Affiliate Marketing - Part 1
Before really jumping into Affiliate marketing, it’s good to have a basic understanding of the tracking that enables it and what affiliate marketing actually is.
Understanding URL Parameters
URL parameters are a broad term for what’s mistaken for UTM parameters. UTM parameters are a subset of URL parameters. A URL parameter is a part of the URL following a “?”.
https://bowtiedopossum.com/?utm_source=twitter&utm_medium=social
URL parameters are made up of the “?” then a string of “parameter=parameter_value”. The first something is the parameter and the second value is the parameter value. Think of a parameter as characteristic of something. Sex=male, age=88, identity=bowtied, etc.
These parameters are then separated by an ampersand (&). They can continue on for, I want to say indefinitely, but I’m sure there’s a limit that I don’t know.
They’re used to pass values to some software program. That could be Google Analytics, your CMS (Content Management System-IE Wordpress/Salesforce/Shopify/Etc), or an affiliate tracking program.
For this conversation, we’re going to focus on Google Analytics and an Affiliate tracking program.
UTM Parameters
Urchin Tracking Module parameters are a set of URL parameters that are standardized so that all marketers are working off of the same parameters as they publish across different media platforms. These parameters are then collected by Google Analytics (or another program) making up how you track incoming traffic among other things.
Fun fact. Google didn’t create Google Analytics. A company called Urchin created it. Google then bought and built out the platform.
For a full overview of how Google uses these UTM parameter, checkout their answer on campaign data and default channel grouping. Seriously. Go to those links. You should have those pages memorized. I don’t put links in these articles/newsletters for fun. The content that I link to is very important to know along your digital journey.
High level, what you need to know is that you need to know what UTM parameters to use when driving traffic to your site and away from your site.
For Google Analytics, when looking at the default channel section, the “medium” drives what channel it falls into. See the campaign data link above.
Non-UTM Parameters
The rest of the URL parameters that you’ll see are for some specific tracking or manipulating the page for a software program. URL parameters can be used to change search results on a page, apply coupons for a purchase and a host of other things.
For this article we’re going to focus on affiliate.
I hate to dive too much into URL parameters, BUT it’s important to know how they work so that you can track/optimize your incoming traffic compared to your outgoing affiliate clicks. You’re going to want to track your outgoing affiliate links (with URL parameters) with event tracking so you can optimize your incoming traffic to what’s most effective to drive outgoing traffic to your affiliates.
For a primer on how you track your outgoing affiliate links, see my article on tracking your site, subsection Click Event Tracking.
Affiliate Tracking Technology (how it works)
Example #1
In the below nytimes.com link, you’ll see that their *internal* tracking parameter is merchant=Amazon. They’re cloaking their link similarly to how I cloak mine behind “/Go/affiliate”. I haven’t dug into why they’re cloaking their link behind a second link but I’m sure it has something to do with their internal tracking/redirection. Their link goes to
https://www.nytimes.com/wirecutter/out/link/43304/169027/4/127037/?merchant=Amazon
Then
https://wclink.co/link/43304/169027/4/127038?merchant=Amazon
Then
https://www.amazon.com/dp/B013LPTUY2/?tag=thewire06-20&linkCode=xm2&ascsubtag=AwEAAAAAAAAAAfA-
Link Redirect Trace browser extension is awesome by the way.
It’s been awhile since I ran Amazon affiliate but I believe the “tag”=thewire06-20 is the Affiliate ID for the website. That tag ID is going to be on every affiliate link that you drive traffic to Amazon with. It’s your unique identifier. Amazon uses its own in house tracking program for its affiliate.
When someone clicks on your affiliate link, the cookie is set at page load and the landing page with the URL parameters is sent to the tracking software. This cookie (and sale) is connected to your link clink (referral) until the cookie is deleted, expires, or the user is referred to the website from another website.
