Does Affiliate Marketing Work?

Affiliate Marketing has been around for some time now with the first schemes hitting the market in around 1994. A number of companies entered the fray but arguably the largest and best known today is Amazon. Almost as soon as the Amazon affiliate scheme was launched, people started making money from Amazon links and banners. In turn, Amazon saw significant uplift in revenues proving that the process works for both parties. In recent years affiliate marketing has taken the online world by storm. In the UK alone, the value of affiliate-led sales is now held to be in excess of £3 billion annually. Thousands of people make their living in the world of affiliate marketing, so some of them must be doing something right!

Affiliate programs have turned small internet businesses into empires. Many affiliate publishers started with one or two sites and, in some cases, today’s “super affiliates” now operate many thousands of sites. In order for a site to work it has to generate traffic. Historically there were two primary approaches to this: either to buy traffic through Google AdWords and other online pay per click (PPC) advertising providers or to build natural / organic search presence and traffic through good search engine optimisation (SEO).

Both come with inherent challenges. Merchants are becoming ever stricter with regard to bidding on brand names under the paid search approach, with the search engines compounding this by placing considerable emphasis on landing page quality, insisting on the affiliate publisher adding value rather than simply re-routing traffic in an ‘arbitrage’ style approach. Equally, natural / organic search is a challenge of no small proportions. The search engines are again forcing affiliate publisher to add value to the consumer. Whilst it is possible to obtain strong natural search rankings for an affiliate site, anyone with any experience of the industry will confirm that this requires a great deal of focus and hard work.

Whichever approach you take — paid or natural search — there is now an imperative to add value. One of the best ways in which to achieve this is to provide useful, informative content that people actually want to read. But this doesn’t even guarantee a sale. Relevance of adverts and affiliate links placed on the site also plays a large part. There’s no point in placing adverts for knitting needles all over a website about the latest music! A site needs to have adverts and links that are going to appeal to its audience. Obvious? You’d be surprised how many sites fall foul of this rule. Get it right, however, and affiliate marketing can be a gold mine for both affiliates and merchants alike.

So, how about some proof? Affiliate marketing is well known to generate a great deal of business. As a merchant, it is a way of getting your brand out in the open without any significant risks. Businesses are only paying for traffic when sales are actually made on a cost per acquisition (CPA) basis. If any high street shop was guaranteed of this kind of directed marketing on an offline basis they would jump at the chance!

With a lack of online expertise and with publishers signing up to their programmes in volume, many early adopter merchants found themselves unable to manage their programmes effectively. Enter the affiliate network. A number of networks have evolved, assisting both merchants and publishers in optimising their affiliate programmes and associated campaigns. Affiliate network quality varies wildly and in recent years, a number of specialist affiliate management firms have emerged, providing a value-added layer to the networks and merchants alike, filling the gaps and fine tuning campaigns.

Fine for merchants but what does all of this deliver for the affiliate?

Reports over the past years from the Electronic Commerce showed that sales generated through affiliate programs in 2006 stood at a staggering £2.16 billion; and these were figures for the UK alone. Estimates for the same year in another report by the research team at MarketingSherpa estimated that the worldwide earnings through product sales and commissions would equate to $6.5 billion from a variety of sources. This latter figure is based around earnings and not sales revenues which must surely help put things in perspective. As with any industry, there are a small number of high earning affiliates (many earning 7 figure annual incomes), a mid tier earning a healthy living and a very long tail of thousands of affiliates earning anything from the costs of an annual holiday down to beer money.

With ever more people shopping online and with sites now so easy (and cheap!) to create and host, expect to see a continued stream of new affiliate publishers entering the market. Further, the increased use of blogging and social networking sites has provided internet marketers with a whole new channel to explore. Some of these will thrive and some will not. We’ll explore some of the key differences between the two in other articles.

Ultimately, no matter what your area of interest, there is almost certainly going to be a set of relevant affiliate programmes to promote. The most active sectors reflect the current distribution of internet traffic: namely adult, gambling and retail. However, these areas are highly competitive and for a new affiliate will prove to be tough to monetise — at least at the outset. That said, according to the Internet Statistics Compendium report produced by e-Consulting in 2007 the finance, mobile phone and travel sectors are expected to see a dramatic growth over the coming years. These are closely followed by internet related services, especially broadband, and online gaming.

Whatever your sector, if you are thinking of branching out into the world of affiliate marketing then now is your chance. We’ll explore some of the key areas to consider in further detail in other articles here at lammo.net

You’ll be affiliate marketing before you know it!

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