What Exactly is Performance Marketing or Performance Advertising?
Performance marketing, also called “Affiliate Marketing,” is quite simple – advertisers pay their marketers (or publishers) once a pre-determined action is completed. That action can be a lead or a sale of the advertised item. It has been described as revenue sharing or paying a commission for referred business. The actions are tracked electronically and publishers are paid out either by the advertiser itself, or through a go-between company, known as an affiliate network such as shareasale.com, CommissionJunction.com, integrate.com or LinkShare.com – just to name a few of the 100s of networks out there.
According to the Performance Marketing Association, performance marketing is a multi-billion dollar industry that continues to grow year-over-year. There are more than 200,000 affiliate publishers and over 5,000 advertisers in the performance marketing space.
I recently returned from Affiliate Summit in Las Vegas where I was surrounded by performance marketers for three days. I think the best introduction for anyone new to this space, whether you are an advertiser or a publisher, is a short glossary of terms.
Advertisers – The company that advertises their goods or services and pays out a fee when a particular action is completed.
Publishers – Individuals or corporations who promote products for advertisers on their websites. This can be done through a static banner ad, a rich media ad or text link on a website or email newsletter.
Affiliate Network – which was briefly explained above, is an intermediary between advertisers and publishers. There are various Affiliate Networks such as CPA networks, CPC or CPM networks for display ads and lead generation networks. One of the largest CPA networks is Clickbooth.com.
Affiliate Manager – runs the affiliate program on behalf of the advertiser, generates sales by establishing relationships with affiliates, tracks sales and pays commissions.
Text Link – Is a link within the body copy of a website and if clicked on, and the desired action is completed by the person who clicked on the ad, the publisher gets the pre-determined commission. For example, if I had a site where I was promoting Valentine’s Day, I might have a text link such as: Spice things up for Valentine’s Day or any day! Enjoy our huge selection of sexy costumes at great prices www.FrightCatalog.com.
Lead Generation – the creation or generation of leads for advertisers by marketers (or publishers).
Cookie – How do these companies know how and who to give commissions to? Cookies are small text files that contain a unique ID tag placed on a computer or a website when you search the web (according to wisegeek.com).
Sub ID Tracking – Many affiliates have more than one site (or newsletter), and they would like to track their affiliate links from these multiple sources. Also, affiliates that provide rewards or incentives to members need to distinguish which person referred a given action. (Definition provided by Affiliate Tip Blog).
Datafeed – is a mechanism for users to receive updated data from data sources. Data feeds are used in eCommerce type affiliates sites where product feeds are uploaded as CSV files and an online webshop can be created in a matter of hours (if you’re fast).
So Why Am I Writing This Post?
I love the affiliate space, I’ve met some of the smartest people in my career as a marketer in the affiliate space. They are driven, they are hungry and they know how move a product. The affiliate space is similar to the Wild West – there is crazy money out there and there are some guns a blazin’. The space is getting more regulated and there are more and more professional businesses that are emerging.
Why is performance marketing right for an advertiser? It is considerably less expensive than traditional advertising with upfront costs. Some networks charge advertisers to run their affiliate programs (some more than others) but these fees can always be negotiated. The advertisers pay their publishers if they perform – hence the term performance marketing.
An important part of a strong affiliate program is a great affiliate manager. Your manager will select the publishers you work with, they will work with your affiliates and they will help them perform. Depending on the advertiser, some will pull together custom creative for their affiliates, they will build programs around their best affiliates, etc. There are many ways in which an advertiser, and their affiliate manager, can help their affiliates succeed.
Here is the best part of an affiliate program for an advertiser, if it fails, or does not go as you had expected, you can easily recover by changing your plan. Commissions can be increased or decreased, the number of publishers you open your doors up to can be increased, and if needed, you can rectify a failing program by pulling the program. That is the nice part about all digital marketing, anything can be changed easily and quickly.