SAMPLE: Affiliate Marketing

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SAMPLE: Affiliate Marketing

Buyer's Guide 2009 Sample only, please download the full report from: http://econsultancy.com/reports/affiliate-marketing-buyers-guide

Affiliate Marketing

Sample only, please download the full report from: http://econsultancy.com/reports/affiliate-marketing-buyers-guide

Published May 2009

All rights reserved. No part of this publication may be reproduced or transmitted in any form or by any means, electronic or mechanical, including photocopy, recording or any information storage and retrieval system, without prior permission in writing from the publisher. Copyright © Econsultancy.com Ltd 2009

Econsultancy London 2nd Floor, 85 Clerkenwell Road London EC1R 5AR United Kingdom

Econsultancy New York 41 East 11th St., 11th Floor New York, NY 10003 United States

Telephone: +44 (0) 20 7681 4052

Telephone: +1 212 699 3626

http://econsultancy.com [email protected]

Contents

Affiliate Marketing All rights reserved. No part of this publication may be reproduced or transmitted in any form or by any means, electronic or mechanical, including photocopy, recording or any information storage and retrieval system, without prior permission in writing from the publisher. Copyright © Econsultancy.com Ltd 2009

Affiliate Marketing All rights reserved. No part of this publication may be reproduced or transmitted in any form or by any means, electronic or mechanical, including photocopy, recording or any information storage and retrieval system, without prior permission in writing from the publisher. Copyright © Econsultancy.com Ltd 2009

Affiliate Marketing All rights reserved. No part of this publication may be reproduced or transmitted in any form or by any means, electronic or mechanical, including photocopy, recording or any information storage and retrieval system, without prior permission in writing from the publisher. Copyright © Econsultancy.com Ltd 2009

1.

Introduction Econsultancy‟s buyer‟s guides are the ideal starting place for anybody researching new suppliers in digital market sectors. They contain in-depth vendor profiles; to help you quickly evaluate suppliers and service providers, as well as market analysis to help you put things into perspective. Vendors are selected for the report based on a combination of factors, not limited to but including:  Analysis of capabilities (services / products)  Clients  Experience (qualifications / trade bodies / case studies / client lists)  Expertise (by sector / topic),  UK status (a UK office is preferred, occasional exceptions are made)  Ability to take on and fulfil new projects  Recommendations from trusted sources (or anecdotal evidence to the contrary)  Google visibility  Business model (a high % of turnover should be related to these services)  Company website Econsultancy does not explicitly recommend any of the suppliers featured in these guides, principally because it is impossible for us to work with all of them to form a first-hand opinion. But we do believe - based on an intensive and careful selection process - that the chosen vendors represent quality. Buyer‟s Guides are updated on an annual basis, so the information contained within is recent and thus valid. Send any questions or comments to Econsultancy‟s Director of Research; [email protected]

Further Reading Econsultancy / Affiliate Window UK Affiliate Census http://econsultancy.com/reports/uk-affiliate-census Econsultancy / MediaTrust US Affiliate Census http://econsultancy.com/reports/us-affiliate-census Econsultancy / R.O.EYE Affiliate Marketing Survey Report 2008 http://econsultancy.com/reports/affiliate-marketing-survey-report-2008 Affiliate Marketing Briefing - October 2008 http://econsultancy.com/reports/affiliate-marketing-briefing-october-2008

Affiliate Marketing

Page 1

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1.1

About Econsultancy Econsultancy is the leading source of independent advice and insight on digital marketing and ecommerce. Our reports, events, online resources and training programmes help a community of over 75,000 registered marketers make better decisions, build business cases, find the best suppliers, look smart in meetings and accelerate their careers. Econsultancy is an award-winning online publisher of reports covering best practice, user experience benchmarking, market data and supplier selection aimed at internet professionals that want practical advice on all aspects of ebusiness. Econsultancy also operates a highly popular training division, used by some of the world‟s most prominent brands for staff education, both in-house and via public courses. We provide training across all areas of digital marketing and at all levels from one day courses to diplomas to Masters in Digital Marketing. In addition, we host more than 100 events a year, such as The Online Marketing Masterclass, regular Supplier Showcases and Roundtables, an annual Future of Digital Marketing event, Digital Cream and a range of social events. The Econsultancy site now attracts over 175,000 unique users per month where they access research, read the blog and take part in discussions in the forums. And as a portal to the digital marketing community, Econsultancy members can also link up with other members and digital suppliers through our directories, as well as find a new job or new digital talent using the job listings. Some of Econsultancy‟s client-side members include: Google, Yahoo, MSN, MySpace, BBC, BT, Shell, Vodafone, Yell.com, Dell, Oxfam, Virgin Atlantic, TUI, Barclays, Carphone Warehouse, IPC Media, Deloitte, T-Mobile and Estée Lauder. Join Econsultancy today to learn what‟s happening in digital marketing – and what works. Call us to find out more on +44 (0)20 7681 4052 or contact us online.

