Managing Affiliates in a Rapidly Growing Market

Fall 2005 Issue: Page 110

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Exercising control over your affiliates is a good way to keep your program from spinning out of control as your business grows.

Over the past two years, the online real estate traffic volume has increased exponentially. Part of this dramatic growth is driven by the low interest rate environment, but a bigger reason for the increase is the rapid shift in realtor marketing dollars away from offline media - such as print - toward online advertising venues.

Affiliates play a large role in the success of online real estate. While this rapid growth has led to new opportunities, it also brings significant challenges. Merchants who match consumers with professional service providers must maintain a consistent flow of only the highest-quality leads. Low-converting traffic will frustrate the service provider and may eventually result in unwanted churn. The observations following are true in particular for any merchant who matches consumers with professional service providers.

A good affiliate manager must connect the dots from consumer inquiry to affiliate sites prior to approving any potential affiliate. You should strive to determine the main sources of traffic that a potential affiliate brings to the table. Affiliates can generate traffic a number of ways. The most common methods are cost per click (CPC) campaigns, search engine optimization (SEO) and email marketing.

These are all generally accepted practices of online marketing and can be verified by the savvy affiliate manager. For example, if the affiliate is using CPC campaigns to generate traffic, you can verify this by typing in keywords and looking for the affiliate's ads. If the affiliate is unable or unwilling to provide at least some examples of how the traffic is generated, then you should assume the worst. If you are unable to connect the dots, then it's possible the affiliate is driving traffic using means such as spyware, incentivized clicks or link hijacking. Connecting the dots is important not only to prevent approving a fraudulent affiliate, but also to gauge the quality and potential volume they can deliver.

In addition to connecting the dots, a good affiliate manager should be able to make the best of a bad situation whenever possible. If a particular affiliate or campaign is under-performing, you need to investigate all possibilities to salvage some or all of the relationship. This can be done by adding, removing or modifying product offerings. You can change pricing. Perhaps most importantly, you can change creative and integration techniques.

For example: an affiliate promoting our brand at a national level wanted to drop the program due to poor results. We offered the affiliate a series of custom city-specific links better suited to his network of local sites and were able to improve the affiliate's performance significantly.

In another case an affiliate was promoting one of our products but didn't match the consumers with the appropriate buying service. To turn this around we encouraged this affiliate to start promoting a more appropriate home listings product. This change sent revenue climbing sharply.

In addition to understanding the affiliate- generated consumer traffic, good affiliate managers possess a keen awareness of all consumer traffic channels. To state the obvious: free traffic (SEO or brand recognition) is preferable to inexpensive traffic, which is preferable to expensive traffic.

If free traffic volume increases, the merchant providing professional services should focus more on optimization of existing affiliates and less on recruitment. Aside from ranking traffic by price, you also need to factor in quality. For instance, if SEO traffic is higher quality versus comparable channels, then you should recruit new affiliates that consistently show up well in the search engines for large-volume, relevant searches.

To gain large market share in times of rapid growth, you need to have a flexible affiliate program. One way to do this is to allow affiliates to participate on several different platforms. Affiliates who prefer the online reporting and payment structure of affiliate networks can join under either of those programs. For larger affiliates who want to partner directly, consider offering higher payouts and direct links. On the product side, flexibility could mean offering regularly updated data feeds, including XML feeds and co-branded forms as well as forms of different layout or length. On the payment side, you could let direct affiliates choose between cost per click, cost per lead or even revenue sharing arrangements. This flexibility in terms of platforms, products and pricing is paramount in helping your program expand.

With the recent explosion in Internet advertising, affiliates are bombarded with merchant offers from all angles. To rise above this noise, you need to be an extremely effective communicator. New value propositions such as better payment tiers, contests, fresh creative, case studies, new products and affiliate testimonials must be communicated regularly to existing and potential affiliates. Due to spam filters and overflowing inboxes, email newsletters are becoming a less effective communication method. Try to communicate one on one with larger affiliates whenever possible.

With so many new affiliate applicants each day, it is inevitable that a few bad apples make it through the approval process. To prevent affiliate fraud, you have to routinely deny affiliates that do not respond to initial contact. While the vast majority of existing affiliates play by the terms and conditions of the affiliate program, there are instances where you'll need to take disciplinary action. In cases where affiliates purchase trademarked broker keywords or if an affiliate violates the CANSPAM Act, action must be taken quickly.

Other challenges include taking steps to monitor cost-per-click fraud. CPC management requires additional time for analysis and closer contact with the affiliates. Each month you need to look closely at the revenue generated per click for each affiliate. Unusual behavior is typically easy to spot and must be corrected quickly. New affiliates - especially those who start on the CPC program - can be given a monthly budget cap to your company's exposure to any potential click or lead fraud. As trust builds with an affiliate, this cap can be raised or removed altogether.

Merchants offering CPC products should also have analytics tools with robot filtering mechanisms in place, as well as the ability to track click patterns funneled down the merchant's site. For CPA products, you should monitor each affiliate's lead-to-close rates and raw lead data on a monthly basis to ensure lead quality.

Implementing tight controls will ensure you have a good handle on your existing base of affiliates, which makes it easier to expand your program as your company grows.

MARIE NILSSON is the affiliate manager for HomeGain, a wholly owned subsidiary of Classified Ventures, based in Emeryville, Calif. She has a background in project management for the telecom and chemical industries and holds a Master of Science degree from Lund Institute of Technology in Sweden.

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