Why Affiliate Marketing remains the Backbone of Ecommerce?

© March Oyinki 2017

Affiliate Marketing is the most popular online advertising channel used by Publishers to distribute content through various affiliate partners who direct traffic to Advertisers websites for a commission. It is the highest revenue earner in the digital marketing space, over-taking Email Marketing. It has provided many small businesses and home office owners the opportunity to earn multiple streams of income just by owning a laptop computer and registering with a Merchant program.

In a survey released in February 2016 by Rakuten Affiliate Network on the perception and effectiveness of affiliate marketing programs, shows that nearly 90 percent of advertisers said that affiliate programs were important or very important to their overall marketing strategy, and majority of publishers also revealed that affiliate partnerships drove more than 20 percent of annual revenue. According to the report, affiliate marketing spend in the U.S. alone will increase by a rate of 10% in the next five years, accounting for over USD$6.8bn.

What is Affiliate Marketing?

In the beginning there was the world wide web, and electronic commerce was the driving force during the early 90's when the technological revolution now known as the World Wide Web evolved, and Information Technology companies at the time, upon the realization that there were opportunities in this new market, quickly rise to the occasion. Website owners started selling contents created by advertisers to millions of consumers across the globe, turning the Internet into a market place for ecommerce.

Advancements made in the area of search engine optimization (SEO) availed a whole new opportunity for rapid growth of the web as it is today. Affiliate marketing came to be when product owners or advertisers started registering with Publishers and offering a fee based on traffic directed to their websites through a process known as pay-per-click (PPC).

Affiliate marketing is defined by Wikipedia as a type of performance-based marketing in which a business rewards one or more affiliates for each visitor or customer brought by the affiliate's own marketing efforts. It is a marketing arrangement by which an online retailer pays commission to an external website for traffic or sales generated from its referrals.

How Does Affiliate Marketing Work?

Affiliate Marketing is a tripod relationship between three key players in the sector consisting mainly of the Advertiser, who is the product owner; Publisher as the Merchant; and the Consumer who are the end users. The product owner registers as Advertiser with the Publisher and offers a fee based on pay-per-click (PPC) to Publisher. The publisher then distribute these adverts in form of codes to its Affiliate channel websites either as banners, links or as content to be sent as email message.

Affiliate marketing programs use cookies to track transactions between the Publisher, Advertiser and Shopper. A cookie is a technology that works with web browsers to store information like user preferences, login or registration information and shopping cart contents. A cookie is what enables your online account or website remember your password and username, and displays pop-up banners that are closely related to your search criteria. The reason why such ads appear is that the browser has already stored your cookie.

In affiliate marketing, one task that cookies manage is to remember the link or ad the visitor to a website clicks on. Cookies can also store the date and time of the click, they can even store information about websites or content you like most. There are several types of cookies and their uses, and the kind of cookie used for affiliate marketing is the first-party cookie.

Every visitor to a publisher's website and clicks on an advertiser's link or banner advert are capture by the browser through the tracking cookie of the affiliate-marketing program using unique identifies provided by the advertiser, and records of each transaction and commission that is due. This data is stored within the link information called parameters, and can include several anonymous data used as attributes.
A link contains some of the identifiers used for proper tracking and auditing of the affiliate marketing process. These links which contain unique Identifiers or numbers are attached to the publisher’s website, advertiser and shoppers as attributes.

What are Identifiers?

Identifiers are a set of codes used by affiliate marketing channels to track activities of publisher’s websites. In affiliate marketing, there are three levels of players, the publisher, advertiser and shopper, with each having a unique identification number known as Identifiers, issued by affiliate marketing channels. The three Identifiers are the Publisher’s website Identification (PID), Advertiser’s identification (AID) and Shopper’s Identification (SID).

Publisher’s website Identification is the number used in identifying the publisher's website. A publisher may have multiple PIDs under one single account, and multiple websites will have multiple PIDs.

Advertiser’s identification is a number, which identifies a specific link and enables publisher to track creative performance as well as credit the publisher when they earn a commissionable transaction. Because each link has a unique AID, it also allows publishers to identify the appropriate advertiser.

Shopper’s Identification is the number that enables publisher to track where their referred actions originated from, thereby allowing them to identify and reward their unique shoppers, and whenever a visitor makes a purchase or completes a lead form; the SID keeps track of transactions and sales records of shoppers.

There are several Affiliate Network Marketing programs, which are capable of tracking and processing an enormous volume of actions and transactions. Commission Junction, Rakuten and One Network Direct are the top Publishers, and for marketing channels, Facebook, Twitter and LinkedIn are some of the leading names in the global arena, while the top marketing channels in Nigeria are Nairaland, Konga and Linda Ikeji.

Why Conversion Rate Drives Sales

The whole essence of affiliate marketing is the rate at which clicks by visitors convert to purchase. Text and banners with links created by Advertisers are aim at attracting visits to the websites by inserting attributes with unique Identifiers in selected top-rated online marketing channels. For a website to achieve a high conversion rate, the traffic to the site must be high.

Reports from marketing studies estimated the average ratio of conversion as 200 visits to one, meaning that for a website to convert a single paying customer, the visitors to the site must at least be up 200 in number, and that really does still does not guarantee sales. For a conversion of 1000 paying customers monthly, the average traffic will be at least 200,000 visitors. This gives an idea of the extent of marketing and advertising efforts required to achieve high conversion rate.

Providing Good Content is Key

Content is the king of Affiliate Marketing. How you coin your messages, and create visual contents matters a great deal to the success of online marketing campaign. In an article '205 Google Ranking Factors – Ultimate SEO Checklist for 2017' written by Debashre Cchanda, quoted Google engineer, Matt Cutts, as saying that, in Google algorithm, good content matters more.

Keeping an Eye on the Bottom Line

On the side of the Publisher, the main interest is sales, whereas earning as much commission as possible, is where the Advertiser's interest lies. For both publisher and advertiser, the bottom line is profit, and in the Affiliate Marketing business, the customer is king. If there is no sales, there will be no commission, and the process of ensuring proper tracking of sales, and payment of appropriate commissions is of great importance to both Publishers and Advertisers. Rating the effectiveness of Affiliate marketing programs and how efficient their tracking and payment processes are, is actually based on this these and other considerations.

Revenue earnings remain a major driver for the affiliate marketing business, and market watchers and advertisers are quick in going the direction of current trends, and are ready to pitch their brands where the money lies. The Rakuten Affiliate Network report, which shows that Affiliate Marketing will continue to record the highest revenue earnings globally, accounting for $6.8 billion over the next five years, has made it clear that advertisers and marketers will continue to make Affiliate Marketing programs their first choice online marketing channel.

To give credence to the position, the survey also established the fact that marketers use affiliate programs at all stages of the customer journey: 83 percent targeted consumers during the discovery and awareness phase, 79 percent during conversion or purchase and 79 percent to create ongoing customer engagement.

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