Affiliate Marketing

Affiliate Marketing- The Tip of an Iceberg


Amazon are the pioneers of Affiliate marketing, and have more than 500K affiliates. Expedia.com and Travelocity spend very little time in acquiring traffic through Google and other expensive online media, they too have a good network of affiliates. In India, the affiliate boom is still to come. Few of us realise that it is the best eCommerce Marketing tool that one can invest in.

Simply put, in affiliate marketing ecosystem there is a merchant along with an affiliate. Affiliate runs program to send traffic to the merchant and if that traffic converts, merchant compensates the affiliate by paying him an agreed sum. Since in this equation merchant confirms a cost, the net outcome is high and positive ROI. Better still, you don’t have to consider affiliate as a marketing arm, but a sales channel. This channel needs to be nurtured with equal enthusiasm and zest as the website.

Affiliate marketing requires a huge investment in technology and manpower. You may decide to develop a program internally, in which case you will have to go in for ready solutions available in the marketplace. This also means you need to have a dedicated technology maintainence team and also an affiliate manager, who is very critical to the success (and on whom we will touch upon later). However, you might want to outsource the whole program and enroll in an affiliate channel, like commission junction or linkshare. In India, this is provided by Deal Group Media or DGM. Here the situation is almost like a Google Marketplace, where the affiliate will enroll in program of only that merchant who will bring profit to affiliates business. None the less effort and dedication is required in both the approaches and the sooner you start the better will it be for the business.

You might ask So why do we need affiliate marketing, my SEO ranking is high, my Google SEM is ROI positive and I’m running a good email marketing program. So why should I invest in technology and infrastructure? The answer lies in the plethora of genre that exists out there.

1. SEO Optimised domains and Pay Per Click Websites
2. Review sites
3. Shopping comparison websites
4. Niche content websites (parenting golfing etc)
5. Personal Websites and Blogs
6. Loyalty websites
7. Emailer websites
8. Unutilised domains

As an e-marketer it will be very difficult to focus exclusively on these websites, run campaign and optimise them. Advertising network do that, but most of them are blind, hence you will never know about the performance. Affiliate marketing enables management of these websites, where the agreement is to pay on performance. Hence the optmisation and making money is not the marketer onus, it is the prerogative of the affiliate website owner. Affiliate marketing ideally can empower every single user on the website to start earning, and the initial cost can be as low as Rs.5000 (registering fees for a domain). One of our affiliate partners, Shoogloo, which is
started by LD Sharma has 500 domains.

The affiliate program manager is key to such program. He is more like a relationship manager and looks at different ways and means to increase the traffic and therefore sales from these channels. One of the most common problems in affiliate marketing is the wayward means to credit sales wich could be through any of these means

1. Forced click
2. False advertisement
3. URL Masking (where you can see the changing url, with the click
4. Adware
5. Mature and Adult content
6. EMail Spam
7. Brand and Trademark bidding

The affiliate program manager needs to ensure that the liberties extended to the affiliate is not misused.

Technology is the backbone of a good affiliate program. In short the technology should ensure

1. Ad serving
2. Tracking and Conversion rule: whether it is last click first click or equal distribution of profit across all the clicks.
3. Sales tracking
4. Integration with Finance, so that the sales get validated and payment is ensured to the affiliate
5. Affiliate login, so that he can see the amount that is credited to him. This is the most important aspect of the infrastructure, as there isn’t a motivator like money.

Whatever solution that you may decide on, please stick to one platform, as you don’t want to pay the same affiliate multiple times over for the same conversion.

Affiliate marketing has to go a long way in India. As there are very few eCommerce players, dominated by Travel. Hence most of the affiliate are structured around this line of business. Also, we haven’t seen much genre coming up. It is the same staple English content, news and Social Networking sites. The development of vernacular sites, special content sites, blogs and reviews, will definitely propel this fledgling industry.

Affiliate Marketing is truly the “Performance Marketing”.

Cheers!


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Brand, Others

Marketing and the Art of Motorcycle Maintainence

As I was driving back home today and cruising through the chain of thoughts, I was reminded of a few regular comments in my organisation, which my marketing folks will not find irregular- Where are the numbers? Marketing can never get their numbers right? Marketing never backs up data. etc etc.

