Special Report Affiliate Marketing
Industry Pulse Check
How big is affiliate marketing? Cambridge, Mass.-based Forrester Research rushed to answer the question in 1999, claiming that $10.5 billion in e-commerce sales would pump through affiliates by 2001. Since then, we've not heard a peep regarding size, as affiliate marketing has yet to be clearly defined. The entrance of dozens of privately held cost-per-acquisition (CPA) networks further complicates understanding of this market potential.
It's estimated that roughly $175 million in 2004 fee revenue was captured by the now-public players in the domestic market, with an additional $124 million booked by private ventures. Internet advertising solutions provider ValueClick, New York City, estimates the global affiliate marketing sector as a half-billion-dollar market.
As reflected by various studies by the likes of Forrester Research and Marketing Sherpa, affiliate marketing is alive and well, with marketers rating it the most effective of all online strategies. Yet marketers, ranging from retailers to service-based companies, admit this sentiment mostly is a hunch based on the strategy's pay-for-performance premise—one that increasingly is coming under scrutiny by marketers concerned with potential pitfalls ranging from fraudulent commissions to duplication of marketing efforts in search engines.
The Affiliate and Search Marketing Conundrum
Broadly speaking, affiliate marketing has evolved into a practice wherein marketers rely on affiliates for none, some or all of their paid and "natural" search marketing. This typically can result in an agreeable or stressed relationship between affiliates and marketers due to dueling competitive interests. In essence, affiliates always have known what works best. Brand names and trademarks stand front-and-center. Affiliates were first to master and leverage search on behalf of marketers, but now marketers are beginning to take search back.
Patrice Colancecco, long-time affiliate manager for catalogers, direct marketers and financial services companies—including Eastwood Co.—suggests affiliate marketing has become so search-centric that marketers who maintain a strong search program may not need affiliates. As consumers "surf" less randomly, she says, affiliates use search to net and/or intercept prospective customers, shuttling them on to marketers. Why? She suggests it's easy to get involved in search. "Some affiliates even do their own advertising," she says. "So why would you have them do this when you could do it yourself? Either you consider this suitable outsourcing or you don't know how to do it."