Throughout the past six years, there has been a significant shift in the promotional methods used by affiliates to drive sales to merchants.
It is important to understand how and why this shift has occurred and ways advertisers can implement strategies to engage with all affiliate types.
Six years ago the vast majority of volume was driven by PPC affiliates, whether this was direct to merchant PPC or to send consumers to a landing page prior to clicking through to an advertiser. The shift in the past six years has seen a move away from PPC affiliates as the predominant type, with the channel moving towards loyalty/incentive sites.
As online marketing has developed, merchants have begun to carry out their PPC activity in-house, or enlisted a specialist search agency. This has been combined with advertisers having stricter terms and conditions in place with regards to their PPC policy as well as Google changes.
Despite PPC affiliates making up a smaller percentage of all sales that have been delivered through the affiliate channel, the volume of sales that they have generated remains steady. This is indicative of the overall value of the affiliate channel growing year on year.
With the development of the channel and consumer behaviours changing, the methods of promotion have also transformed.
The recession has seen the way that customers shop online change. Savvy shoppers know there is often a discount to be had by shopping online and will conduct searches geared towards finding these discounts.
The cashback model of paying part of or all of a commission back to the customer has seen the leading cashback sites experience phenomenal growth. Similarly there has been a significant rise in the number of vouchercode sites and the volume they are able to deliver.
The data below looks at the breakdown of affiliate type that we have seen across the Affiliate Window platform and how this has changed over time.
This focuses on the top 20 affiliates across the network, each of the affiliates categorising themselves by their primary method of promotion:
In January 2005 13 of the top 20 affiliates were classified as PPC affiliates. By January 2011 only three affiliates listed in the top 20 stipulated their primary promotional method as PPC.
Conversely, vouchercode sites did not generate a significant amount of volume until 2006. By January 2007 three vouchercode affiliates were listed within the top 20 across the network. Similarly, the increase in the number of sales through cashback sites has seen the number of affiliates in the top 20 more than triple from two in Jan 2005 to seven in Jan 2011.
It is encouraging to note that despite incentivised traffic seeing a significant increase, content/other sites continue to have a strong presence within the top 20 affiliates, reiterating the fact ‘content is king’.
The last click model that is prevalent within the industry will favour business models which are geared towards being the last click. Cashback/Reward and vouchercode sites invariably receive the last click as consumers are primed to purchase when visiting these sites.
As more and more consumers become aware of the cashback concept these sites are likely to become their first port of call, with the ability to carry out a comparison when on the site.
Content/comparison sites add significant value within the purchase cycle but this is typically in the research phase, before a customer is ready to purchase. On a last click model, these sites are likely to miss out on a number of sales they have initiated.
A value attribution model can be developed to reward affiliates based on the value they provide. This can be based on advertiser KPIs which could include sales volume, split of new vs existing customers and their position within the purchase cycle/perceived influence on the sale. This would ensure that it is viable for content/comparison sites to continue to work on a CPA model.
Research carried out by Affiliate Window indicates that those most likely to lose out on the last click model are PPC and price comparison affiliates. These are considered to be ‘initiators’ rather than ‘closers’.
All affiliate types have demonstrated the ability to generate new customers and drive volume for merchants, but the popularity of incentive sites has shown that they are an effective lever to pull in order to increase sales demand.
An incentive-based model allows for an increased commission to be used tactically in the short term to increase sales, with the typical member of these sites susceptible to an increase in cashback to stimulate their desire to purchase.
Throughout 2011 we can expect to see a further shift in affiliate types. The continued emergence of retargeting sitting within the affiliate channel as well as the development of mobile commerce could see entrants from these affiliate types in the top 20 this time next year.
It is important for advertisers to understand where their sales are coming from through affiliates and how this impacts upon sales through other online channels.
One of the most interesting developments will be advertisers who move beyond traditional affiliate segmentation and start to recognise that individual affiliates offer unique brand partnership opportunities. Only by doing so will they be well placed to capitalise on the variety of opportunities the channel presents.