For sites looking to monetize their existing traffic through affiliate marketing, a major determinant of success is picking the right offers to run. The difference in earnings from a bad offer and a good one can be enormous. Unfortunately, finding the “right” offer isn’t exactly easy; if you’re using an affiliate marketing network such as Commission Junction (now CJ Affiliate), SharesASale, or LinkShare, you will have literally thousands of affiliate offers available to you.
As with many aspects of Web monetization, the exact strategies will vary from site to site. There’s no universally superior affiliate marketing offer or merchant. There are, however, some general guidelines on factors to consider when evaluating potential affiliate marketing offers. We’ll dive into several of these below. We’re using screenshots from ShareASale throughout this article to illustrate the process, but the tasks and terms will be generally similar across the major affiliate marketing networks. (By the way, if you’re enjoying this article, you may want to subscribe to our free newsletter; we’ll send monetization tips straight to your inbox each day.)
The major affiliate networks will have thousands of offers available to you. The vast majority of them won’t be appropriate for your site, in the sense that the products or services advertised aren’t relevant to your audience.
One of the major factors that determines affiliate marketing success is the click rate on your site, or the percentage of your visitors who click on an affiliate marketing link. The more targeted and relevant the offers you present, the more likely your visitors are to click through to the merchant site.
Every network offers affiliates a way to filter through the numerous offers presented. Take the time to go through the various categories or search for specific merchants that you think would do well on your site. There’s no set of rules for filtering through the options; you’ll ultimately need to rely upon your familiarity with your audience and your gut feelings about what types of offers will perform.
If your site is more general in nature (e.g. a personal blog or general news site), you may have a bit more flexibility and a deeper pool of initial candidates.
The commission is generally the percentage of a sale that is paid to the affiliate for referring a customer. The commission percentage can range from the low single digits to more than 50%. (E-products generally have the highest commissions since the margins are close to 100%.)
Though commission rates are obviously important, this number definitely needs to be considered in connection with the type of offer. A merchant offer that pays 50% commission seems very attractive in a vacuum, but if the product offered isn’t relevant to your audience and the creative is no good the results will probably be uninspiring.
In other words, the equation for affiliate marketing revenue has several variables:
Revenue = Visitors x Click Rate x Conversion Rate x Average Sale Price x Commission
In many cases, offers with the highest commission may result in sub-optimal click or conversion rates. The commission percentage only comes into play if you actually generate sales.
Some offers will feature unique wrinkles in the commission structure:
Multi-Tiers: While most commissions are a flat fee, some offers will pay out different percentages depending on sales volume.
Bonuses: Some merchants will offer bonuses for reaching certain sales thresholds, creating another opportunity to generate revenue for major affiliates. For example, a company may offer a $500 bonus to affiliates that generate $25,000 in sales in any given month. While only a very small percentage of affiliates will ever hit this target, it can translate to a higher effective commission rate (the extra $500 on $25,000 in sales is effectively an additional 2% commission). Here’s an example of a bonus commission offer (in this case, $625 for hitting the $25,000 mark and $1,250 for generating $50,000 in monthly sales):
The presence of multi-tier pricing and bonuses can obviously increase the overall attractiveness of an offer.
The hardest aspect of an affiliate marketing offer to evaluate may also be the most important. Your ability to drive traffic to merchant sites via affiliate links is one of the primary revenue drivers, and it depends in large part on the tools you’re given. These tools are the advertisements merchants have available for affiliates to use on their site. The better the ads are, this more clicks they will get.
Networks will generally provide a preview of the creative files a merchant has before you sign up. There are a couple elements of ads to evaluate:
Technical aspects, such as sizeOverall qualityThe first point is straightforward enough; affiliates need to identify offers that include ads that will fit easily into their site. For example, if your site has only 300×250 ad units you’ll want to stick only to offers that have a 300×250 ad.
Harder to evaluate is the quality of the ads.
Generally, larger and wealthier merchants will be able to spend the time and money to produce a wide variety of high quality ads.
Affiliates receive credit for a conversion by placing a cookie on the computer of visitors they send to a merchant site, allowing the network to attribute sales to specific partners. Many merchants will give credit for a sale to an affiliate even if the sale comes after the initial visit to the site. For example, assume:
Visitor clicks affiliate link on publisher site;Visitor browses merchant site, but doesn’t buy anything;Visitor returns to merchant site (by typing in URL) a week later and completes purchase.Many merchants will still give credit for this sale to the affiliate, even though the visitor came directly to the site and not through an affiliate link when they completed their purchase. This is a fair solution in many cases, since many customers take time to make a decision and commit to a purchase. In the scenario above, the affiliate still provided a valuable service to the merchant–getting the customer to their site–and deserves to be compensated for that.
Here’s an example of a cookie that lasts for almost 6 months:
A 30-day cookie is the standard, but there can be quite a bit of variation here. Some cookies expire after just a week, while others run indefinitely. From an affiliate perspective, the longer the cookie length the better.
Many networks provide metrics on the earnings of other affiliates with certain offers. The standard metric is EPC, or earnings per click. This unit is generally presented as the total earnings for every 100 clicks received. An EPC of $97 means that for every 100 clicks on an affiliate link to that merchant, affiliates are generating $97 in revenue.
EPC can be converted to RPM, or revenue per thousand impressions, as follows:
RPM = (EPC / 100) x (CTR x 1,000)
This assumes that you know (or can estimate) the click rate that an affiliate offer will get on your site.
This metric is a way of summarizing the conversion rate, average ticket price, and commission percentage. It does not take into account the click rate that an offer will receive. So while EPC is certainly a useful stat to consider when evaluating potential affiliate offers, it must be considered alongside the click rate an offer will receive. A great EPC combined with a bad click rate won’t translate to great earnings. (In other words, the highest EPC isn’t necessarily the best offer.)
Reversals refer to completed sales for which the commission is cancelled and returned. This can happen for a number of different reasons:
The order was cancelled by customer (and refunded by merchant);The transaction was a duplicate (i.e., customer card charged twice);The transaction was fraudulent;A violation of the merchant’s affiliate policy was committed.Reversal rates are generally in the low single digits; it’s standard for about 1% of transactions to be reversed. If you see offers with extremely high reversal rates, that could be a red flag. It doesn’t mean you should necessarily stay away, but it’s worth understanding why so many transactions are returned. For example, there’s something strange going on with this merchant:
A lower reversal rate equates to higher revenues.
Affiliate marketing compensation arrangements generally fall into one of three categories:
Pay-per-sale (most common)Pay-per-lead (somewhat common)Pay-per-click (pretty rare)The pay-per-sale and pay-per-click structures should be pretty obvious. Under a pay-per-lead arrangement, affiliates can get paid even if the merchant doesn’t generate any revenue. In most cases, this would involve earning a commission when a referral starts a free trial to a service. Even if they never pay for that service after the trial expires, the commission is earned.
You may eventually determine that certain types of pricing arrangements work better on your site and with your audience. Excluding pay-per-sale offers, however, will dramatically limit the pool of options at most affiliate networks.
Success in affiliate marketing ultimately comes down to finding the right offers for your audience, and effectively funneling your traffic to your merchant partners. Picking the relevant offers that feature attractive commissions is a tough process, but one that is worth spending a considerable amount of time on.