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For those working in affiliate marketing it genuinely feels after a handful of false dawns that our £4bn industry is at a crossroads, poised to develop genuinely more intelligent and intuitive commission modelling.

Affiliate marketing is at the coalface of online, premised on converting traffic to valid leads or confirmed sales. The past 15 years have seen a significant portion of online disciplines worked to cost per acquisition, falling within the remit of performance based marketing and rewarded on the same ‘last click wins’ discipline.

But as de-duplication becomes commonplace and analytics’ packages provide a wealth of data so the clamour for a ‘fairer’ reward system has gained momentum.

Consensus in the time this issue has been discussed seems to perpetually reference what is referred to as a ‘multi-attribution’ approach, that of rewarding the various affiliate touch points that may exist in any given sale, transaction or lead.

In theory this makes sense, take one commission and split it between the variety of affiliate types that constitute a sale; the price comparison site who initiated the transaction, the content site who fleshed out the product information, convincing the consumer to purchase and finally the incentive (be it voucher code or cashback) that convinced the consumer to transact. Three affiliates, all working independently but all adding value and all rewarded under a multi-payment solution be it evenly or weighted to first or last click.

But if it was this simple wouldn’t all networks and advertisers be offering this to affiliates already?

There are a handful of considerations advertisers should be aware of before embracing any move away from last click and all of them involve taking a few steps back to understand both what they’re trying to achieve and what is currently happening with their affiliate traffic.

First a caveat; I’m from an affiliate background and I know affiliate marketing doesn’t exist in a vacuum. Of course affiliates comprise just one channel amongst many but the unique nature of the discipline, effectively all digital in microcosm, means affiliate marketers are well placed to study how different online interactions impact within a single channel.

This is an important point as any multi-attribution model cannot work without acknowledgement of an advertiser’s wider online mix. To address just the affiliate channel is missing the point. Whilst this may address affiliate concerns regarding what they perceive to be unfair commission distribution, it doesn’t necessarily address an advertiser’s priority; more intelligent targeting of their online marketing spend both in and outside of affiliate marketing.

So lets take that as a starting point and assume if we could offer an advertiser an intelligent mechanism to set commissions that accurately reflected the ‘value’ of the affiliate receiving the payment, they would want to use it.

What would this value consist of? Lets take a retailer who may be looking at a variety of metrics to determine how best to reward affiliates delivering their individual measurement of success. The number of new versus returning customers being driven by the advertiser’s different types of affiliates (for example does incentivised traffic drive higher or lower numbers of new customers compared to a voucher code or price comparison site?) is a good starting point, especially for more mature affiliate campaigns.

Another consideration they may take into account could be the average order values driven by various types of affiliates or the persistency of transactions from those affiliates. Additional pointers may be where the affiliate figures in the transaction path, initiator or closer of the sale, or possibly somewhere in between. Similarly how ‘sticky’ is their traffic? How granularly does the advertiser want to take this data; down to individual affiliate or by segmented affiliate type?

Beyond this there are a number of additional ‘value’ points that could be considered but all these layers lead us to one conclusion: that it isn’t the click that is deciding the value but everything surrounding that click.

If we accept this premise then surely a multi-click attribution system doesn’t necessarily deliver a way for merchants to intelligently set commissions. It’s essentially part of the answer to part of the question.

Number of clicks involved in a sale is one metric amongst many that can help an advertiser start to build a picture or even just an educated feel of their affiliate traffic. As such, a multi-attribution model based on clicks is as ‘least worst’ an option as last click is, as it measures the wrong thing to determine value.

Let’s not lose sight of the two key elements that underpin the discussion; a better reward system for affiliates and a more intelligent commission setting structure for advertisers; one could determine the other but neither can exist in isolation.

The nature of our fragmented industry has meant networks and agencies display data that gives half the picture, but rarely does an advertiser work with their supplier to tie all the information together.

For example, if new customer acquisition and persistency are critical performance metrics for an advertiser this could be fed back to both network and affiliate. I know of no more than a handful of advertisers who do this and usually only one such ‘value’ strand.

