Oddly, in the last couple of weeks, I’ve had 7-8 emails from friends asking for some advice on affiliate marketing. It’s weird: I ran Skimlinks for 11 years, and yet as soon as its not mine anymore, people suddenly are curious about the wonders of referral marketing!

The thing is, I don’t *really* know that much about affiliate marketing from a merchant’s perspective. I certainly do if you are a publisher and want to use it to make an income writing about shoppable products. That is what Skimlinks did. But as we didn’t work directly with merchants, I am less familiar with the in’s and out’s of that side of the equation. We aggregated and integrated other affiliate networks, that *did* offer the tracking and marketing on behalf of merchants, but we didn’t do it ourselves.

But, after 11 years in the industry, I guess I do know a little something, so here goes… An intro to affiliate marketing from a merchant’s perspective.

Terminology

Let’s get our nomenclature right, so we are all on the same page:

  • Merchant – is the party that wants to use affiliate marketing to drive referrals and new sales to their business
  • Publisher – is the party that wants to earn money from merchants for driving them referrals and sales. Also called an ‘affiliate’.
  • Customer – is the shopper who is referred to the merchant by the publisher
  • Affiliate network – is the party that a merchant uses to run its affiliate program. They will usually recruit publishers, provide the click tracking technology, handle chargebacks (when a product is refunded), bill the merchant, and distribute funds to publishers based on the chosen attribution model (see below for details on attribution).
  • Skimlinks – Skimlinks (the company I founded) aggregated over 50 affiliate networks and tens of thousands of merchant’s affiliate programs, so that as a publisher, you don’t have to worry about which network’s link syntax you need to use for which merchant, nor log into multiple networks to see your earnings. You just link directly to whatever merchant you want, and Skimlinks will automatically turn it into its equivalent affiliate link for you, and provide aggregated reporting and payments.

Commission

There are different ways a merchant can reward a publisher, and this is entirely based on the type of business you are, the products you are selling, and what behaviours you want to encourage. The norm is to pay a % of the purchase price, usually 2-5% for low margin products, 5-10% for mid-margin products, and 10%-25% for high margin products.

However, if what you are selling is a subscription or a relationship – such as a subscription to a SaaS product or a new customer that will have recurring business with the merchant, you may go for a one-off bonus. Mobile phone and internet subscription companies will do this, as will companies buying new customer leads.

You can get fancy here. I’ve seen some merchants do things like pay a bounty for new customers, but this rarely works as an incentive as the publisher has no idea who your customers are. Some merchants will pay different % for different types of products, but that can sometimes confuse and piss off publishers. It’s best to keep it simple unless you really need to get complex.

Technicalities

The way affiliate marketing works is usually cookie-based. A publisher links to a merchant’s product using an affiliate link provided by the affiliate network. When a customer clicks on that link, they are routed through the affiliate network, where the network’s cookie is dropped, before being routed to the merchant’s product page. If the customer buys that product – now or within the cookie’s lifetime (see attribution below for details) – at the point of purchase, the merchant checks to see if there are any of it’s affiliate network’s cookies on the customers computer. If there are, then it attributes that sale to that cookie ID.

The affiliate network then calculates what commission is payable to what publisher, and pays the publisher at the end of the month. If the customer returns the product, the merchant updates the affiliate network and the commission is charged back.

Attribution

Merchants can set all types of rules for how they will attribute a sale’s commission. The most common and simplest is called “Last Click”, which means the publisher that sent the most recent click to the purchase is the one that is awarded the commission, irrespective of any other publishers that drove traffic to the merchant earlier. The somewhat weak assumption here is that this last click publisher was so influential that they got the customer to make the final purchase decision, and should be thus rewarded. Of course, in reality, this isn’t how people shop. People often read about a product on one site, then do further research on other sites, then think about it for a while, then do some price comparison, and then possibly visit a coupon code site before making a purchase. Using Last Click attribution, only the coupon code site would get the sale’s commission, even though it was likely that first publisher that added the most value to the purchase process.

As a result of the flaws in Last Click attribution, a few other models have sprung up. Merchants can now give different percentage commissions for different types of publishers depending on the perceived value they serve (content publishers tend to be awarded more than coupon code sites). They can also share the commission between multiple publishers, although this is not as common and is quite difficult to do well due to its inherent complexity.

