• by Lynn Russo Whylly , February 22, 2007

Amazon gave birth to online affiliate marketing and Google refined it. But while these companies remain leaders, affiliate marketing today requires much more than simply adding links. OMMA’s Lynne Russo Whylly sat down with Kerri Pollard, vice president of client performance at affiliate marketing network Commission Junction, to identify some of the issues and trends surrounding affiliate marketing today.

What value does affiliate marketing (AM) bring to the advertiser?

KP: Affiliate marketing is the epitome of performance marketing because publishers do not get paid until a lead is generated or a transaction occurs. It’s cost-per-action-based, and there’s no up-front commitment on the advertiser’s part, so it’s a phenomenal ROI-generator for them. Because of the performance model, during the dot-com bust, even though a marketer might have had to lay off 50 percent of its staff, the cost of AM is so low that their programs stayed intact.

How has AM changed over time?

KP: Last year when Web 2.0 erupted, we began to see these pure plays like MySpace and blogs and they’re focused on the so-called long tail. So companies are still doing search, but instead of the word “golf putter,” which may go for $0.61 a click, they might instead bid on “Odyssey,” the brand name of the putter and pay less. It’s less traffic, but higher quality traffic, and the ROI is better.

Is affiliate marketing more complicated today than in years past?

KP: I think it is because the consumer is no longer a homogenous entity. Consumers are very diverse. And they’ve gotten more savvy online and started to use the online channel in different ways, so that adds a level of complexity to finding the right customer. In response, publishers have more ways to reach consumers, so marketers have to do more analysis to ensure the publishers they choose are reaching their target customers. I think that’s where the complexity comes in.

What are the challenges for affiliate marketing today?

KP: From the publisher’s point of view, the biggest challenge is that payment is not occurring until the transaction occurs, so that means the publisher has to make a certain amount of the investment up front. From the advertiser’s viewpoint, marketers have a hard time being able to measure the value of affiliate marketing channels against other channels because they’re using different reporting programs and platforms, so they don’t necessarily get the whole picture.

What are the best practices of affiliate marketing?

KP: Advertisers that succeed with affiliate marketing are nimble, cooperative, and accessible, and I think those same three terms could be used to describe publishers as well. They must be open to change and cognizant of change around them, both with the consumer and the publisher. And I can’t emphasize enough how important the data is. I still see some advertisers that say, “Don’t promote me next to my competitor” or “Don’t put any other competitors in my vertical.” But consumers don’t shop that way. In order for publishers to attract the right consumers, they must meet the needs of the consumer.

Where do you see affiliate marketing in five years?

KP: I think you have to ask the question, ‘Where do you see the consumer in five years,’ because that’s who we need to follow. If mobile marketing is going to be a huge business, then we will go there. We see smaller niches and verticals, and I think a lot of the Web 2.0 technologies will make their way down to the transactional level. In addition, we’ll see more social communities around different products and services. I think a lot of us are just trying to filter through the noise right now to see what we can do to support these shifts and trends.