How Top Brands Ensure Affiliate Revenue is Incremental

Affiliate Summit East 2013August 19, 2013 | Philadelphia, PA

Robert Glazer, Acceleration PartnersWesley Brandi, Ipensatori

David Naffziger, Brand Verity

Where Affiliate Programs Have Been

1. Management: Whoever was available in-house & network based management. <2 years.

2. Metrics & Payout: “Revenue” and number of affiliates. More volume equals more $ and >%

3. Affiliates: 95% loyalty/toolbar and coupon sites

4. Networks: Multiple, often redundant networks

5. Transparency: Little to none, no referring url

First Generation Affiliate Programs

The result is a expensive retention program masquerading as a new customer acquisition channel.

And Where Affiliate Programs are Going

1. Management: Experienced in-house managers or specialized third party firms partnering with in-house

2. Metrics & Payout: Incrementality; new customer acquisition & conversion rate. Pay for quality.

3. Affiliates: Bloggers, platform tools, shopping sites, more relevant content focused sites

4. Networks: Fewer networks, big not necessarily better

5. Transparency: Knowing who your affiliates are and how they are promoting

Second Generation Affiliate Programs

The result is a smaller new customer acquisition program organized in business development

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How Affiliate Program Economics Often Work

• Acme Corp has $100M in annual online revenue and an “unhealthy” $15M affiliate program. They pay a 10% commission to affiliates plus 3% of affiliate revenue in fees to the network, totaling $1.95M or 13% of revenue.

• However, 75% of their affiliate revenue is non-incremental, from coupon sites and other low-value sources targeting existing customers.

• Acme is actually paying $1.95M for $3.75M in incremental revenue or 52% of sales, not 13%. Almost $1.47M in costs are being paid out unnecessarily.

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Cost Center or Revenue Generator?

• 80% of affiliate revenue across the industry is from coupon, incentive, and other low-quality sites.

• Many of these affiliates convert at 20% or more,10X+ times a normal site average. These numbers are achieved through targeting customers already committed to buying.

• This results in little incremental affiliate revenue to many retailers. However, there are real and significant costs - commissions, network fees, management fees, etc.

Total Company Revenue:

$2MSEO: $1M

Affiliates: $1M

PPC:$1M

Email / CRM: $1M

Display & Re-Targeting :

$1M

Social Media: $1M

When 1+1+1+1+1+1 = 2

Everyone is taking credit for the same sale, each channel acts like the others do not exist

Email PPC

Affiliates

Organic Search

Display & Retargeting

Social

* Incremental Affiliate Sales

See What Analytics Can Show You

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“Affiliate Revenue” is a Misrepresented Metric

• It does not describe revenue solely from affiliates – it counts revenue where an affiliate was involved in the transaction

• Healthy programs try to attribute affiliate revenue appropriately

• Unhealthy programs count all revenue touched by affiliates, distorting overall marketing picture

Organic search Paid search Affiliate Transaction

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Demand Generation vs. Interception

Scenario 1: Customer Buying

Commodity Product

Customer wants a toaster, they research and look for the best deal for the chosen model.

Loyalty/coupon sites can add value by affecting merchant selection.

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Demand Generation vs. Interception

Scenario 2: Customer Buying

Differentiated Product

Customer goes directly to the chosen merchant with purchase intent. They are either intercepted along the way or hop out of the cart before purchasing to look for an offer that may or may not exist.

For many branded, custom & differentiated products, coupon/loyalty sites likely do not play a role in the purchase decision.

• Forced Clicks• Cookie Stuffing

• Incorrect Offers• SEO or PPO Trademark

• Toolbars • Spyware

Multi channel attribution allows for performance pay outs based on the value of each channel in the customer funnel.  

Valuing The Entire Funnel

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Sale! ($100)

Closing $25

Engaging$25

Introducing$50

Introducers: Content SitesBloggersShopping Sites

Engagers: Social Media

Closers: ToolbarsCoupon sitesCRM

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How would it work for a baseball team that only valued a closer?

Overvaluing Last In Is Expensive & Misleading

Starting Pitchers• Content Sites• Bloggers• Shopping Sites

Bullpen• Social Media

Closers• Toolbars• Coupon Sites• CRM

$6,000,000Last Place NL East

No Playoffs

Heath Bell

$11,000,0003rd place NL East

No Playoffs

Jonathan Papelbon

$1,650,000Most Wins

Regular Season

Tyler Clippard

$1,570,000World Series Champions

Sergio Romo

Vs.