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Affiliate Marketing

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2.

Executive Summary

Market valuation Econsultancy estimates that the UK affiliate market was worth £3.82bn in 2008, a 22% increase from £3.13bn in 2007. An estimated £227m was paid last year in commissions and fees to affiliates and networks. The focus of this report is affiliate marketing, with an analysis of market trends and challenges, as well as detailed profiles of both the leading UK affiliate marketing networks and the main UK agencies offering affiliate marketing services. Merchants and publishers are continuing to see an increase in CPA activity, as advertisers come under greater economic pressure to achieve a good and demonstrable ROI (return on investment). Trends covered in this guide include:  CPA model goes from strength to strength  Consumers turn to voucher code and cash-back websites  Issues surrounding “last-click-wins” become more apparent  Affiliates call for a greater emphasis on transparency & communication across the sector  Affiliates develop innovative media methods  More agencies offer affiliate marketing services to clients

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Affiliate Marketing

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3.

The Market

3.1

Focus of Report and Market Definition The focus of this report is affiliate marketing, with detailed profiles of the leading UK affiliate marketing networks and agencies offering related services. There is an extensive analysis of trends and challenges within the UK affiliate market. The guide is intended to be of interest to online retailers and other types of merchants across a range of sectors who are considering affiliate marketing for the first time or reviewing their current approach. It should also be of interest to media agencies, affiliate networks and publishers, as well as analysts and journalists writing about this increasingly influential sector.

3.1.1 Terminology and key stakeholders Affiliate Marketing In the context of digital marketing, affiliate marketing is the practice of a company financially rewarding a publisher (an affiliate) for a sale, customer or lead which has been shown to derive from the affiliate‟s website or email activity.

Affiliates Affiliates are the companies or individuals who attract traffic for their selected businesses (known as “merchants”). They do this in a number of ways, typically through paid search, search engine optimisation (natural search) or email marketing. Affiliates can use a number of digital marketing channels or methods in order to get traffic to merchant websites. Some of these different affiliate “categories” (which are not necessarily mutually exclusive) include:  Search affiliates Pay per click (PPC) affiliates run campaigns within search engines such as Google and Yahoo, bidding on words and phrases to help drive traffic to a merchant‟s website. Merchants are able to choose whether they want to have affiliates bidding to promote their products or services. Additionally, if this route is followed, they need to decide whether the affiliate is allowed to bid on brand terms or generic terms.  ‘True content’ / SEO affiliates Affiliates who run websites that are aimed at a specific niche in the marketplace can be an ideal way for merchants to target users of a specific demographic with their products. These affiliates rely on the quality and specialist nature of their content which lends itself well to search engine optimisation (SEO) and gives them high visibility on the natural listings of search engines. Websites that are categorised in this way can include online games or gambling websites, niche-focused retail and travel-related sites.

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Affiliate Marketing

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Affiliate Marketing Agencies Agencies can add value by working with companies to refine their affiliate marketing activities, for example by helping their clients to work more effectively with networks and affiliates, and by optimising the mix between different digital marketing channels .

3.1.2 Affiliate marketing networks: benefit for merchants The benefits of affiliate marketing include sales increases (or sign-ups and leads), the transparency of return on investment (through the ability to track the origin of sales) and the ability to pay commission to affiliates based purely on performance (therefore removing a large element of financial risk). Although sometimes overlooked for other areas of online marketing, such as email or paid search, affiliate marketing has become an established weapon in the marketer‟s arsenal, complementing and sometimes replacing other types of online and offline marketing as an important channel to market. Networks enable merchants to tap into hundreds, or even thousands, of affiliates without the logistical problems which direct contact with every affiliate would entail. Networks can also provide technology which is trusted by both parties to underpin the relationship.