Example #2
In the below case for my website, you’ll see that my affiliate link goes to bluehost.com/track/vcdsh. In this case, my affiliate ID is “vcdsh”. The link is then redirected to a link with UTM parameters to make it easier to track in Google Analytics.
You should seriously get the Link Redirect Trace browser extension
In the Bluehost scenario above, there’s two ways that I can think of them tracking the affiliate. Through a logger on the first redirect or by utilizing GA in the second redirect. I’m guessing the second.
For you anon, it doesn’t matter. The point here is to make sure you’re using the correct URL parameters or you won’t get credit for the sale.
Example #3
Affiliate tracking companies. If you look at the below link redirect chain from retailmenot.com to CVS.com, you’ll notice kqzyfj.com and cj.dotomi.com in the chain. The “cj” is Commission Junction. They’re a third party intermediary that we’ll hit on more below.
They run the traffic through their own owned domains to set a cookie so they can be the intermediary of truth.
You still don't have Link Redirect Trace browser extension?
Affiliate Networks
The performance marketing industry has been consolidating over the past few years, but it’s still the Wild West. That being said, there’s no way that I’m going to be able to cover them all here. If you’re a new affiliate, you’re going to want to start looking at the below networks to decide on your site or to find offers for your current site.
Note that merchants generally stick to one affiliate network while affiliates (or publishers) will sign up for the big ones or as many as needed.
Below’s a list of the most popular networks. If you don’t know what you’re going to target, sign up for the below and look for offers. Generally, if you have a target in mind, the company will have an affiliate page that will send you to the network that they use.
If you’re just starting an affiliate program and you’re looking for merchants, go to ClickBank. Some of the initial setup fees for networks like CJ and others are down right theft for a small merchant.
Affiliate Network’s Benefits
Affiliate tracking companies serve several purposes for merchants and affiliates. Also called advertisers and publishers.
They act as an intermediary/source of truth between the affiliate and merchant. This way, there’s no disagreement between the tracking of each and how much should be paid out. They’re a broker ensuring trust between the two. They take a percentage of sales for this service.
From a merchant POV, they help with the recruitment of affiliates. I’m not saying their introductions are worth their fees, but their interface that allows you to search for affiliates in your category is highly valuable.
From an affiliate POV, they help with trying to find merchants for you to promote. As an affiliate, this is very valuable to be able to find most offers in your field and be able to compare the payouts and incentive structure.
From an affiliate and merchant POV, it’s nice to have one place to pay and get payed. Managing 100+ affiliates or merchants becomes very cumbersome. Especially with minimum payout thresholds that you may not hit for some individual merchants. For bowtiedopossum.com, I have a CJ account and a few affiliate agreements with merchants directly. If you’re going to recruit a large amount of merchants/affiliates, get as many of your agreements as possible through a third party affiliate network like CJ. Eat the fee that they take and save yourself the headache.
Affiliate Partnerships as Business Partnerships
I have a different view than most on what an affiliate is. Maybe it’s because I’ve initiated and negotiated affiliate agreements between $1B+ companies. To me, it’s nothing more than a business agreement to pass customers.
I want to expand your mental model of what affiliate actually is. It’s not just click on a link and if they buy, you get paid. It’s a business relationship where you vouch for a product or service. Thinking of it just in terms of online limits your understanding.
In the next section, you’ll see why I use such a broad definition.
Affiliate Types
Now that I’ve expanded your concept of what an affiliate partnership is, let’s dive deep into a few different models that don’t fit the standard bill of an affiliate.
Referrals in the real world. If I pass a business contact to my friend’s consulting business, I get a cut of revenue. I refer clients and act as an affiliate to his business. We can debate the morals behind disclosure all day, but this is how much of the business world works.
Because of this, you constantly have to be thinking about people’s incentive structures and backdoor deals that you may not know about. Is this person genuine and the company is top notch or are they getting paid on the side.