Networks need to work harder to educate merchants how their affiliate programmes drive a perpetual loop of information that needs to be fed back to networks and affiliates to allow us all to make more intelligent commission decisions whilst providing transparency for affiliates about their traffic quality. If they did, the data would probably show (contrary to received wisdom and common assumption) that very few affiliates are involved in a typical sale and voucher code sites most likely overwrite other voucher code affiliates rather than ‘content’.

Network interfaces may need to change with data flowing from both advertiser and affiliate into a central hub with flexible reporting at more granular levels but this is a natural evolution, helping to build confidence in an industry that some blue chips have typically approached cautiously. 

Those advertisers that embrace this transparency will be best placed to truly know the value of their affiliate programme and in doing so, will be enabled to make the increased investment those of us working in the industry strive for daily.

Kevin Edwards

Published 23 June, 2010 by Kevin Edwards

Kevin Edwards is Strategy Director at Affiliate Window, the current Chair of the IAB's Affiliate Marketing Council and a contributor to Econsultancy. 

6 more posts from this author

Comments (4)

Matthew Curry

Matthew Curry, Head of Ecommerce at Lovehoney

You're right of course Kevin, and I would love to be more transparent with my affiliate network. I have no qualms in passing back the characteristics of the sale, such as whether the customer is new, an engagement and propensite level, really whatever as long as its anonymous.

My issue is however, that my goals - New Customer acquisition, and getting this customer to their 3rd order (which we count as an indicator of their loyalty) are rejected by the network as not being conducive to increasing affiliate sales. I would happily pay additional incentives for a new customer, and reduce incentive for existing (and in general with a long order history) customers accordingly. However getting sales from customers on their 5th or 6th or even later order (by which time I don't see the value in paying an affiliate) are pretty much a cash cow for both the affiliate and the network.

Until the affiliate industry realises that the cashback/vouchercode "grab the feed and churn it out" model is not healthy for any marketing strategy, the channel will not grow beyond being the occasional sale to a new customer and a margin parasite to all others.

about 6 years ago

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iPodDanny

Value attribution models are definitely a good thing and if done correctly will benefit all parties.

From a merchant point of view, finding out the true path to a conversion helps you attribute cost against value to find the true ROAS -> which will then help you set out the correct marketing mix that will deliver an improved ROI.

For the affiliates, this is an opportunity to create a better value relationship with the merchants, which in the long run should deliver improved earnings for the affiliate.

For the value attribution model to work, both sides have to treat each other fairly and understand that best value comes from understanding each others business and customers.

about 6 years ago

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ron

I just got started on affiliate marketing and no one said it was going to be easy but the thing about affiliate marketing is you really gotta get out there to the people because the way america is of right now people rather see a person with proof than just proof . Keep up the good work I hope to hear more for you in the future .

about 6 years ago

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Lekan Adetifa, Head Online Acquisition at Moi

The article gets me thinking and asking questions

1. Surely the merchant possesses sizeable power here? Your affiliate marketing strategy (commissions structure,rewards etc) should be informed by the issues raised here which boil down to squeezing real value out of the channel, right.

2. If you have a decent analytics platform, you should be able to tell which referring site(s) are sending you real value and reward/manage them accordingly?

Like Matthew mentioned, isn't it possible at this time to relate directly with top affiliates and reward them for i.e new customers?

This should make the chosen ones think of how to deepen capacity to boost new clients acquisition online?

3. Surely, your affiliate marketing campaign would begin to show you only a few deliver real value (the so called 20:80 rule) and you know what to do?

4. I assume greater transparency will deliver greater value to the merchant and help them make the affiliate marketer better partners.

It will surely make affiliate marketers work harder? smarter? pay attention to details in delivering real incremental value. I'm not sure about what will become of the commissions though

Makes me think of the movie "Bruce Almighty" and so many people winning the lottery because "God" (Bruce) answered yes to all prayers.

Problem was, the jackpot was shared amongst so many, only pennies got into individual hands! It sparked a riot! :)

5. The main article also makes me think how much data should really be shared out there. Like the writer said, it should be a natural evolution!?

about 6 years ago

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