot
to clean up its image over the past few years, eradicating underhand
dealings and establishing best-practice guidelines. Despite this,
brand-owners need to define clearly what their affiliates can and can't
do. "It is essential that advertisers put stringent measures in place to
protect their brands and ensure that their affiliates don't go off
message," says Mike Glegg, UK sales director at TradeDoubler.

Pay-per-click affiliates are used to tough restrictions on keyword
bidding, but advertisers need to define the use of brand images, logos
and copy across all emerging affiliate disciplines. "Companies spend
millions building a brand," says Lillie. "For affiliates to jump in at
the last moment with ad copy that is not on brand message is
unscrupulous and dangerous."

The diversity of the media being used by affiliates to generate traffic
for merchants also increases the need for advanced tracking technology
capable of ensuring that the affiliate receives the right commission for
its part in driving an online sale (see technology feature, p54). "It is
difficult for a single affiliate to exploit a multi-channel campaign,"
explains Mike Teasdale, planning director at Harvest Digital. "The risk
is that a banner campaign run by an affiliate will drive traffic through
a keyword search that may be linked by another affiliate. The normal
rules of the last click wins will not in this case reward the affiliate
for their contribution to the sale."

Affiliates have demonstrated their ability to deliver results for online
businesses and they have also diversified beyond paid search to embrace
new channels capable of driving online audiences. But they can't afford
to stand still. The ever-evolving internet, with new opportunities
appearing on the horizon every day, will keep providing affiliate
marketers with uncharted territories to conquer.