Six years ago, Jamie Harwood, like many new affiliates, was working out of his bedroom and wondering how long it would all last. Now, he’s sitting on an estimated fortune of £18m and is one of the most successful players in the affiliate space.
Here, we talk to the head of UK Web Media about the secrets of the affiliate game and where he sees new opportunities emerging in the industry. He also tells us what retailers could be doing to improve their use of the channel and lays out his plan for international expansion.
How did you get into affiliate marketing originally and where are you at now as a business?
It all started in my bedroom, just like many affiliates, in the evenings and weekends. Adwords was about a week old and I played about with it a bit, then found out about networks and started to use Tradedoubler. I proceeded to get busier and busier and I started to take on more people.
We have 23 employees at the moment. We have eight major sites – in finance (compare.com), broadband (broadband-finder.co.uk) and mobile phones (mobile-phones.co.uk) – as well as others. We also run lots of different niche sites in various different sectors that have been developed for merchants.
Do you see yourself as an affiliate, a media owner or a search agency?
We started off as an affiliate and that’s what I know. CPA is something we have always had to work to and that is us. We know how to drive business using the CPA model.
Over time, our sites are starting to look more like those of a media owner. We receive millions of impressions each month. And along the way, lots of clients have come to us and asked if we can do their search for them. We have different parts of the business now; we have search, we run our portals, and then we have new business, which is about identifying new niches and opportunities.
I’m proud to be an affiliate. We’ve got rid of the bad name that affiliates used to have and it has matured into an industry that is understood a lot more. We’re not perceived to be grubby little men in our bedrooms. You can much more easily explain it to businesses and as an industry, we’re finding platforms that really work.
Where do you see your business in three years’ time?
In three to five years’ time, we want to be perceived mainly as a media owner. We will have a number of large portals and websites in most consumer sectors. We will still use CPA but we will also use CPM and other models, which we are naturally moving into now anyway.
We have to look at how to take a long term position in the industry. Search is getting so competitive and the big players are coming in. Margins are getting tighter, so we want to have real estate that we own in particular sectors. That’s hopefully the best way forward, but I’ll tell you if it is in three years’ time.
In the last 18 months to two years, we’ve really started to think there was longevity in this. We are becoming much more process driven and structured and efficient. We used to have fantastic RoIs and a small spend, because of the budgets. Now the RoIs are coming down so we are making sure our in-house technology is really good, so we can get the best RoIs out of every pound we spend.
Is there still room for the smaller, bedroom-based affiliates or is it all about the big publishers – or ‘super-affiliates’ – now?
Yes, definitely. The way I look at it is you have the small affiliates that target particular niches and sectors, and become very good at that. They might have one niche site that does large volumes. Then there are larger affiliates that have a number of sites and do more volume stuff across the network. I always believe there is space for both.
How have you structured your business to be flexible enough to respond to new trends and opportunities?
We have some very good people now. We have the more mainstream part of the business – the portals – established. Then the other key members of the company are looking at the industry and talking to new companies and trying to see new trends and opportunties. We also work with over 150 merchants so we can very quickly see new trends; what is picking up and what’s not.
For example, literally, out of nowhere, last year garden shed sales were going through the roof. We were very quickly able to move in on that. The industry changes monthly and we see patterns in consumer buying, so it’s hard to put a traditional business model next to it. I like the fact that we have that ability to manoeuvre very quickly and move into sectors we hadn’t thought about six months ago.
How long does it take you to set up a new property?
About a week. We have a very good back-end system and in-house designers, content writers and techies and can get stuff up very, very quickly. That’s what keeps us ahead of the game and as soon as we start resting on our laurels, we’ll be in trouble.
How are you acquiring your traffic and how has that changed over the last couple of years? Have you moved away at all from paid search as costs have risen?
We very much started with CPC. With SEO, with Google changing as much as it used to, things could change rapidly. You could have a site that was doing very well one month and the next month nobody would visit it. You would not make as much money with CPC, but you could control it more and grow the business in a more sustainable way.
That’s what we did until about a year ago. Now, we spend a lot more time and effort on SEO and are getting some great results.
We’re also looking at little bits of offline advertising. We are doing some niche magazines and dipping our toes in the water, to see if we can increase volume. It seems to be working but it’s slower and harder to measure.
What effect have you seen from the introduction of Google’s landing page quality score in the last couple of years?
As much as people don’t like Google, I think Google has really helped to professionalise the industry. There were some dubious sites and pages out there. It has said it needs quality sites that can help the consumer.
Since the quality update, we have had to look at what we are doing a lot more, rather than the best way to get someone on and off the page. We are doing SEO as well and we are looking at the consumer journey a lot more.
How has Google’s brand bidding change affected your business?
To be honest, there was a huge furore about it but Google now has an algorithm that is pretty good. If you don’t have a relevant site, you will not be able to afford the click prices.
Now, we see a lot more low hanging fruit like un-affiliated brands, but I don’t think it has had the massive impact everyone thought. It has raised search costs for some merchants where competition has come in, but I don’t think it was the massive thing everyone expected.
There has been very little change, although merchants have come to us and talked about brand protection, asking us to sit second or third in the listings.
Are you concerned that merchants might move away from the last click wins model? Would this decrease affiliates’ share of online marketing budgets?
I think ‘last click’ has been a good foundation and has got us to where we are, but going forward, merchants want to see where value is being created.
Personally, I think we will move more to a route where CPA is divided between the last click and other people involved in the sale. I don’t think it will happen this or next year, but I think it is two or three years away. I think it is definitely where merchants want to get to, and I think it’s a sensible way of doing it because there are so many facets to online sales.
Generally, I think we will move to a multi-cookie approach which will allow merchants to see the value affiliates add and what our role is in the chain.
Do you think affiliates might lose out when that happens?
No. From what I can see, merchants still pay twice for a lot of sales. They are starting to understand better where sales are coming from. If they have been paying twice for a £30 sale, they can go to someone and pay £60 now. That means affiliates can go and look at how they generate more volume.
Is there anything you wish merchants would change in their use of affiliate marketing?
One of the biggest things we see is failure to allocate a correct CPA for sales. Affiliates are still one of the cheapest routes to market and yet we could probably do a lot more if we were given a little bit more of a budget.
We will try and provide the most possible sales but sometimes we think, ‘If we had a few more quid, we could go and do a lot more’. For us as a business, we want to provide the best service we can. It is about sustainability. The merchants need to wake up a little bit to the fact that affiliates can do a very good job but they need to allocate a proper CPA.
What do you see as the most innovative and exciting things going on in the digital arena?
I think technology is improving a lot in terms of giving site owners the ability to create innovative tools, and that is really exciting. I also enjoy the fact that the lines between search, affiliate and media are becoming very blurred. It’s great to watch the industry mature.
How will you raise cash for the expansion you mentioned? Will you use existing cash resources or are you considering an IPO?
We are in various talks at the moment and that’s all I’m going to say, I’m afraid.
Have you had any takeover approaches?
Yes, we do get spoken to quite a lot by a whole mixture of people. It’s generally people trying to find out more about what we do. Affiliates have done a great job of growing their businesses but also remaining under the radar, and suddenly people are seeing their turnovers and want to find out what they are up to.
Have you any international plans?
Yes. We do work in Europe at the moment and we are looking to take some of our sites into Europe and America.
One of the reasons we have been very good in this country and one of our biggest challenges will be to understand culture and how advertising works over there. But we have some very good technology now and I would rather be very good in one country and have satellites around that, rather than having a broad spread across different territories.
We’re looking at six months to a year for European expansion, and America in about 18 months.