Affiliate Programs: Moneymakers or Brandbusters?

Search engine affiliate programs offer the promise of greatly increasing your online exposure and sales, but be careful: They can also displace your firm in search engine results and dilute your brand image.

A special report from the Search Engine Strategies 2003 Conference, December 9-11, Chicago, Illinois.

Are pay-for-performance programs, aka “affiliates”, a comprehensive alternative to managed services?

That core question infused a panel discussion on working with affiliates at Search Engine Strategies most recently in Chicago, reflecting an industry wide debate on whether brand owners are better off managing their own search engine marketing, in particular pay-per-click advertising, or turning all traffic generation over to affiliate marketers.

Voiced by Lisa Riolo, vice president of client development at Commission Junction, the question accompanied another on many brand holder’s minds, “Who Kidnapped My Keywords?” aptly the title of her presentation. Speaking with Riolo on the panel were Jamie Crouthamel, president and CEO of Performics, and Todd Friesen, owner and founder of Oilman Promotions, and Gary Stein of Jupiter Research.

In the space between those two questions lie all the reasons to work with affiliates… and all the reasons to think twice.

But first, some definitions for those new to this affiliate arena.

Affiliate marketers, or affiliates for short, send traffic to the web sites they promote, and are compensated only when they do, hence “pay-for-performance.” Affiliates engage a number of tactics, listed by Lisa Riolo as email campaigns, software applications, website promotions, and paid placement in search engines. Note: insiders use the term “publishers” interchangeably with “affiliates.”

Because affiliate pay is based on traffic to the sites they promote, they are interested only in placements that pay off for them. They keep a keen eye on costs, too, since they pay their own per click charges. The squeeze zone between affiliates’ costs per click and their cut from the sites they promote is where publishers have honed their skill at finding the best performance placement. Indeed, they are highly motivated to do so.

Affiliates refer to familiar search marketing as “managed services” meaning the tactics brand owners engage either themselves or via out sourcing, rather than laving them up to affiliates. The implication is that brand owners using affiliates have little more to do in advertising their products and services than collect their share of the revenue their partners generate, as opposed to managing their own search marketing programs, with all the effort that entails.

So what are the good news/bad news views on using affiliates? According to the panel, affiliates can and often will:

  • Increase the volume of visitors to your site, adding potential for increased conversions. That means sales, with next to no effort on your part.
  • Increase brand awareness with greater visibility in search engines, both organic and paid listings.
  • Find those elusive price points of profitability on popular keywords in paid listings.

On the other hand they are just as likely to:

  • Confuse customers by altering the experience of finding your site.
  • Up the ante for keywords you must bid on, including your own brand name.
  • Jump ship to your competition if your program isn’t lucrative enough.

Todd Friesen was blunt on the topic of affiliate loyalty. “We’re out to make the most money we can, anyway we can,” he said. Still, the affiliate business model is such that what’s good for the publisher is good for the advertiser, a point made several times by Commission Junction’s Riolo. “The pay-for-performance model demands efficiency; they wouldn’t be where they are if they weren’t making money.”

“There is no complete answer for any one advertiser.” said Jamie Crouthamel, “It’s a complex set of trade offs between getting robust search results versus controlling your brand and customer experience.”

“It’s all about negotiation,” said Jupiter Research’s Gary Stein, adding that compound competition in keyword advertising is difficult for a brand. “You’re best off with a frictionless market. The gap between users’ desires and fulfillment closes to an extreme degree when affiliates promote your brand.”

“If you shut off affiliate advertising, your competitors may take over their spots,” Lisa Riolo warned. “It is easier to manage your affiliates than your competition. She recommended a “both/and solution”. “Build complementary efforts,” Riolo. “Protect you interests. Get affiliates in line with what you want to do. Ultimately your have to have a strategy. What are you trying to accomplish?”

Be aware of the risks of working with affiliates and the risks of not doing so.

Tips for working with affiliates

1. Many brand owners restrict bidding on trademark terms by affiliates. Using a number of on screen examples to illustrate, Jamie Crouthamel defined three levels of keyword control:

  • Open, in which either brand owner or affiliate chooses the best words.
  • Closed, with bans on advertising on trademark terms.
  • Controlled, some bans and some freedom of action.

2. Set your affiliates to work on your optimal keywords, those that have the greatest potential for profit and may also be the most competitive. “They will go to town with them to figure out what’s needed to get you positive ROI,” said Riolo. “The bottom line is they wouldn’t be spending money if they weren’t making money. Let them identify the best price point at which you both make money.”

3. Set clear guidelines. “The more controls you have in place,” said Friesen, “the more we’ll be able to work with in your guidelines and make money for everyone.”

4. “Know your brand,” said Stein. “What is the quality of your brand in the marketplace? Price versus assets? What do you own?”

5. Keep your affiliates satisfied. Build good relationships. “Like people,” observed Stein. “You have your really good friends and then the people you would just call up to ask for a ride somewhere.”

The bottom line: Because of their business model, affiliates will know for sure what’s converting, said Riolo, so they can give you really good information. You can take steps to create loyalty but they will go where they can make the most money.

“At the end of the day what matters is the check going into the bank,” added Friesen.

Anne Kennedy is the Managing partner of Beyond Ink.

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