Digital Fortress

Amazon are the pioneers of Affiliate marketing, and have more than 500K affiliates. Expedia.com and Travelocity spend very little time in acquiring traffic through Google and other expensive online media, they too have a good network of affiliates. In India, the affiliate boom is still to come. Few of us realise that it is the best eCommerce Marketing tool that one can invest in.

Simply put, in affiliate marketing ecosystem there is a merchant along with an affiliate. Affiliate runs program to send traffic to the merchant and if that traffic converts, merchant compensates the affiliate by paying him an agreed sum. Since in this equation merchant confirms a cost, the net outcome is high and positive ROI. Better still, you don’t have to consider affiliate as a marketing arm, but a sales channel. This channel needs to be nurtured with equal enthusiasm and zest as the website.

Affiliate marketing requires a huge investment in technology and manpower. You may decide to develop a program internally, in which case you will have to go in for ready solutions available in the marketplace. This also means you need to have a dedicated technology maintainence team and also an affiliate manager, who is very critical to the success (and on whom we will touch upon later). However, you might want to outsource the whole program and enroll in an affiliate channel, like commission junction or linkshare. In India, this is provided by Deal Group Media or DGM. Here the situation is almost like a Google Marketplace, where the affiliate will enroll in program of only that merchant who will bring profit to affiliates business. None the less effort and dedication is required in both the approaches and the sooner you start the better will it be for the business.

You might ask So why do we need affiliate marketing, my SEO ranking is high, my Google SEM is ROI positive and I’m running a good email marketing program. So why should I invest in technology and infrastructure? The answer lies in the plethora of genre that exists out there.

1. SEO Optimised domains and Pay Per Click Websites
2. Review sites
3. Shopping comparison websites
4. Niche content websites (parenting golfing etc)
5. Personal Websites and Blogs
6. Loyalty websites
7. Emailer websites
8. Unutilised domains

As an e-marketer it will be very difficult to focus exclusively on these websites, run campaign and optimise them. Advertising network do that, but most of them are blind, hence you will never know about the performance. Affiliate marketing enables management of these websites, where the agreement is to pay on performance. Hence the optmisation and making money is not the marketer onus, it is the prerogative of the affiliate website owner. Affiliate marketing ideally can empower every single user on the website to start earning, and the initial cost can be as low as Rs.5000 (registering fees for a domain). One of our affiliate partners, Shoogloo, which is
started by LD Sharma has 500 domains.

The affiliate program manager is key to such program. He is more like a relationship manager and looks at different ways and means to increase the traffic and therefore sales from these channels. One of the most common problems in affiliate marketing is the wayward means to credit sales wich could be through any of these means

1. Forced click
2. False advertisement
3. URL Masking (where you can see the changing url, with the click
4. Adware
5. Mature and Adult content
6. EMail Spam
7. Brand and Trademark bidding

The affiliate program manager needs to ensure that the liberties extended to the affiliate is not misused.

Technology is the backbone of a good affiliate program. In short the technology should ensure

1. Ad serving
2. Tracking and Conversion rule: whether it is last click first click or equal distribution of profit across all the clicks.
3. Sales tracking
4. Integration with Finance, so that the sales get validated and payment is ensured to the affiliate
5. Affiliate login, so that he can see the amount that is credited to him. This is the most important aspect of the infrastructure, as there isn’t a motivator like money.

Whatever solution that you may decide on, please stick to one platform, as you don’t want to pay the same affiliate multiple times over for the same conversion.

Affiliate marketing has to go a long way in India. As there are very few eCommerce players, dominated by Travel. Hence most of the affiliate are structured around this line of business. Also, we haven’t seen much genre coming up. It is the same staple English content, news and Social Networking sites. The development of vernacular sites, special content sites, blogs and reviews, will definitely propel this fledgling industry.

Affiliate Marketing is truly the “Performance Marketing”.

Cheers!

My friend Anuj Anand shared a very interesting report with me last week and as usual i was about to junk it ;). A better sense prevailed and I didn’t regret a bit going through the report.

Though it is called “Accenture Global Digital Advertising Study 2007″and you might think that it pertains only to US (no wonder their local baseball competition is also called World Cup), it does have something for all of us. Coming back to the report, the key takeaways were…

- 79 percent of our survey participants agree that advertising will become more performance-based, as the industry moves towards precise measurement of results, rapidly delivered. This will impose a performance discipline on an industry that has rarely felt this kind of pressure.

- 87 percent agree that analytics will become more accurate and more critical to the business. This shift will drive a decline in the use of traditional success measures — total audience per advertisement — but will enable advertisers to gain increased return on investment through more accurate targeting of audiences.

- 97 percent agree that advertising relationships with customers will become more interactive, and the other 3 percent say they don’t know, meaning that not a single respondent disagrees. As a result of this greater interactivity, capabilities such as clickthrough buttons on TV will enable a two-way dialogue with the consumer all the way to purchase. These capabilities will also create a more meaningful feedback loop on advertising effectiveness.

- 43 percent of the respondents believe that digital media will become the primary form of programming and advertising content within the next five years, and a further 33 percent say this will happen in between seven and 10 years. The impact of this transition may be
accelerated by the typical pattern that early adaptors tend to be from higher income demographic groups that are more attractive to advertisers. Traditional advertisers are largely unprepared for the wave of digitally driven change about to engulf them.

- Only 29 percent of executives believe the industry is technologically prepared for the resulting changes in performance measurement. The proportions are even lower in terms of customer analytics (25 percent), targeted advertising (21 percent) and customer interactivity (13 percent).

- Largely as a result, the highest proportion of respondents (43 percent) believe advertising agencies have the most to lose in the transition to digital advertising, followed by broadcasters with 33 percent.

- Correspondingly, 46 percent believe that online search companies have the most to gain, followed by digital advertising specialists with 19 percent.

- 77 percent agree that advertising will be viewed in an integrated way on three screens — television, computer and wireless handset.

Indian scenario can’t be more rosier. Digital agency Zenith Optimedia expects Internet ad spend to double, from 210 crores 2006 to 450 crores in 2007 and can potentially rise to 2,250 crores mark in 2009 (a 10 times increase). As a share of advertising pie, the share will rise to 6.8%, which was 1% last year. There is another interesting report on digital industry.

It just certifies a fact that we already know, that the advertising industry is facing a radical transformation — in terms of its technological and cultural impact. We need to focus strongly on the use technology to offer advanced customer interactivity. Targeting and analytics are gaining real competitive differentiation.

Therefore the implications for us are…

- If you are a new media company — build, partner or buy systems (sales, reporting, delivery) to support products across three screens and to deliver targeted advertising in privacy-compliant ways.
- If you are a marketer — escalate your integrated marketing and advertising initiatives across three screens, keeping a critical eye on performance metrics.
- If you are a technology company — focus on developing front-end and back-end systems specific to each medium’s unique needs.

If you can’t locate PDF on the net, do write to me and I’ll send you a copy

Cheers!!

Alootechie interviewed LD Sharma sometime back. LD was a part of DGM earlier, but now is a full time entrepreneur, and has more than 500 domains. It is a great read for those interested in affiliate marketing…
Cheers!