Paying for What You Get

As we’ve discussed before, setting commission rates and other affiliate payments is a critical component of your program’s success. But there’s more than just payout rates to consider when making sure your affiliates are fairly compensated for their performance. Some months ago, market research firm AdKnowledge released some interesting findings in its quarterly Online Advertising Report.

Specifically, AdKnowledge made a startling observation: On average, across multiple advertisers and campaigns tracked over the previous six months, there were more conversion events from users who only viewed an ad, but did not click, than from users who clicked.

Huh? A greater number of web users “viewed and bought” than “clicked through and bought.” Here’s how it works. First you show web users a banner. At the same time, you cookie their browser, indicating the advertisement they saw and the site on which they saw it. If they click the banner, you read the cookie and record it. Whether they click or don’t click, if the same web users later make a purchase, you read and record the same cookie. After some period of time, simply sift through the data and if your results are like AdKnowledge’s, you’ll have more nonclicking customers than you do clicking customers. Wow!

On one hand this is great news for brand marketers banners appear to actually have branding value. After all, visitors saw your banner, never clicked, and still bought! This led AdKnowledge to a few other important conclusions:

  1. The potential ROI impact of Internet advertising is much greater than previously thought because advertisers only track sales from clicks and tend to ignore the brand impact on sales.

  2. Advertisers who base decisions only on clicks, or even on postclick conversions, may miss some important effects of their campaign, including the impact of an impression on the propensity to convert.

However, when viewed through the eyes of an affiliate, this can be quite troubling. If a nonclicking visitor views an affiliate banner and later buys, the affiliate is left with no reward.

According to AdKnowledge’s figures, the amount of undercounting is significant. Affiliates are likely being credited for less than half of the sales they produce. Which means as a merchant, you’re crediting your affiliate program with about half of the sales it deserves. It also means you’re inaccurately crediting another significant chunk of your sales to viral marketing, word of mouth, or other basically “free” marketing activities. In reality, your site may not be growing nearly as virally as you might want.

To correct the tracking problem, some affiliate networks like Dynamic Trade have come up with a simple solution. By offering merchants the ability to set a “persistence” interval, such affiliate networks provide affiliates with the protection they need. This setting basically determines the number of days until a particular merchant cookie expires. The longer the setting, the more time an affiliate has to earn a commission on nonclick purchases.

Affiliate marketers need to find ways to correctly recognize affiliates for transactions generated by nonclicking visitors. These incremental costs are outweighed by the value of a thriving affiliate base. The result? More accurate tracking for all involved. Marketers pay affiliates for ALL the performance they drive. In the process, marketers also get clearer overall tracking of other marketing activities including the ability to understand the impact of viral programs and word of mouth.

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