Affiliate Advertising: Friend to the Bottom Line
Before the dot-com crash, many startup Internet companies were encouraged by venture capitalist firms to spend ever more ridiculous sums to acquire customers via advertising.
But after the crash, many Internet companies had to greatly reduce their advertising spending.
This is true even of those that still exist.
A lingering problem for many Web sites is how to buy banner advertising at a price that will add to their bottom lines.
The answer is through the proper use of affiliate programs.
Given the choice, most Web sites would prefer to sell their banner advertising inventory by the impression. Under that model, the publisher, the owner of the site on which the banner ad appears, gets paid simply for showing the ads regardless of whether they generate visitors or customers for the advertiser. This model is low risk for -- and therefore attractive to -- the publisher.
This same model, however, is usually the least preferable to the advertiser, who assumes all of the risk of the ad not working.
With advertising budgets drying up, fewer organizations are willing to buy advertising on an impression basis, especially because many are aware that they can buy the same ads on a performance basis: by the click-through, the lead or the sale.
When selling by click-through, the publisher gets paid only when one of its users clicks on the banner ad to go to the Web site of the advertiser.
When selling by lead, the publisher gets paid only when one of its users successfully fills in a form provided by the advertiser.
And when selling by sale, the publisher gets paid only when one of its users buys something from the advertiser.
The Affiliate Angle
Affiliate programs are efficient vehicles for purchasing online advertising because they allow the advertiser to purchase advertising on a performance basis from hundreds or thousands of publishers.
One of the benefits of an affiliate program that often surprises the advertiser is that advertising is often more effective. This is because the advertiser is able to set the criteria that must be met in order for the publisher to be paid, and that criteria tend to be based on the effectiveness of the advertising.
For example, CollegeRecruiter.com pays its affiliates a $100 (U.S.) commission whenever a visitor to one of their sites clicks through to CollegeRecruiter.com and buys something -- anything -- within 365 days of that initial click-through. What could be a more effective use of our advertising dollars? We only pay for our advertising when we know that it has worked.
Web sites that purchase advertising through affiliate programs often find they can do so with minimal time involvement because they don't have to try to make performance-based advertising deals.
As long as advertisers use affiliate networks like Commission Junction, LinkShare, or Be Free, they don't need to negotiate terms. Affiliate recruitment and retention are the responsibility of the advertiser in any case, but most advertisers using a network recruit all their affiliates through it. Retention comes from paying affiliates well and communicating with them regularly.
Spending less money on advertising isn't impossible. The way to do it is to create your own affiliate program and use it to buy your online advertising. It could be the best marketing decision you make this year.
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