Greg Shepard

The Affiliate Marketing Channel Is Simply The Best Online Marketing Strategy

More than ever, Affiliate Marketing is being driven by the power of flexibility. It has long been the most flexible online marketing strategy available. You see this realization more and more as search marketing companies start affiliate networks and affiliate networks start utilizing cost-plus-performance hybrid campaigns. It has become obvious that there are two giant industries competing for merchants’ dollars and the space on referring sites. Search, both paid & organic, has dominated the market in the past. However, as the numbers of merchants grow, the potential revenue to be earned from those merchants also grows, thus providing earning potential for all. Search only offers one effective page and maybe five or ten worthwhile spots on that page for each keyword or keyword phrase, whereas, affiliate marketing opens the door to an enormous range of complementary sites that can be featured. This has created a battlefield of competition for the merchant. The conflict being to bid for the very limited space that every one of the merchants’ competitors contend for, and to do it as furiously.

Last year I attended OMMA show in San Francisco, the main topic of which was that an estimated $250 billion in advertising money is headed to the online space, a tsunami of huge proportions, with search engines holding nowhere near the inventory to satisfy demand. The speaker then went on to say that the entire online community of internet marketers has neither the technology, nor the inventory to handle such demands for traffic. I sat there in silence thinking, “Wow! The affiliate space can handle as much as can be demanded.” There are 3 reasons why.

– Prices for search engine traffic are ever increasing, due to supply and demand and inexperienced PPC bidders, who bid far beyond what will bring an ROI. These factors raise the need for sites to monetize in order to cut the cost of advertising. This in-turn increases the number of available sites for affiliate driven inventory.
– With the introduction of the hybrid campaign, affiliate marketing has become much more cost effective than standard CPM, CPC, or flat priced advertising. Furthermore, both parties have a vested interest in the success of the campaign.
– There are only so many keywords and searches that can send traffic to a merchant site and they must be targeted directly to receive high conversion and thus ROI. However, the affiliate channel offers unlimited complementary sites that get traffic from virtually all sources which allow the affiliate marketer to capitalize or piggy back on traffic that has already been paid for. This way, the merchant earns revenue from free sources, effectively lowering their end cost for advertising.

Let’s take a look at some solid evidence of this evolution; Google launches its Ad Sense product, and it’s a BIG HIT! Why? Because people want more traffic than they are getting from search. So Google turns to merchants for placing banner size text links in place of affiliate links offering payment to offset the cost of getting their own traffic, essentially recycling visitor traffic. As this has shown, it worked. Now others are developing ways to utilize the same principals, and all of them, whether they know it or not, are running an affiliate network. The only difference is that Google, and soon others, are offering compensation for traffic. However, with the recent shift to hybrid campaigns, the affiliate marketer can now offer an even better solution, paid-plus-performance. Once again, Affiliate Marketing is evolving.

With this evolution come new and larger competitors from the well-established search industry. Why? Well, it’s simple. We are all marketing in regards to the limited budget of each merchant. With Google using the affiliate marketers’ space to increase click-through traffic and earn additional revenue, a new set of competitors have been born. So what is the good news? The largest players in the online marketing arena have validated without a doubt that the affiliate concept, though evolved, is one of the two real channels available to merchants to drive traffic to their website. These two channels are clearly Search Marketing and Affiliate Marketing.

So how should one approach marketing expenditures in light of these new changes? To truly compare the two approaches, one must adopt a new perspective as to what affiliate marketing has become. Prior to now, the search community had implied that search traffic is of better quality than traffic driven by other means. However, this cannot be true if Ad Sense is essentially the same as affiliate traffic. The bidding process for Ad Sense clearly determines the value of a click through the participation of thousands of merchants. So if the value of a click is the price it sells for in the search market, and the search market is sending customers the same traffic as affiliate marketing due to programs like Ad Sense, then it would make sense to say that the affiliate traffic has the same value; hence, the title of this article. “Now prove it”, you say.

To prove it we must look at traffic value. For example, if a click in the average PPC search engine for top placement sells for $5.00 then the value of the click for top placement is $5.00. However, you must consider that not all would bid top placement. So let’s use third place, with the hypothetical price of $3.00. To prove to you that the affiliate channel is better and less costly we must look at the available traffic and the cost for that traffic. Earlier, I explained the unlimited availability of traffic through the affiliate channel and the limitations of search traffic from Google’s Ad Sense program. Now, let’s address the comparisons financially. To test my hypothesis, I took 25 clients and compared what the cost would be for the same traffic, a third place position in Yahoo search under targeted keywords. I averaged 10 keywords per client, looked at the price, developed an average and compared results. The verdict was not a surprise. The affiliate traffic was substantially less expensive. What’s more, the affiliate traffic can be more targeted because you choose where your traffic comes from. There are many complementary relationships that constitute an affiliate partnership that cannot be made by automated categorization, as found in search traffic. Furthermore, affiliate traffic is more sustainable because you can develop direct relationships with the websites in which you are deriving traffic from. Plus, an affiliate program gives you real tangible value and annuity. What do I mean? Well, if you stop paying for traffic in a pay-per-click relationship the traffic stops and you have no control. However, through the affiliate channel, relationships are direct and continue to grow; in fact, they can easily eclipse search traffic in a developed program.

I want to make something clear; I am not declaring war on search. There is plenty of business to go around. What I am declaring is that serious prior budgeting for affiliate program development will become a real way to ensure a long-term strategy for success, creating an ever-increasing return on investment over time.

In the future, I see a massive migration of marketing dollars into the affiliate marketing niche. I see the hybridization of the affiliate channel brought into the spotlight. I see improving technologies, open minds, and the recognition that there are two worthwhile marketing strategies, Search & Affiliate Partnerships. When all is said and done, I see the affiliate channel being accepted as the best and most effective online marketing strategy.

Greg Shepard

About Greg Shepard

Greg Shepard, the Chief Strategy Officer of Pepperjam, is a seasoned veteran in building and running sustainable growth businesses. Inspired by the unique perspective he garnered as both a merchant and affiliate in past ventures, Greg established AffiliateTraction and it has since expanded into the largest multi-national affiliate marketing agency with offices in Silicon Valley, Toronto, London and Sydney. In January of 2016, AffiliateTraction was acquired by eBay Enterprise Marketing Solutions. In April of 2016, eBay Enterprise Marketing Solutions became Pepperjam, resurrecting a familiar name in the performance marketing space.

4 Responses to The Affiliate Marketing Channel Is Simply The Best Online Marketing Strategy

  1. Beth Kirsch says:

    I find this a little strange as a hypothisis, since search is powering about half of affiliate marketing as far as I can tell.

  2. Peter says:

    Great post! One area that I feel will also grow is "Verch" or vertical search.

    I still need to read this a few times over however, as I don't see how the affiliate traffic is so much "cheaper". The affiliate traffic may be seen as cheaper to the merchant but there is still a cost to have that traffic reach the affiliate. Also the value of affiliate traffic to a merchant is lessened by the commissions and affiliate management overhead.

    I'll give it another try after hitting the slopes tomorrow 🙂

  3. This is a great article. I learned a lot of tips and pointers. Thanks for the information!!!

  4. Search engines will eventually offer rev-share models, and to do that they'll buy up all the major affiliate networks. Search and affiliate marketing will merge even more than they already have.