The war between between sales and marketing lingers on; numbers and leads and conversion. These are eternal debates and has been a discussion point for many research papers and conferences.

However the truth is and the fact remains that at the end of the day and the quarter and the year end, sales is the only factor which has a direct impact on the organisation’s bottomline and it is these numbers that builds CFO’s confidence (and therefore CEOs). Marketing on the other hand, and till this point this would be still contesting and justifying, which gets me thinking- Is marketing an exact science?

Let me elaborate a little on what I’m talking about. I happen to attend a session on ROI marketing organised by ZenithOptimedia, where panel included Mr.Santosh Desai (Future Brands), Mr.Sachin Bhatia (MakeMyTrip.com) and a gentleman from new Walmart team. Mr Desai’s thought were very provoking, he said- Numbers are handled very loosely and sometimes we measure for the sake of measuring. Remember, when we made graphs for science lab test. The line in the graph would come first and then would the figures. Results and targets would come first, then the numbers. All of us would have encountered this situation.

Now, consider marketing, where the greatest tool/invention is the concept of “Brand”. Ironically, it never features in the balance sheet. But it is a brand which drives the consumer mindspace, preferences to use the product and therefore sales and market. Organisations spend huge time and money to build a strong brand. An ideal stage would be something like Google, where one doesn’t have to spend any money, but before one gets to this situation, one has to do a lot of board meetings and meet quarter end sales pressures.

And if I were to ask, how big the brand should be, what is the measure of a big brand and how can it drive business goals, to what extent does it effect the bottomline and will shareholders buy it? Well, it is very debatable, but surely, it is not as easy as to have a future projection for sales. It is like defining the “Quality”, which might empirically precedes any intellectual constructions. Deriving formula for numbers and projection is easy, but creating a brand isn’t. Sales is easy, Marketing isn’t. Thats why there are few marketing guys and very few of them become CEOs 🙂

Let me elaborate a little more and dwell on the realm of philosophy. World’s fastest growing company, Google didn’t know what it would become when it launched “Adwords”. Best of the discoveries were not planned. It happened with a mixture of conscious effort and magic (call it hands of god, stoke of luck, belief etc). Robert R Prisig’s book “Lila” (he also wrote “Zen and the art of motorcycle maintainence”) has a very insightful story. P wanted to reach Newfoundland, and prepared well for it. He trained himself as a sailor, gained proficiency in reading stars and maps. And so one day, he started on his journey to Newfoundland. There was a terrible storm and he lost his map, but then his inspiration kept him going. He used his instincts to guide him towards coast. He saw an island and he remembered that newfoundland was 10 kms to the right. Though he could not measure 10 km, he went further and saw some people. In order to ensure that his calculation was right, he asked these people how far was newfoundland. To his surprise he found that he was in Newfoundland!

In the process to get the right numbers, right target, right stretch target we seem to suppress our instincts and loose the feel for numbers (read business) and can’t look beyond. If we can’t differentiate between business goals and targets, the numbers become useless to reach goals. We loose the bigger picture. We measure for the sake of measuring and we make numbers to defend our options and resort to precision and more precision. The qualification of success would be how precise we are. And so would be the bonuses!

Marketing is philanthropic in its construction and all about hopes, dreams and aspiration and philosophy, which may not follow a polynomial regression equation and extends beyond the number business. Marketing is an inexact science and a creative profession. It is laidback, but performs, we should try to force fit its statistic correlation with bottomline.

Or shall we? I would love to hear from you 🙂
Cheers!!


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Advertising Industry, Digital Marketing, Internet Industry

Accenture Global Digital Advertising Study 2007

My friend Anuj Anand shared a very interesting report with me last week and as usual i was about to junk it ;). A better sense prevailed and I didn’t regret a bit going through the report.

Though it is called “Accenture Global Digital Advertising Study 2007″and you might think that it pertains only to US (no wonder their local baseball competition is also called World Cup), it does have something for all of us. Coming back to the report, the key takeaways were…

– 79 percent of our survey participants agree that advertising will become more performance-based, as the industry moves towards precise measurement of results, rapidly delivered. This will impose a performance discipline on an industry that has rarely felt this kind of pressure.

