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  1. #1
    ABW Founder Haiko de Poel, Jr.'s Avatar
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    Exclamation The writing on the wall was a neon sign!
    Affiliate marketing will remain strong but will evolve, study says

    Affiliate marketing is holding its own as a low-cost, high-return customer acquisition strategy among online marketers, who will spend an estimated $4 billion on it annually by 2014, according to Forrester Research Inc.'s U.S. Affiliate Marketing Forecast, 2009-2014. But the landscape will shift over the next few years, with marketers increasingly looking to cultivate independent relationships with top-producing affiliates. Source


    Bold added by me. Gotta love the choice of words - "evolve".


    BTW, also check out the social network aspect in the piece as well.
    Continued Success,

    Haiko
    The secret of success is constancy of purpose ~ Disraeli

  2. #2
    ABW Ambassador Joshua's Avatar
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    Eh, I don't trust much information about internet marketing that Forrester publishes. I've seen a number of reports over the past few years from them that just don't seem to make sense. For example, the article says "About 50% of all spending on affiliates is projected to go to networks and fees to networks this year, but that will drop to a projected 43% by 2014, according to Forrester's projection. ". 50% going to network markup or fees? I've never worked with an affiliate program, large or small, where 50% of the cost ends up going to the network. With CJ, if monthly minimums aren't an issue, advertisers will be paying a 30% markup to CJ (as of published rates a while ago). That means that 23% of the total cost of paying affiliates goes to the network. I can't see how a network will pay as much money to a network in fees as to affiliates in commission, even if a company is purchasing value added services or full management from the network. Maybe someone from an AM/OPM side can comment too, but this just seems off to me.

  3. #3
    ABW Founder Haiko de Poel, Jr.'s Avatar
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    It's spot on.
    Continued Success,

    Haiko
    The secret of success is constancy of purpose ~ Disraeli

  4. #4
    SEO: A Specialty - Web Design: Slow or outsourced andbeyond's Avatar
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    Maybe that is why affiliate programs are not more popular or dont work in all industries is the high percentage going to the network?

    If you have to bring traffic in on just the goal of buying something many programs through the big networks do not make sense in a PPC manner or even a labor intensive SEO project.

  5. #5
    ABW Ambassador Joshua's Avatar
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    Quote Originally Posted by Haiko de Poel, Jr.
    It's spot on.
    Is there some sort of data set that backs that up, with a frequency distribution to go along? Saying "It's spot on" without any sort of examples sort of doesn't back up a vague point . I've worked on the advertiser end before, and I generally saw lower percentages, inclusive of network %, network fees AND management/salary fees (whereas the statistic from Forrester only included network % + fees).

    What network fees am I missing besides the % of sales + additional monthly minimums if a threshold isn't hit? Anything running any decently active program on ShareASale should definitely have way less than 50% fees going to the network, since their monthly minimum is only $25, and fee is only 20%.

    I can't believe that most advertisers in affiliate networks buy enough value-added services from the network to increase the network expense to 50% of their overall program cost.

  6. #6
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    I found the piece quite interesting and substantially agree with many of the points it made. However, as with any other "system" that has so many variables it will be quite difficult to predict the exact (or perhaps even the general) path affiliate marketing will follow. The thoughts the piece contains are something to consider carefully as our business "evolves". I was especially interested in the comments about the social aspects of affiliate marketing as I have been a bit reluctant to consider it to be the "magic potion" for success.

  7. #7
    ABW Ambassador VampireSkunk's Avatar
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    Sure, search is still the major source of qualified leads from affiliate sites to merchants. Surely the savvy affiliate marketer is using social networks not to drive qualified leads, rather primarily as a source of backlinks to boost their sites' rankings in the serps.

  8. #8
    ABW Ambassador superCool's Avatar
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    Quote Originally Posted by Joshua
    that will drop to a projected 43% by 2014, according to Forrester's projection.
    they are close, but it depends on what they mean by 2014. it will be 44.333% (repeating) on 1/1/2014 and 43.017% by 12/31/2014. Forrester is in the correct range, but a big out-of-network sale at the end of the year could play havoc with the numbers.


  9. #9
    Analytics Dude Kevin's Avatar
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    Quote Originally Posted by Joshua
    Is there some sort of data set that backs that up, with a frequency distribution to go along? Saying "It's spot on" without any sort of examples sort of doesn't back up a vague point . I've worked on the advertiser end before, and I generally saw lower percentages, inclusive of network %, network fees AND management/salary fees (whereas the statistic from Forrester only included network % + fees).

    What network fees am I missing besides the % of sales + additional monthly minimums if a threshold isn't hit? Anything running any decently active program on ShareASale should definitely have way less than 50% fees going to the network, since their monthly minimum is only $25, and fee is only 20%.