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• Trademark SEO• Forced Clicks • Trademark Poachers • Trademark + Coupon PPC Bidders • Trademark PPC Hijackers • Loyalty and Affinity Sites

Understanding Low-Value Affiliate Tactics

Affiliates have developed a number of ways to go after a merchant’s existing traffic through demand interception.

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Trademark SEO

80% – 90% of users come to coupon sites through a landing page that is optimized with a merchants trademark + coupon keywords.

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Coupon Sites Using Forced Clicks

Trademark optimized landing pages use forced clicking tactics to set the affiliate cookie (often for inaccurate offers), forcing a commission.

Click to Reveal Code

Not a Real Offer

Six Month Expired Offer

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Trademark Poachers

Affiliates incorporate the company trademark into their primary URL to target customers who know the brand or are in the cart

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Trademark + Bidders

Affiliates bid on the trademark plus the word “coupon(s),” targeting existing users and also driving up the company’s branded PPC costs

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This PPC ad is not from Blurb, it is from an affiliate. It is impossible to detect without advanced software that most merchants don’t use.

This turns a high ROI brand PPC campaign into an expensive and unnecessary affiliate payout.

Trademark Hijackers

Affiliates pretend they are the company in PPC, “laundering” the original source of traffic through another thin website or blog

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This box popped up unsolicited after typing www.homedepot.com in the browser with the Upromise toolbar installed. Clicking it gives Upromise affiliate credit even though we came directly to this site.

Over 14M people have used the Upromise toolbar shown above, and millions more use the Ebates and other toolbars.

Loyalty & Affinity Sites

Large loyalty affiliates offer toolbars that, once installed, override direct visits and some search results, loading an affiliate link instead.

Methods to Identify Low Value or Fraud

Research new affiliates and their promotional methods

Look for sudden spikes in traffic, transactions or conversions (8%+ is suspicious for non coupon sites)

If network displays referring url, check this frequently with new or high volume affiliates

Compare first referrer to last referrer cookie

Beware of conversions that come through proxies or thin sites with very high Alexa rankings (no human traffic)

Use resources like BrandVerity, AffiliateFairPlay, RiskIQ, and Fraudlogix

Who is a Value Added Affiliate?

Ability to affect a purchasing decision or vendor, not after the decision has been made

Ability to develop brand loyalty in a new audience

They have the traffic or mindshare that you want

75%+ new customer referrals

2%-3%  conversion rate

Promotion is often at the product level

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Tiny Prints Example

• Individual order based attribution

• Lowered commission for partners with high channel overlap and cart based clicks

• Overwrite protection for content affiliates from coupon affiliates

• Increased commission for affiliates who drive top of funnel and brand awareness

• No toolbars

= High performance and loyalty from quality affiliates

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Best Practices: Finding High Value Affiliates

• Who Likes You Already • Customers, partners, social media, and reviewers• Tools: Radian 6, google analytics, CRM

• Who Should Like You• Has the traffic you want, potential partners, complimentary

products/services• Tools: SEM Rush, Alexa

• Reaching the Affiliate Community• PR announcements, conferences, and competitive research • Tools: syntryx, abestweb, affiliate summit

Run your affiliate program like business development

• Force themselves into potential transactions between a buyer and a merchant

• If the buyer happens to make a purchase within a certain period of time, rogue affiliate is paid an unearned commission

• Merchants lose

• Honest affiliates ALWAYS lose

• Buyers don’t know it, but they lose too

Rogue Affiliates

• Three techniques are covered fairly regularly: Cookie-stuffing, Adware & Typosquatting

• Cookie-stuffing: trend on the rise is to defraud merchants through advertising networks. Google ads has a flaw here that allows for third party pixel tracking. Very large adult advertising network has the same problem

• Adware: use PPV to force a cookie onto the machine. It’s easy, and cheap too

• Typosquatting: launder typosquatter traffic before sending it to the merchant

• Technique seldom mentioned: attacking other affiliates in an effort to hijack their traffic and steal their leads

Techniques

• When was the last time you shared intricate details on a fraudster that burnt you?

Collaboration

Collaboration

Example 1 – PPV displays twizio.info, cookie-stuffs an Amazon Associate cookie then tries to collect email

Example 2 – ad on merchant site stuffs cookie from merchant’s affiliate program. No click required!

• Your affiliate program is in an arms race against unscrupulous, sophisticated and motivated individuals

• Unsure of where you stand: query.ipensatori.com

Robert Glazer | Founderrglazer@acceleration-partners.com www.acceleration-partners.com@affiliatemgr

Wesley Brandi | Founder wesleyb@ipensatori.com www.ipensatori.com

David Naffziger | CEO davenaff@brandverity.com www.brandverity.com@BrandVerity

Questions & Contact Info