– 87 percent agree that analytics will become more accurate and more critical to the business. This shift will drive a decline in the use of traditional success measures — total audience per advertisement — but will enable advertisers to gain increased return on investment through more accurate targeting of audiences.

– 97 percent agree that advertising relationships with customers will become more interactive, and the other 3 percent say they don’t know, meaning that not a single respondent disagrees. As a result of this greater interactivity, capabilities such as clickthrough buttons on TV will enable a two-way dialogue with the consumer all the way to purchase. These capabilities will also create a more meaningful feedback loop on advertising effectiveness.

– 43 percent of the respondents believe that digital media will become the primary form of programming and advertising content within the next five years, and a further 33 percent say this will happen in between seven and 10 years. The impact of this transition may be
accelerated by the typical pattern that early adaptors tend to be from higher income demographic groups that are more attractive to advertisers. Traditional advertisers are largely unprepared for the wave of digitally driven change about to engulf them.

– Only 29 percent of executives believe the industry is technologically prepared for the resulting changes in performance measurement. The proportions are even lower in terms of customer analytics (25 percent), targeted advertising (21 percent) and customer interactivity (13 percent).

– Largely as a result, the highest proportion of respondents (43 percent) believe advertising agencies have the most to lose in the transition to digital advertising, followed by broadcasters with 33 percent.

– Correspondingly, 46 percent believe that online search companies have the most to gain, followed by digital advertising specialists with 19 percent.

– 77 percent agree that advertising will be viewed in an integrated way on three screens — television, computer and wireless handset.

Indian scenario can’t be more rosier. Digital agency Zenith Optimedia expects Internet ad spend to double, from 210 crores 2006 to 450 crores in 2007 and can potentially rise to 2,250 crores mark in 2009 (a 10 times increase). As a share of advertising pie, the share will rise to 6.8%, which was 1% last year. There is another interesting report on digital industry.

It just certifies a fact that we already know, that the advertising industry is facing a radical transformation — in terms of its technological and cultural impact. We need to focus strongly on the use technology to offer advanced customer interactivity. Targeting and analytics are gaining real competitive differentiation.

Therefore the implications for us are…

– If you are a new media company — build, partner or buy systems (sales, reporting, delivery) to support products across three screens and to deliver targeted advertising in privacy-compliant ways.
– If you are a marketer — escalate your integrated marketing and advertising initiatives across three screens, keeping a critical eye on performance metrics.
– If you are a technology company — focus on developing front-end and back-end systems specific to each medium’s unique needs.

If you can’t locate PDF on the net, do write to me and I’ll send you a copy 🙂

Cheers!!

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Display Advertising, Email Marketing, Media Buying, Search Engines

CPM/CPC or CPA?

The other day I had a tough time negotiating with one of the big online publisher. “We sell only on CPMs”, the publisher said and were ready to discount the price by 20%. CPM is the usual discussion starter for any media negotiations and vary from publisher to publisher (at times can be as high as Rs.500). CPM stands for Cost Per Million, but in reality is only cost per thousand (CPT). Let me illustrate with an example

If you buy 1 Million impressions on Yahoo at Rs.350 CPM, means that at the end of the campaign you will have to pay Yahoo
1,000,000
_____________x350= 350,000 Rs.
1000

The other way to handle the negotiation is to get a fixed spot in prime real estate, at a fixed cost. e.g if you block the DHTML position (LHS position below the header). You might have to pay Rs.200,000 and would generate say 3 Mln impressions. See the following example to access if effective CPM might be a good idea to take a fixed position.

200,000
___________x1000= Rs.67
3,000,000

Thus indicating that given monies the same, Rediff is a better buy.

Most of the publishers keep revising the rates, depending upon the popularity of that position. internationally, it the third party auditing sources like comScore or Neilson net rating that corroborates this, however in India, it might be decided by the availability of the inventory (which brings us to the second most used term in discussion “Our inventory is sold out” ;). How many come to the website, what is the rightmatrix for measurement, time spent/Pageview, audience profile is a different discussion and Pandora’s box. Check this article.

