This guest post was written by Steve Poland, a former TechCrunch writer working on his soon-to-launch start-up InSeconds that allows sites to easily customize each visitor’s experience, resulting in optimized revenue for each visit.
Affiliate marketing is 15 years old this month—CyberErotica is said to have launched the first program in 1994. The adult industry has always been ahead of the curve, but I digress. Despite 15 years of existence, which is essentially an eternity in “online years”, the performance based marketing method is still in its infancy. Sure, there are lots of affiliate programs that exist for many online etailers (and other sites that seek sales, leads and visitors) and $2.1b was paid out last year from affiliate programs, but affiliate marketing is still not as easy as it should be for website/blog Publishers to implement and get compensated for their referrals.
For those that don’t know, affiliate marketing works like this—a company with a product or service for sale pays a referral fee to Publishers (marketing companies) that can drive sales, leads, or visitors to them. The Publisher is taking on the risk here—they might be outlaying their own cash on advertising to promote the product/service, or they are linking to that company’s product/service in the content of their site’s own webpages (when they could be linking to another company instead). The Publisher signs up for an account with the affiliate program and is then given “trackable links” to use in their content, which track referrals back to them. Most etailers have an affiliate marketing program in place—for example, Amazon .com’s Associates program will pay 4%-15% referral fees to you when a visitor of your website clicks a link on your site and makes a purchase at Amazon.com.
Most recently, it’s not just websites/blogs that are referring sales, but rather individuals themselves, who are using realtime sites like Twitter and Facebook to influence their friends and followers by recommending products to buy, music to listen to, and movies to watch. These realtime discussions are becoming important sources of referral sales and leads for websites—if someone is asking on Twitter what digital camera they should buy, you bet your ass that Amazon.com wants anyone on the Internet responding to that user’s question to be linking to a camera for sale on Amazon.com (and not Walmart.com or BestBuy.com). Amazon.com wants to make sure that those influencers are compensated for referring people to buy from their website, which thus positively reinforces them to continue linking to Amazon.com product pages in the future.
Everyone with access to the Internet today is a Publisher. They are a voice. This has always been the case, but not the way it is now with Microblogging. Individuals were Publishers on a smaller scale via email forwards, email replies, IM, or most recently blog posts. Blogging broadened individual’s view points (influence) up to a global scale—no longer would they only influence just a few friends in a closed-circuit email, but they could influence the masses online. But blogging wasn’t realtime discussions. Instant messaging and chat rooms were always realtime discussions—but primarily on a one-on-one or small-group basis. Twitter and Facebook status updates, aka microblogging, has mashed the realtime nature of instant messaging with the global scale and voice of blogging.
Amazon.com Pioneers Affiliate Marketing, Again
As an early pioneer of affiliate marketing for site/blog Publishers (holding the patent on all the components of an online affiliate marketing program), it only makes sense that Amazon.com would now become an early pioneer of affiliate marketing for individual publishers—those who simply tweet and comment on their friend’s Facebook updates. Last week, Amazon.com announced they would start compensating individuals with referral fees for using Amazon.com links in their Twitter messages and in their Facebook status updates/comments. Although it will likely lead to more noise (and spam), I think we’re going to see many companies follow Amazon.com’s lead. I also think this has the potential of being a game changer, if some other pieces fall into place—more on this in a bit.
What has shocked me over the years is the number of links in webpages that aren’t trackable links. Most links in content are just regular links out to other webpages, which means that they don’t contain a tracking code that corresponds to them as the referring website—which means that when a sale is referred and occurs on a site that has an affiliate program in place, that affiliate program site doesn’t know who to pay the referral fee to (even though they honestly would like to, because it encourages future linking to them by that referring Publisher). In a perfect world, all the links on all the webpages on the Internet that link to Amazon.com product pages would be trackable links which would earn those websites referral fees for whenever their visitors click over and purchase products from Amazon.com. Ditto for all the links that have affiliate programs in place.
Affiliate Marketing for Publishers Still Not Quick and Easy, Yet
I would go out on a limb and estimate that 99.99% of all links on the web are not trackable links. Why? Because it’s been a bit of a pain in the ass, quite frankly. If you’re a publisher and you’re writing a content piece, you would need to go away from your writing, login to the affiliate program for the website you want to link to (i.e. Amazon.com Associates), and then generate the trackable link for the webpage you want to link to—ensuring that when your visitors click that link, that you’ll earn referral fees from Amazon.com when purchases occur. Not to mention that you have to signup for all of these affiliate programs; some of these programs are handled by third-party companies and become discontinued (making your links dead). And then there’s the money—if you don’t get very many visitors each month to your site, you may only earn a few dollars a month from affiliate programs, which then discourages you from putting forth the time to place trackable links into your content in the first place.
