NOTES: These are the notes for our interactive July 26 clinic on The ROI on PPC vs. Affiliate MArketing. The recording of the event will be posted here in a few days.

Which gives the best return on your investment - Pay per Click advertising, or building strong affiliate partnerships?

Building and maintaining strong PPC campaigns is becoming increasingly difficult in what has become a very competitive marketplace.

At the same time, many companies report poor performance with their affiliate programs.

The question we asked ourselves is this:

• If companies invest sufficient time and effort to develop strong affiliate programs, can affiliates deliver a better ROI than PPC advertising?

 Please note that the purpose of this brief is not to encourage marketers to abandon their PPC advertising in favor of affiliate marketing.

 Instead we are suggesting that a strong affiliate program can deliver additional revenues with a very favorable ROI. Also, with skilled affiliates working on your behalf, and with some of them using PPC advertising themselves, you can extend the reach of your total PPC exposure, and reduce your PPC costs.

::Case Study 1 – Tracking the relative ROI between the PPC and affiliate programs of National Alert Registry.

While we have been handling their PPC campaigns only for about a year, we have seen a decline in ROI, in spite of making substantial efforts in a number of areas:

• We have added a number of new campaigns over time, often in response to current news in the media.
• We have more than doubled the number of keywords we are bidding on, searching the “edges” for low-cost words and tracking their conversion rates.
• We have more than doubled the amount of traffic to the site generated through PPC.

However,in spite of this, over the last nine months we have seen our partner’s PPC cost per sale going up, and PPC profits going down.

Over the same period, they have more than made up for the decline in PPC revenue and profits through their work on their affiliate program.

This increase has been achieved by focusing very tightly not on recruiting thousands of new affiliates, but by identifying a small handful of super-affiliates, or strategic partners.

Here are the results:

KEY POINT: Monthly profits from affiliate revenues have increased by 281.57% over a period of just nine months.

::Case Study 2 – Growth in affiliate revenues for Net Detective.

Another of our research partners, NetDetective.com, has been working with an affiliate program for several years now.

The Net Detective affiliate program has now been running for over nine years, which makes it one of the longest running programs of its kind on the web.

By building and refining the program over such a long period of time, they are now in a position where almost 80% of the company’s total revenues are generated through their affiliate partners.

The most significant increase has been over the last year, during which time they have recruited a number of new super-affiliates.

As with the National Alert Registry, time invested in forging strategic partnerships with key affiliates has been shown to dramatically increase revenues.

Here are their results, also over the last nine months. The figures show payouts and profits per affiliate, per month.

KEY POINT: The average profit per affiliate per month has increased by over 122.41% over a period of nine months.

::Guidelines – Guidelines for establishing and running a successful affiliate program.

Pay per Click campaigns can still be a strong channel for many online marketers. As with any channel, the higher the level of your expertise in this area, the better your results will be.

::Consider the following guidelines.

1. Commit to allocating sufficient resources to fully research and explore the best way in which to manage your affiliate program, whether you use an in-house affiliate management solution, or partner with an outside supplier like Commission Junction or LinkShare.
2. If you are going to use an in-house solution, invest in a program or service from an established provider. While some companies have done well with solutions they have built and programmed themselves, this takes an enormous investment of time and money and fails to leverage the enormous expertise and experience of other companies.
3. When launching an affiliate program, give yourself a 12-month breakeven horizon. It takes time to build a reputation for having a good program, and to recruit good affiliates.
4. While some affiliate programs make huge revenues by having tens of thousands of affiliates, others achieve the same results with just a few strong partners.
5. Treat your top affiliates as valued strategic partners. Your top few affiliates may have the potential to provide you with a significant proportion of your total revenues.
6. Get to know how each super-affiliate operates. Some will feature your company within an existing, high-traffic content site. Others will create new sites, specifically to sell your products or service.
7. Be generous with your commissions. Top affiliates make their living as affiliate marketers and invest their resources only in programs which offer generous terms and are well managed.
8. Be prepared to increase commission rates for your top performing affiliates.
9. Provide affiliates with the marketing tools they need in order to effectively promote your products or services. These may include text links, banners, content pages, data feeds and even complete stores delivered by javascript.
10. Give affiliates access to detailed reporting on their performance and sales. Top affiliates will want to track the ROI of links from their pages...from exposures, to clicks and through to sales.
11. Be open to special requests from key affiliates. Some may ask you to place custom code on your sales confirmation pages in order to track their own marketing efforts, including PPC campaigns.
12. Listen carefully to top affiliates when they critique your landing pages. Many professional affiliates will have deep expertise in what works and what doesn’t.
13. Be available to top affiliates by email and phone. You should treat your top performers as important strategic marketing partners. Being available to them helps build that kind of relationship.
14. Appoint a single individual to work with top affiliates, so they know who their contact person is within your company.
15. Enable affiliates to link to any interior page on your site. Conversions will be low if you simply attract affiliate traffic to your home page.
16. Work with your top affiliates, learn from them and build custom landing pages to help maximize conversion rates.
17. Alert your affiliates to upcoming specials, deals and new product or service introductions, so they have time to prepare their own pages or links.
18. While some companies forbid their affiliates to bid on the company’s “own” keywords, this practice is not recommended. eBay, Amazon and other major sites freely allow this practice, as they understand and have calculated that giving their affiliates free reign is to their advantage. A common exception is that most companies will not allow you to bid on their trademarked names and phrases.

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