Then there is the contentious area of multi-channel attribution. This makes perfect sense for merchants. There are likely many marketing channels you are using to attract customers, affiliate marketing being only one of them, so it makes sense to work out the role and impact of affiliate versus social media marketing versus search engine marketing versus direct site visits due to brand marketing. Where it gets contentious to affiliates is that some merchants will not pay an affiliate their commission – even if they were the Last Click publisher – if there was another marketing channel touch point. The merchant will give Last Click attribution to, say, Google Search, and pay the publisher nothing.

Honestly, I don’t suggest you do this. Pissing of publishers with this type of shenanigans is a very short-term strategy. The merchants that have really benefited long term from affiliate are those that are generous with content publishers. Why? Because publishers are essentially creating free high-quality content about your brand, on the chance that it drives a sale at your site. It is significantly cheaper than sponsored content and much more authentic; you only pay once there is a sale, unlike all other forms of pay-per-click advertising. And you not only get a sale, you get persistent authentic content created about your brand, that will eventually do well in Google search results, giving you an evergreen source of high quality traffic for perfectly predictable cost-of-acquisition.

Cookies

The majority of affiliate tracking uses first-party cookies. When you define your attribution models, you will also define your cookie lifetime. The more generous you are here, the more publishers will like you. Usually you will set it to be 90 days, that means that if the customer clicks from the publisher’s site, doesn’t buy right away, but returns of their own accord 89 days later, you will still attribute the sale to them, and pay them the full commission. Many merchants are now reducing this to just 30 days or less. Amazon uses a session-based cookie, ie. if you don’t buy right away, the publisher gets nothing.

Here is why you should set it to 90 days: in reality, most purchases are done within a week of the first clicks. More impactfully, the likelihood that the publisher’s cookie will be replaced by another publisher, cleared from the customer’s computer, or unreachable due to a different browser or device being used by the customer, are all so high, that the number of sales you’ll be paying from 2 months after click are negligible. But it is so respectful to publishers, they will be grateful and more likely to write about your products.

Tracking tools

This is what everyone wants to know the most, it seems. How do I do it? I think they assume Skimlinks is the tool, and I hate to disappoint them, but Skimlinks doesn’t work with merchants directly. If you want to create an affiliate program, you need to do one of two things:

  1. Pick an affiliate network
  2. Use a white-label affiliate tracking technology

If you pick an affiliate network, it is more expensive, but you get full-service tracking and reporting tools, account management, and publisher acquisition. If you chose a white-label affiliate tracking technology, some of them are quite full featured (but you pay for it) but most are quite simple, and you have to recruit your own publishers and do all the account management. This means you’ll probably need to hire someone in-house to manage it, as its a full-time job for someone if you want to do it well. Even if you use an affiliate network, you’ll likely need someone in-house to do it well, or hire an affiliate marketing management agency.

So, who should you choose? For affiliate networks, the main guys with a good presence in the UK are:

  • Rakuten Linkshare – big Japanese owned-company
  • Commission Junction – big US-based company
  • Affiliate Window – European-based, and personally, one of the best tech-wise

The best self-managed white-label affiliate tracking software are:

There then then tons of cheap, simple, affiliate tracking technologies. I have no idea which ones are good, there are literally hundreds. I have heard that Refersion and Post Affiliate Pro are good, they are about $90/month each roughly for basic plans.

Publisher recruitment

So, you’ve worked out your attribution model, you’ve decided to use a white-label affiliate tracking solution, you are set up and ready to go… now what? Well, you need publishers to want to write about you now. There is no easy way to do this (unless you use a full-service agency or network). You will need to do your own research on what publishers are likely to be interested in writing about you, you will have to reach out to them directly yourself, and hope that yes indeed they are interested in writing about you. However, affiliate marketing is NOT paid marketing or sponsored content. Unless you are willing to pay publishers a lot of money, they have zero obligation to write about your product, and zero control over what they write about you. That is double-edged sword of affiliate. To get publishers to write authentic unsponsored content about your product, and pay only if and when customers actually buy something from you, you have to hope the publisher likes your product and wants to write about it. Paying a generous commission, using a long cookie lifetime, making it clear you don’t work with coupon code sites, are all things that will make a publisher grateful and more likely to remember you when thinking about what to write about next.

Some merchants will send free product samples to publishers, or offer to lend them a product (when samples aren’t a suitable solution). This is usually appreciated, and will give the publisher the ability to write a thorough, researched, authentic piece. You just have to hope they like it, because you can’t control *what* they say, even if you give them free product. In fact, the publisher is legally obliged to disclose that they were offered free product in their post, and that you pay them a commission, but most good publishers do this really authentically, and it doesn’t deter customers from engaging with the content one bit.

So that is it! If you have additional questions, leave a comment, and I’ll update the post with the answer.