    I can't believe that most advertisers in affiliate networks buy enough value-added services from the network to increase the network expense to 50% of their overall program cost.
    In this particular instance, I think you have to consider that SAS, Avantlink, et al make up a pretty damn small percentage of that overall revenue. Lump in all the "relationships" that pass as affiliate marketing these days and I think we find that report is probably fairly accurate. Haiko has more knowledge on that than me, so I'm not prepared to scientifically say spot on, but as I've said many times before, I think the industry, in large part, is heading in a bad direction, this article inclusive.

    All that said, 50% is a pretty big number. I hope it's not true. Talk about worthless overhead.
    Kevin Webster
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  10. #10
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    "but as I've said many times before, I think the industry, in large part, is heading in a bad direction, this article inclusive."

    Where was there bad in the article? I saw nothing but good.

    "Affiliate marketing will remain strong but will evolve, study says" Good

    "Affiliate marketing is holding its own as a low-cost, high-return customer acquisition strategy among online marketers, who will spend an estimated $4 billion on it annually by 2014," Good

    "But overall, the share of affiliate payments to networks and network fees–versus direct payments to individual affiliates—will drop over the next several years." Good

    And so on, article was all good.

  11. #11
    Analytics Dude Kevin's Avatar
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    It's a question of how you look at it Trust. And we know we don't look at it the same way. To me it's a wake up call (or hammer to the head) for small affiliates. I'm assuming that you and Joshua are larger affiliates, but I don't know that for a fact.

    If you don't have leverage with large merchants or large networks as an affiliate now, I believe your options will be limited in the future. To me, that's not a good thing. It will benefit some greatly. That list has less of the good guys on it.
    Kevin Webster
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  12. #12
    ABW Ambassador
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    I'm a small affiliate. What part of the report specifically has less for the good guys? Quote something so I know what you're talking about.

    Affiliate marketing will remain strong.

    Holds it's own for low cost, high-return customer acquisition strategy

    Merchants will still look to networks for their affiliate program

    The share of affiliate payments to networks will drop - Is that the bad? That's good, less reliance on networks. But I don't see that happening with the smaller or midsize networks.

    More transparency, not a bad thing.





  13. #13
    Analytics Dude Kevin's Avatar
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    Heading out the door, but I'll get back to you
    Kevin Webster
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  14. #14
    Half a Bubble Off Plumb RemodelingGuy's Avatar
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    Those that put their nose to the grindstone and develop PPC skills as well as customer friendly web design skills will make it.

    Sites like mine are at the mercy of search engine optomization..

    But I know enough about the ever changing market to know how to stay alive.

    Affiliate marketing is all about PPC..

    Focusing on well performing merchants and creating relationships with them on the side ( better commissions ) is just good business.

    The Pros make Crazy Cash and are the REAL BAROMETERS of how our Affiliate Future is heading.

    Jimmy McDonald - Your Local Hard Working RemodelingGuy ( & SprinklerGuy - & GarageGuy )
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    Do What You LOVE & LOVE What You Do! ....

  15. #15
    Prince of Content Vinny O'Hare's Avatar
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    Sites like mine are at the mercy of search engine optomization..
    Your sites should never have to worry about where they rank in the search engines. By now you should have an email newsletter that brings people back to your site.
    Vinny O'Hare - OPM - Contact Info email: vinny at teamloxly.com ~ 702-582-6742 Twitter

  16. #16
    Comfortably Numb John Powell's Avatar
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    Quote Originally Posted by Trust
    What part of the report specifically has less for the good guys? Quote something so I know what you're talking about.
    I'm going to guess as to what bothered Kevin.
    But the landscape will shift over the next few years, with marketers increasingly looking to cultivate independent relationships with top-producing affiliates
    If you see that as a continuing of the trend favoring OneCause types that could be a worry.


  17. #17
    Analytics Dude Kevin's Avatar
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    Quote Originally Posted by John Powell
    I'm going to guess as to what bothered Kevin.If you see that as a continuing of the trend favoring OneCause types that could be a worry.
    Thanks John. My thinking exactly.

    Again Trust, I don't ever say the industry is dead. I simply say that as the pot gets bigger, it won't distribute in a favorable way.

    Can anyone develop a site that makes money? Sure, just about. But there is going to be too much control in the hands of too few to make it viable for the small affiliate.

    I shouldn't really bother to keep repeating myself. I know there are many, including you, that disagree, and since we look at what I consider to be warning signs very differently, I'm not sure I can convince you otherwise.

    I simply cannot stand though the way this industry is heading. Does it matter if I like it? Nope, not in the big scheme of things. I simply choose to devote more energy to other projects. I still have sites, and I'm still working on my project because it interests me. So I still have a stake, which is why I come here .
    Kevin Webster
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  18. #18
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    "But the landscape will shift over the next few years, with marketers increasingly looking to cultivate independent relationships with top-producing affiliates"

    Oh, but you guys automatically think it's the bad guys. There are good guys that are top producing affiliates as well. Yes, there are cases like what you described but I also think that when/if merchants become wiser, they won't be partnering with those type of affiliates (onecause etc.) because it doesn't make much sense.

