Affiliate revenue as defined by most popular tracking systems and online networks simply means an affiliate obtains some monetary benefit from a completed transaction. Unfortunately, most stakeholders including network managers, third-party vendors and internal affiliate managers generally recommend this narrow view of affiliate revenue as the ideal measure of affiliate success. After all, who benefits if only a quarter of one’s customers completes a sale? However, affiliate revenue management is actually much more complex than that. In fact, the true measure of affiliate success is determined by many variables and requires an unusual assortment of metrics that may vary between individual merchants and networks.
A common metric often used to determine affiliate revenue is commission-based compensation plans such as pay per lead and pay per sale (PPS). Although these commissions may sound attractive, they typically come with many strings attached including: high startup costs, limited resources for acquiring new leads and sales, lack of flexibility regarding exit strategies and potential for abuse. Furthermore, the commissions earned by affiliates often do not fully represent the true costs of promoting the merchant’s products or services since the merchant usually earns their own profit before paying the affiliate. Finally, affiliate networks and marketing firms often fail to provide adequate support and resources to their members.
Another common metric used to evaluate affiliate revenue relates to payment method. Typically, merchants prefer to pay an affiliate for each sale rather than pay for leads or other services since this method produces faster and more reliable money-making results. Affiliates, on the other hand, generally prefer to be paid for performance or for each lead generated rather than for actual product or service sales. Still, the merchant has the option of setting their own payment method that many affiliates find unsatisfactory since most affiliates have a difficult time justifying a large cash outlay for each sale generated.
One of the ways that affiliate revenue can be measured is through the number of referrals received from the merchant’s or network’s in-house affiliate partners. Generally, networks provide their in-house partners with tracking information so that they may view how many referrals their partners generate and learn which partners are generating a significant amount of referrals. However, tracking information provided by the network’s in-house partner does not provide insight into the quality or volume of the affiliate partners’ referrals. In addition, a network may require a significant investment by the network in equipment, software, staffing and training in order to establish the in-house affiliate partnership tracking system.
A relatively new way to measure affiliate revenue is through the conversion of one visitor into one buyer. The majority of networks and merchant accounts do not offer this type of commission because it does not provide an accurate reflection of the number of visitors to a website. Common methods of evaluating this metric include measuring total page views, number of unique visits and page views per visitor. While these metrics provide a good insight into affiliate revenue, they do not provide a full picture of a website’s performance and can often lead to misleading conclusions regarding the effectiveness of an affiliate marketing program.
Affiliate fees can also be confusing. Many merchant accounts demand monthly minimums for affiliate marketing, which can make a large part of an affiliate marketing campaign’s revenue disappear as quickly as it was generated. At the same time, some merchants require a one-time fee that allows them to permanently register the use of a particular affiliate link on a web page. While this fee may sound reasonable, it often charges significantly higher affiliate revenue than the original cost of registration. In addition, it requires that merchants re-apply the fee every month, thereby increasing the cost of affiliate marketing and decreasing its effectiveness over time.
Another common issue in affiliate revenue measurement is the calculation of pay-per-click and affiliate commissions based on estimates of affiliate sales. As noted above, these estimates can prove inaccurate because of wide variability between different advertisers. This makes it difficult to develop accurate metrics that accurately measure affiliate revenue since it is difficult to get an accurate estimate of how many visitors click on links contained within advertisements. Without access to correct data, it is impossible to establish the validity of affiliate marketing pay-per-click and affiliate commissions.
Affiliate networks can help solve these problems by providing merchants with an accurate and comprehensive measurement tool that is free from inaccuracy or uncertainty. By collaborating with a variety of third-party vendors and network operators, affiliate program managers and affiliates can develop mutually beneficial relationships that can further their mutual goals. In return, merchants gain access to an unparalleled source of affiliate revenue streams, as well as the opportunity to expand their business by adding another layer of advertising to their existing network. The bottom line: a good affiliate revenue network will not only help a merchant succeed in its affiliate program, but will also increase sales and website traffic at a significant rate.