Lead Generation. Many people think of this as its own separate category but it’s obviously affiliate. The tracking is going to be different than a standard online affiliate. You may need to be able to track phone calls, email address signups, online to offline deal closes, etc. It takes more technical knowledge for tracking and the ability to negotiate, but it can be way more profitable than driving to a ClickBank, ShareASale or CJ merchant.
Referral Programs. Whether the referrer is getting paid or not is irrelevant. They’re getting some incentive out of it in terms of points or discount. These are by far the cheapest affiliate to have if you’re selling a product. Unfortunately, not a lot of people want to refer a product for a 10% discount. It’s very difficult to scale in comparison to other affiliate models.
Commission Structures
This can vary to anything you can think of. From an online structure, it’s important to first talk about cookie life.
When you pass a visitor to another site, a cookie is set in their browser that connects your referral to their purchase.
Cookie Life – This ranges from 24 hours to lifetime. Essentially how long after the cookie is set do you still get credit for the sale. Amazon has a 24 hour cookie due to the amount of people that already shop at Amazon. They want to minimize the amount of commission on sales that would have happened anyways. In a future article, I’ll get into marketing attribution as the Holy Grail of marketing.
First vs Last Click Attribution – Say you introduce one of your users to a product when they click your link. As the user is in the cart, one of their browser extensions pops up with a coupon for that product. The user clicks the coupon and the page reloads setting the browser extension’s coupon.
Who gets the sale? Well unfortunately, a majority of merchants do last click attribution. You lose the sale even though you introduced the customer to the product. It’s not fair but it’s why there has been a proliferation of coupon/rewards/cash back browser extensions come on the market in the past few years.
I’ve spent weeks analyzing the actual incrementality of these browser extensions’ “sales”…
A smart ecommerce company would do away with these “partners” (see vampires) immediately. Don’t listen to your affiliate network or agencies about muh “increased conversion”. Those customers would have purchased anyways. You’re now stuck with paying 10%-20% of your revenue for customers that would have purchased anyways.
Per Lead vs Pay on Customer Conversion – Pay on conversion is by far the most common. Getting paid per lead is great but it’s easy to send unqualified or fake traffic to a website. Per lead is generally reserved for private deals and larger companies that will have other stipulations signed into the contract.
Flat Fee vs Share of Revenue vs Recurring – There’s benefits to all but it’s all depending on your website/model. Recurring is generally the most profitable for an affiliate and are used by SaaS companies that are trying to grow fast.
Most hosting companies used to be recurring. That’s why so many people used to “recommend” hosting companies. It was highly profitable for them. They’ve largely switched to a flat fee structure which is more profitable for the affiliate in the short term (1-2 years) but less profitable long term.
Share of revenue of first sale is the most common for ecommerce. Hence the proliferation of browser extension coupon affiliates. They’re the last click since they’re in the funnel and they’re always ready with a coupon for every sale.
Recurring fee companies early in their technology adoption cycle are by far the most profitable.
The last one is the sweet spot.
You have a long time to get the recurring fee before they switch to flat fee.
Less competition in the market for SEO and SEM.
Early adopter benefit to build up your domain strength.
It’s recurring…
There has to be something Web 3.0 related in this early adoption cycle that would be very profitable…
Affiliate Marketing Strategies
There’s a million strategies to drive traffic to a website and convert it. It would be impossible to go through them all here. If you can develop a profitable affiliate website, you’ve gained most of the skills to run a very effective ecommerce website. That’s why I advise everyone to start affiliate first and learn all the basics.
High level, every business has three levers to grow. New customer acquisition, customer retention, and up-sell.
New Customer Acquisition
I’ll just touch on the top strategies here of where you’re likely to start. Start with one, get the tactic down then move on and expand to others. Trying to learn SEO, SEM, and Social all at the same time is a fool’s errand. You’re going to fail at all of them until you focus on 1-2.
