Tuesday, November 6, 2007

Web 2.0

The rise of blogging, interactive online communities and other new technologies, web sites and services

based on the concepts that are now called Web 2.0 have impacted the affiliate marketing world as well.

The new media allowed merchants to get closer to their affiliates and improved communication between

each other.[9][10] New developments have made it harder for unscrupulous affiliates to make money.

Emerging black sheep are detected and made known to the affiliate marketing community with much greater

speed and efficiency.

Compensation methods

Main article: Compensation methods

Predominant compensation methods

80% of affiliate programs today use revenue sharing or cost per sale (CPS) as compensation method, 19%

use cost per action (CPA) and the remaining 1% are other methods, such as cost per click (CPC) or cost

per mille (CPM).[11]

Diminished compensation methods

The use of pay per click (PPC/CPC) and pay per impression (CPM/CPT) in traditional affiliate marketing

is far less than 1% today and negligible.

Cost per mille (thousand) (CPM/CPT) requires the publisher only to load the advertising on his website

and show it to his visitors in order to get paid a commission, while PPC requires one additional step in

the conversion process to generate revenue for the publisher. Visitors must not only made aware of the

ad, but also pursue them to click on it and visit the advertiser's website.

Cost per click (CPC/PPC) used to be more common in the early days of affiliate marketing, but diminished

over time due to click fraud issues that are very similar to the click fraud issues modern search

engines are facing today. Contextual advertising, such as Google AdSense are not considered in this

statistic. It is not specified yet, if contextual advertising can be considered affiliate marketing or

not.

Compensation methods for other online marketing channels

Pay per click is the predominant compensation model for pay per click search engines and their

contextual advertising platforms, while pay per impression is the predominant compensation model for

display advertising. CPM is used as a compensation method by Google for their AdSense/AdWords feature

"Advertise on this website", but this is an exception in search engine marketing.

While search engines only recently started experimenting with the compensation structures of traditional

affiliate marketing, such as pay per action/CPA,[12] they have used similar models in display

advertising, offering CPA as early as 1998.[13] By the end of 2006, the market share of the

CPA/performance pricing model (47%) caught up with the CPM pricing model (48%)[14] and will become the

dominant pricing model for display advertising, if the trend of the last 9 years continues in 2007.[15]

CPM/CPC versus CPA/CPS (performance marketing)

In the case of CPM or CPC, the publisher does not care if the visitor is the type of audience that the

advertiser tries to attract and is able to convert, because the publisher already earned his commission

at this point. This leaves the greater, and, in case of CPM, the full risk and loss (if the visitor can

not be converted) to the advertiser.

CPA and CPS require that referred visitors do more than visiting the advertiser's website in order for

the affiliate to get paid commission. The advertiser must convert that visitor first. It is in the best

interest for the affiliate to send the best targeted traffic to the advertiser as possible to increase

the chance of a conversion. The risk and loss is shared between the affiliate and the advertiser.

For this reason affiliate marketing is also called "performance marketing", in reference to how

employees that work in sales are typically being compensated. Employees in sales are usually getting

paid sales commission for every sale they close and sometimes a performance incentives for exceeding

targeted baselines.[16] Affiliates are not employed by the advertiser whose products or services they

promote, but the compensation models applied to affiliate marketing are very similar to the ones used

for people in the advertisers' internal sales department.

The phrase, "Affiliates are an extended sales force for your business", which is often used to explain

affiliate marketing, is not 100% accurate. The main difference between the two is that affiliate

marketers cannot, or not much influence a possible prospect in the conversion process, once the prospect

was sent away to the advertiser's website. The sales team of the advertiser on the other hand does have

the control and influence, up to the point where the prospect signs the contract or completes the

purchase.

No comments: