Affiliates Desperately Need a Business Plan
Web Marketing Today, Issue 61, October 1, 1999
A lot of Internet newbies look at affiliate programs as a way for them to retire and sail to Tahiti while their website keeps chugging away generating dollars they never have to work for.
|
Ranked by "Click-Throughs" |
Top 10 |
Top |
Bottom |
Total of 287 "active" affiliates in September |
|
Displays |
25% |
60% |
40% |
26,954 |
|
Click-Throughs |
75% |
85% |
15% |
735 |
|
Click-Through Rate |
8% |
4.1% |
0.9% |
2.7% |
|
Sales (percent of total) |
60% |
80% |
20% |
This data indicates several things, which I think are probably fair to generalize:
- Most affiliates aren't serious . Of a total of 1,049 affiliates who signed up for my affiliate program, only 287 (27%) were "active" in September, that is, had a link to my site.
- Most affiliates don't generate much traffic . In my case, 7% of the active affiliates generated nearly 50% of the displays of my banner or search box graphics, and 80% of the click-throughs.
- Most affiliates aren't very targeted . I found that the top 20% of my affiliates had an average click-through rate (CTR) of 4%. The other 80% averaged 0.9%
The 80/20 Pareto Principle postulates that 20% of the people do 80% of the work, and you can see it in operation here. While the top 20% got 80% of the sales, the bottom 80% got only 20% of the sales.
The average "bottom 80%" affiliate showed my banners and search boxes only 45 times in September, and had less than half of one person click on the banner. (Now I suppose this could be a full person who was only 40% there, too. I've met a lot of those people.)
(If you're a subscriber to Web Commerce Today, you'll read soon what these kinds of figures indicate about merchant affiliate program strategies. If you aren't a subscriber, why don't you subscribe now at http://www.wilsonweb.com/wct/)
A Typical Affiliate Site
This is what I found when I picked at random a site fairly typical of the bottom 80%.
It was a "free" website consisting of 8 webpages. On these 8 pages you find a little bit of content, 200 to 500 words per page on how to put together a website and make money on the Internet, and 286 links (and some linked graphics) to various affiliate programs, mine being one. I must say that some of the links were in context with the written content of the page, but most weren't. This particular siteowner had 30 impressions on a link to my site in September, so I am guessing the site had about 1000 impressions total in September (since the home page would have gotten more than the page my link was on).
Now if I were to venture to describe the business plan for this site (and this is typical), it is: put up some webpages with a little bit of information (nothing unique here), sign up with as many affiliate programs as you can find, and make money.
My guess is that VERY little money is made from this site.
Why little money? Not enough traffic.
Why not enough traffic? Nothing to come to this site for.
You Can't Break the Laws of Web Marketing
Wilson's First Mutable Law of Web Marketing is the Law of the Dead End Street. "Setting up a website is like building a storefront on a dead-end street. If you want any shoppers, you must give them a reason to come." (See my "Five Mutable Laws of Web Marketing," Web Marketing Today, Issue 55, April 1, 1999. http://www.wilsonweb.com/wmta/basic-principles.htm). 80% of affiliates (using Mr. Pareto as my authority) have no content, nothing that really draws people to the site.
There is no free lunch on the Internet. You've got to give something to get something, which is Wilson's Second Mutable Law of Web Marketing: The Law of Giving and Selling, " Attract visitors to your site by giving away something free, and then try to sell something additional to those who visit." 80% of affiliates don't give anything away, and then wonder why they're not getting more visitors, more revenue.
A Book-Selling Example
I want to give you an example of a successful affiliate site now so you can see how this can work, and get a reality check. I consider my own site a successful affiliate site because it typically brings in a little less than $1,000 each month in referral revenue. I'm thankful that I don't have to live on that $1,000 per month, but I am thankful for it as one stream of revenue.
I have about four affiliate programs that bring in the bulk of my referral revenue. The most prominent of these is Amazon.com. On the right side of nearly every page in my 750 page site, in the area not seen by 640 x 480 pixel monitors, is a list of Web Marketing and E-Commerce books, most linked to Amazon.com. Since my site provides information on Web marketing and e-commerce, these are books fit well as part of the information. In other words, they are in context. I also write book reviews, and include book links at the end of each review -- placing the books even deeper into context.
If you'd like to see the results for a typical week, I have placed online my Amazon.com Affiliate Report for the week of September 26 to October 2, 1999. http://www.wilsonweb.com/wmta/991001amazon-report.txt Here are some salient facts from the report:
|
Unique Visitors to Amazon from my site |
1,466 |
|
|
Book pages viewed |
3,000 |
|
|
Books purchased from a direct link |
22 |
28% |
|
Books purchased via browsing at Amazon.com |
57 |
72% |
|
Total Books purchased |
79 |
|
|
Revenue from a direct link (at 15%) |
$71.21 |
59% |
|
Revenue from browsing (at 5%) |
$49.82 |
41% |
|
Total revenue |
$121.03 |
|
|
Unique Visitors to Amazon from my site |
1,466 |
|
|
Approximate page views on my site that week |
50,000 |
|
|
Click-Through Rate for All Amazon Links (several assumptions here). 1466/50000 |
2.9% |
|
|
Conversion Rate (Amazon visitors to purchases, assuming one book per purchase). 79/1466 |
5.4% |
|
|
Effective CPM for my book "real estate". $121.03/50K |
$2.42 |
|
Here's my analysis. The Click-Through Rate (CTR) is pretty good (2% to 4% is pretty typical for my site, though fairly often banner ads go to 8% CTR). The Conversion Rate, too, is quite good (if you accept the assumption of one book per shopper, which is probably isn't true). Of course, Amazon.com has a pretty high trust level and I probably have higher than average past Internet shopping experience among my visitors.
I think it's interesting that even though nearly all visitors to Amazon.com came through a direct link to a book, only 28% of the purchases were from direct links and 72% from browsing (though the 28% of direct link purchase constituted nearly 60% of my revenue).
Now let's examine this another way. If Amazon.com had paid 15% on ALL books sold (total sales price $1,471.13), I would have made $221 for the week. If they had paid only 5% it would have cut my earnings to $74 for the week.
Now let me share my business plan: generate as much traffic as possible by means of dynamite content to provide people for four main streams of revenue: (1) services to clients, (2) advertising, (3) subscriptions, and (4) affiliate programs.
The Bottom Line Is Traffic
The message I hope you've been getting is that affiliate programs don't get you rich. They can provide a supplement to other income from your site, but they probably won't make enough by themselves to live on. Your site must be about something attractive, interesting, absorbing in and of itself. Two things drive traffic: (1) advertising and (2) content. Both are expensive (either in terms of money or time), nothing is free.
So I may never sail away to Tahiti while affiliate programs pay my way. I'm too busy creating content. But the content drives traffic to increase each of my four sources of revenue -- and the extra income is nice, especially since I was going to create the content anyway.
