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Affiliate Marketing – Part 1: A Return on Marketing

According to Hitwise, the recession is driving ecommerce growth. As consumer budgets tighten, shoppers are turning online to shop, compare, and save.

In fact, Internet Retailer reported that last year alone, while brick & mortar retail grew a mere 3.8%, online retail grew a whopping 21.8%. And according to Forrester Research ecommerce will grow an additional 17% in 2008.

With growth, however, comes increased competition, so it’s going to that much more important to step up your online marketing campaigns and target them better. One of the ways that an etailer can do both of these without breaking the marketing/advertising budget is through affiliate marketing.

Basically, affiliate marketing is an online advertising medium that doesn’t cost you until an ad converts into a sale. Through affiliate marketing, you deploy your ads
through a network of affiliates. Affiliates in that network who are
interested in promoting your product place those ads on their site.  Then if a user clicks on an ad and subsequently makes a purchase, the
affiliate gets a commission on that sale. If the user doesn’t purchase
anything, there is no cost to the advertiser.

It’s like recruiting an army of freelance salesman who work on a commission-only basis. Consequently, it comes with relatively less risk than impression-based or cost-per-click advertising campaigns.

A Brief History of Affiliate Marketing

Now, even though the online medium is over a decade old (and the technology has been evolving for just as long), affiliate marketing has always been the red-headed stepchild of online marketing. But now that even Google has launched an affiliate network (GAN), there’s just no way to ignore affiliate marketing as a legitimate and credible online marketing channel.

Basically, when Google acquired DoubleClick, they also got the company’s affiliate ad network program called Performics. Only recently, however, has Google added the Performics affiliate network to its list of namesakes, giving both the network and the affiliate marketing medium as a whole an entirely new level of credibility.

You see, before GAN, the only major brand name affiliate network was Amazon Associates. None of Amazon’s brand name credibility trickled down to the rest of affiliate marketing, however, because Amazon was the only merchant advertising on the network.

Not only is GAN open to any merchant/advertiser, but Google has a name that’s synonymous with online advertising/marketing, performance, and analytics.
Of course, even though GAN carries the Google name, it’s still the same Performics affiliate network which had many competitors.

In a word, GAN isn’t the only kid on the blog, and for good reason: just as different conventional ad networks are better suited for different brands and their product offerings, there are different affiliate networks for different business models.

When pursuing affiliate marketing as an online sales strategy, then, you have to consider:

  • How the medium can increase your revenues and add value to your business;
  • What your business model and resources; and
  • What kind of support you’re going to need from an affiliate network to make your affiliate marketing program work.

I’ll be elaborating on these three points over the next few posts, so stay tuned to find out how you can drive sales to your ecommerce portal through an advertising medium with a much more performance based cost structure than cost-per-click or impression-based advertising.