Ever wonder why I have such a broad depth of knowledge? Among other things, it’s because in the beginning, I tried to focus on and learn everything. I wasted a lot of time in the beginning trying to learn the entirety of digital marketing, website development, etc.
A better way to go about this is to learn the high level of everything then start really diving into each subject one at a time. This is exactly what I’m trying to do with this newsletter/website. I can write a 5000 word article on SEO but if my audience doesn’t know what a UTM parameter is, how to setup a site, how to inspect code, it’s going to be all for nothing. They will fail.
SEO Short Term – These short term sites are generally churn and burn. Type up 4000 words on the best lamps or cat food, send black hat backlinks to the site (among other things), collect the check and wait for Google to slap you. There’s a lot of money to be made but a high risk that your income disappears overnight. BUT it can go on for years before Google catches you. I don’t advise people to go this route even though we’ve all done it…
SEO Long Term – SEO is generally a long term game. When going this route, you have to develop a process to be effective. The general process for me is below.
Develop search phrase that I’m trying to target
Determine competition in SERPs of domain strength, word count, H2 structure, structured data
Develop H2 structure of article to fully encompass the searcher’s intent
Develop better content than competition
Insert structured data (table of contents, q&a, etc)
Promote article anywhere I can
Constantly be on the lookout on HARO and other places to score backlinks
Repeat
SEM – Search Engine Marketing or Paid Ads will scale very quickly compared to SEO. However, it’s more difficult for affiliate. You are essentially playing a game of arbitrage. Figure out what the LTV (lifetime value) of your visitors are and acquire the same quality of user at a lower cost from SEM. Then scale.
The opportunity for companies to take this traffic and convert it instead of paying affiliates is there. They just leave a lot of opportunity for arbitrage.
If you’re going to go this route, you’re going to need a nice size ad budget and the skills to test different campaigns and tactics.
For a good thread on content arbitrage with Display ads, see the below thread.
Social – Organic social can drive a lot of traffic to your site or affiliate posts on the social network. IF you have a presence already built. The Jungle has been able to grow their follower count quickly due to the rest of the Jungle. In this scenario, it can be your initial main acquisition channel.
If you have the cash and the skills, paid social can definitely be the way to go. Unlike SEM, Paid Social will allow you to grow an organic channel along side it.
Customer Retention
You can focus on constantly filling your funnel, but if you don’t retain a portion, you’ll never be able to grow to any size. This is one of the reasons why email lists are so important. This is common in ecommerce but generally forgot about in affiliate.
Your viewership just decided to start their weight loss journey. They buy your workout program. You don’t just say by forever. Within the next few weeks or months, they’re going to need some supplements. After a few more months, they may want to build out a home gym. A few more months, they’re going to need new clothes because of the weight they lost.
You want to retain the customer so that you can be there at every point in their journey to upsell them for things they need. See the post on Brand Building and Share of Voice.
Upselling
Upselling gets a bad rap sometimes. This bad rap is due to people not providing value for what they’re upselling. Think about once a customer is on your site or in your list. How do you provide more value that they would be more than happy to pay for? What were they going to buy anyways and you were already there with an affiliate link?
I won’t go to deep into this but just know that affiliate doesn’t have to be a one product purchase.
Conclusion
I thought I’d be able to cover this topic in one post. Turns out to be a bad assumption. So what I’m going to do instead is write a Part 2 based off of a few things.
Reply back to this email with questions or things you’d like me to cover in Part 2.
A few small case studies of real websites.
Another thing to remember when it comes to affiliate. If you build an actual audience, you can then transfer your site to selling your own products (ecommerce). Greatly increasing your revenue with a built in audience for a faster ecommerce ramp.
If you have an audience, you can always make money.
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Disclaimer: Nothing written here should be construed as legal for financial advice of any kind. These are opinions and observations, written by an anonymous cartoon Opossum, built up over years working in e-commerce & affiliate marketing.
Great article! Thank you Opossum!
Really enjoyed this, slowly making my way through your sub!