The lack of ease that sites/blogs have had to endure to use affiliate marketing over the years is the same for Individuals now. Amazon.com has said they endorse trackable links by users in social media, but it’s still not easy enough. Sure, you can go over to Amazon.com, login to your Associates account, and a button appears at the top of every product page saying “Share on Twitter”, which then creates a tweet with your trackable link in it, but that’s still one too many steps. People are lazy. More than half of Twitter users are using a Twitter application to do their tweeting. Until the affiliate programs are integrated into the social networking platforms (Twitter, Facebook, MySpace, forums) or the applications used on these platforms (Tweetdeck, Seesmic, Tweetie, bit.ly), this affiliate marketing by individuals won’t take off.
It’s in the interest of the platform (Twitter) to make this easier because it will ultimately allow their users to earn money. It’s in the interest of the users, because it earns them money and reinforces their usage of the platform (Twitter). It’s in the interest of the affiliate program (Amazon.com), because it positively reinforces users to share links to their site. (On the flip side, Twitter might not want to encourage this for fear of making teh spam problem even worse than it is).
“Facebook Credits” could become de facto Virtual Currency with a Facebook integration of Amazon.com
But if you really think about it, Facebook should really be integrating these affiliate program partners into its platform first. Facebook has the most to gain by integrating. You may have heard of the virtual currency system that Facebook has been working on—Facebook Credits. It will allow users to purchase Facebook Credits with cash and then use them in third-party Facebook applications, such as leveling up your character in a game or buying a virtual rose for a friend. To get people using this system, Facebook will likely give away some initial credits to every user, to get them to see how simple they are to use, then get the user to pull out their credit card and refill.
What about a constant refill of Facebook Credits every month to help spur more in-app activity/purchases? That could happen. Even if users were merely earning $0.44 or $1.32 monthly from their link sharing habits, if these referral fees were automatically turned into Facebook Credits, Facebook could really jump-start this in-app currency of theirs (and if they operate anything like Apple, they’ll nab 30% of all in-app money spent). This will work for Amazon.com and other affiliate program participants, as long as the user knows that the 1000 Facebook Credits they earned this month were from their sharing of Amazon.com links. Facebook would love it because these affiliate links would be an income generator for their users, encouraging their users to spend more time on Facebook, and of course there is revenue associated with users spending their credits. Finally, Facebook application developers would love it because they’ll be seeing a steady stream of revenue as well. Meanwhile, app developers and Facebook can steer clear of Scamville-type offers. With affiliate links, you only get paid if someone actually clicks through and buys something. Good referrals get rewarded,while bad referrals get nothing.
Plus, imagine the publicity for a Facebook or Twitter. I can see the headlines now, “Facebook now ’employs’ 300 million people” or “Facebook lets 300 million people to start earning money just by sharing links”.
This is Now, Get Ready for the Effects
One effect of affiliate programs becoming integrated easily into these realtime platforms (and/or client apps) is that referral fees will go down. Amazon.com currently pays out 4%-15% on referral sales, but that’s because they know only a small percentage of their sales occur now from referrals (because of the lack of ease—and because of the laziness of sites linking to Amazon.com). But with a vast usage of trackable links, then for example, if sales remained flat and 5% of all purchases were referrals previously and now that number becomes 25%, then Amazon.com can’t be paying out 8% referral commissions (unless sales went up 5x too), so Amazon.com would reduce that to 1.6% referral commissions (8%/5).
Yes, this movement is going to turn up the volume of spam noise to us all via our use and searches on Twitter, Facebook, and elsewhere. Those people who you follow may get spammy, but their influence over you will go down (just like those people that send you too many nonsense email forwards). Everyone has a personal brand and if you spam your audience with tons of links, they won’t be listening to you as much.
But what I’m talking about isn’t the future—it’s here now, with Amazon.com leading the way. Those companies that don’t embrace affiliate marketing for Individual Publishers, will lose. If someone is tweeting about the new iPod, that someone is going to link to the webpages that will earn them money.