    And there's literally thousands of merchants with affiliate programs and growing everyday, there's no shortage of merchants to choose from. I can go down the top 500 merchants http://www.internetretailer.com/top500/list.asp and with those with affiliate programs, I can get into most of them.

    If you can send a merchant sales/traffic, why wouldn't they want to partner with you? You might find an example here and there but you would be arguing the exception when I'm talking about the rule. And those exceptions just don't know how to run an affiliate program the right way and in the future if they get somebody who does, then they'll change for the better.

    Are there any examples, like which merchants only work with OneCause type affiliates, while dropping small or clean affiliates? I realize there might be some but specifically which merchants?
    Last edited by Trust; October 3rd, 2009 at 03:51 PM.

  19. #19
    Analytics Dude Kevin's Avatar
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    I said less, not none.

    Let me ask you this... If a big GAN merchant really wanted an affiliate in their program that couldn't get an Adsense account, do you think they could talk GAN into letting them in?

    What's the alternative? Open a second in house program? (apparently, per the article, that's too expensive.) Open a second program at CJ? LS? Isn't that how we get to 50% of affiliate marketing revenue getting wasted?
    Kevin Webster
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  20. #20
    Analytics Dude Kevin's Avatar
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    Quote Originally Posted by Vinny O'Hare
    Your sites should never have to worry about where they rank in the search engines. By now you should have an email newsletter that brings people back to your site.
    What about new sites, Vinny? Or new marketers? Pretty sure there are still some left in college.

    Newbie affs are going to have a hard enough time getting into GAN. I seem to see a whole lot of GAN Mod new program postings.....

    The article points to relationships being created with high value affiliates. Does a newbie have to create thousands of pages of content and capture eyeballs a plenty in order to even be considered?

    What happens to the casual blogger? I'm fortunate. I have network relationships that are coming up on 10 years old. I'm not worried for me in that regard.

    I believe that merchants are being sent down a path by the big 3 networks (as well as many many CPA ne'erdowells) that is NOT healthy. Think they'll eventually wise up to bad loyalty sites? Yup. And in less someone is there holding their hand, they won't just pull the plug on those sites. They'll abandon the model, since they ONLY look at numbers.

    You and Loxly are right, education is key. Who's doing a vast majority of the educating these days? Wish it was you guys, but it isn't.
    Kevin Webster
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  21. #21
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    Don't know but that's why I said that "The share of affiliate payments to networks will drop" was a good thing. Sometimes networks do things to damage the affiliate/merchant relationship like GAN and merchants should adjust. Open up elsewhere, have options or go to a network that doesn't do things to damage relationships.

    And that 50%,
    About 50% of all spending on affiliates is projected to go to networks and fees to networks this year, but that will drop to a projected 43% by 2014, according to Forrester’s projection.

    not sure how that number even came about. Have to see how exactly that came about but http://www.forrester.com/Research/Do...,54363,00.html it costs $499 but also read on that page:

    "US affiliate marketing spending will thus reach $4 billion by 2014 and will increase at a compound annual growth rate (CAGR) of 16% from 2009 through 2014. Payments to affiliate sites direct from marketers will represent the majority of the affiliate marketing spending, or 57%, in 2014."

    So that's how they got that 43%. 100-57 = 43. So doesn't that say, they'll actually be paying out more to affiliates and isn't that a good thing? Less to the networks, more payouts to affiliates. Or am I reading that wrong?

  22. #22
    Analytics Dude Kevin's Avatar
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    Depends on how they are defining "network". That could be bastardized into "non-direct affiliate spend", in other words creative costs, OPMs, network fees, network dues, etc.
    Kevin Webster
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  23. #23
    15 years and counting
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    But the landscape will shift over the next few years, with marketers increasingly looking to cultivate independent relationships with top-producing affiliates
    It's how affiliate marketing started. The networks took advantage of affiliate marketing, they didn't create this industry.
    A good part of my affiliate income comes from relationships I had developed with merchants before 1998 but I don't recommend working with indies if you dont represent a big share of their business. If you don't make $10K (a month) in commission with a merchant, forget it. It's too time consuming to get paid.
    So, it's nothing new.
    The networks have to bring a service, if they fail, affiliates with traffic will look for direct relationships with the merchants.

  24. #24
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    Word is the report is only 9 pages long but from their blog:

    Affiliate Marketing Still Growing

    Despite unfavorable economic conditions which have slowed affiliate marketing growth in 2009, US online marketers will still be spending a total of $1.9 billion of their budgets on affiliate marketing fees. Furthermore, we expect affiliate marketing to return to double-digit growth in 2010 and we anticipate affiliate marketing to become a $4 billion market by 2014.

    http://blogs.forrester.com/ebusiness...-growing-.html

    Growing nicely. Just didn't see anything negative in that report at all, just the opposite.

  25. #25
    ABW Veteran Mr. Sal's Avatar
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    What Network?

    I think I've heard enough!

    I'm Mad as hell, and I am not going to take this anymore!

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