CPM is the starting point of any discussion and can actually multiply into lot of mathematics. The first such matrics is GRP, which brand advertisers will find most relevant. You might recall that (like television)

GRPs= Reach x Frequency

comScore has a special tool in its module that will help you to access the reach and frequency of your campaign. I’m not familiar with Neilson Netrating (as they don’t have their services in India), but I’m sure they will also have this standard tool. This matrix will help you to synergise online campaigns with the other mass media component. However, the online world has a different brand dynamics. You might note, the first trigger of an offline campaign results in search for the keyword/website. Please note that this is an inexact science and as of now has no valid data point to corroborate assumption :).

There are other bunch of guys who swear by SEM. It is only by trial and error that you will find the solution to this misery and find that optimum Offline and Online mix.

CPM also brings us to the next big currency- CPC. You might get this standard reply from a big publisher- “We don’t sell on CPCs ;)” or “We can lower the CPM”. All they mean is that they don’t have the right technology to support CPCs. Let me illustrate CPC by example. If you buy 1 Million impression on Yahoo with Rs. 3.5 Lacs as the outlay and a fixed spot on Rediff Home page for Rs.3 lacs, how would you measure the deal.

One way to do this is to use the Media Planner reach and frequency through comScore and come about a GRP number (which a brand guy should).

However, if you happen to be a marketing manager of a website, where traffic is paramount and you need visits to increase the bottomline (with your bottomline at stake), you will consider clicks. Say Yahoo creative has a an average click through rate of 0.6% and Rediff has 0.3%. The number of clicks that you will get from respective Publishers is as under…

Yahoo….. 1,000,000 x 0.6%= 6,000
Rediff…. 3,000,000 x 0.3%= 9,000

CPCs will be as under

Yahoo…. 3,50,000/6,000= Rs.58
Rediff… 3,00,000/9,000= Rs.33

Indicating that Rediff real estate works better and is more cost effective to drive the click traffic (maybe Rediff should sponsor my blog). Please note that the numbers are only indicative and for the sake of discussion.

As a performance advertiser, you would want a real estate that drives traffic and converts, not necessary a property that gets you eyeballs. CPC when used will remove this doubt from a planners mind (a smart marketer will further better this by using a better performing creative and up the CTRs). The benchmark CPCs (and effective CPCs) should be in the range of Rs.3 and upwards depending on the category. If you are jobs, it is easy and becomes tough for a luxury product/service.

In the performance marketing space the “IN THING” is the CPA (cost per acquisition), which a further distilled version on CPCs and effective CPMs. The most expected answer from a Publisher will be- “What is CPA?” and “There is a policy against CPAs”. As a smart buyer you will chance upon and start the CPC discussion with the publisher again.

Truth is, CPA deals are a potential source of loss for a publisher, unless he is in a dire need to sell his inventory. By far, Google and Other Search engines will give the Best CPAs, followed by Affiliates (if your price and conversion rates are attrctive). Another fact of the matter is that a publisher would need huge investment to CPAs, MSN has Atlas, Komli has it own technology and so does Yahoo (but they still have to start monetising it). Let me illustrate it with one last example. Suppose Yahoo campaign converts at 0.5% and so does Rediff. The cost per conversion will look as under

Yahoo Total conversions= 6,000 clicks x 0.5%= 30
Total Cost= Rs.3,50,000/30= Rs.11,667

Rediff Total conversions= 9,000 clicks x 0.5%= 45
Total Cost= Rs.3,00,000/30= Rs.6,667

Indicating that Rediff drives much cheaper conversions (Now Rediff should definitely sponsor this blog;). This however depends on a number of factors, but most importantly what a publisher must realise is that most of the conversions is brought about by Non-prime real estate or the remamant inventory. This opens their inventory to a completely new set of clientele and huge potential to monetise their inventory. Check out this mediapost article…

Please do note that the smarter you buy, the better you can justify the value and at the end of the day it your numbers and board meeting that matters!!


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