How many networks should you use? A recurring issue that we come across is affiliates, agencies and merchants questioning whether they are using too many or too few networks. Both affiliates and merchants can use more than one network in order to increase their chances of success, although from a merchant‟s perspective the benefits of belonging to more than one network may be outweighed by the extra administration, duplication of effort and the danger of being spread too thinly.

3.1.2 Affiliate marketing networks: benefit for affiliates Similarly to merchants, individual publishers/affiliates can also greatly benefit from working with a network as they can deal with a single point of contact rather than having to handle administration (e.g. invoicing) across every advertiser featured on their websites. It is much easier for affiliates to receive commission from numerous merchants simultaneously via a single payment from a network, rather than having to deal with separate payments.

3.1.3 Affiliate marketing agencies: overall benefits A key strength of the best affiliate marketing agencies is that they generally have strong relationships with the major affiliate networks and can help to provide clear reporting and insight into how the affiliate channel is performing against other activities. As well as an intricate knowledge of affiliate marketing, agencies should also have a good understanding of their clients‟ online capabilities, aspirations and competitors, combined with the ability to tailor affiliate campaigns accordingly with the recruitment of the most appropriate publisher.

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Affiliate Marketing

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3.2

Market Value and Growth

Econsultancy Econsultancy estimates that the UK affiliate market was worth £3.82bn in 2008, a 22% increase from £3.13bn in 2007. An estimated £227m was paid last year in commissions and fees to affiliates and networks. Despite the recession, the affiliate marketing industry continues to prosper and, in terms of online sales coming from this channel, is on course to be worth well over £4bn by the end of 2009. Although the slashing of marketing budgets and well-documented collapse of companies such as Woolworths has had a negative impact, the increased appetite for performance-based advertising is making up for some of that downside. We estimate that the market was worth £3.82 billion overall last year, and this figure should be seen in the context of research by the IMRG and Capgemini which found that UK online retail sales grew by 25% in 2008 to £43.8 billion.

Value of UK Affiliate Marketing 4500

Millions

4000 3500

2004

3000

2005

2500

2006

2000 1500

1000

2007 2008

500 0

Fig. 1 Graph representative of UK affiliate marketing growth, year on year.

Our affiliate sales growth figure of 22% for 2008, while bullish, is slightly lower than the IMRG figure of 25%. We have taken into account research for the Econsultancy / R.O.EYE Affiliate Marketing Survey Report 2008, based on a survey of merchants, which found that the average proportion of sales coming through the channel had dropped slightly since 2007.

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What the agencies say “Sales generated by affiliates will increase compared to other marketing channels but this will probably be offset by a number of merchants falling by the wayside. The affiliate channel is uniquely positioned to take an increased amount of spend during these tough times, as advertisers look to channel their budget into sectors that negate their risk... “The affiliate sector is a tremendously powerful one for merchants and one that they will continue to embrace. The performance model and the ability to increase online reach is incredibly attractive to advertisers when done correctly.” SAMPLE QUOTE “Merchants are examining how and where affiliate marketing fits into their overall marketing plans. Merchants are looking to co-ordinate affiliate marketing with search and looking to use affiliates to generate additional sales. In the next 12 months we‟re likely to see merchants make additional effort on digital co-ordination with more de-duplication across channels, user engagement mapping to understand the effect of affiliate exposure on other channels and the careful selection of strong affiliates.” SAMPLE QUOTE

What the networks say “In this market, it is almost impossible to guess a percentage of growth, but we can say, out of all the digital channels, we expect the affiliate marketing channel will benefit more during the downturn due to its cost per acquisition model. That said, the pace at which the affiliate marketing sector develops will not be nearly as aggressive as in previous years as most major e-tailers have now adopted an e-commerce strategy and their affiliate marketing programmes have begun to mature. As this happens, the focus will be on affiliate within the broader mix or multi-channel marketing and ensuring quality over quantity.” SAMPLE QUOTE “Affiliate marketing, like any kind of marketing this year, is in for a rocky ride - there‟s just no getting around the impact that a dip in consumer spending will have on advertiser budgets. But, just as necessity is the mother of invention, so a recession should drive, not hinder, advances in the sector.” SAMPLE QUOTE

3.2.3 Size of market compared to other online marketing channels It is instructive and insightful to compare the size of this market to other online channels and sectors:  The UK market for Search Engine Marketing was worth an estimated £2.75bn in 2008  The UK market for Email Marketing Platforms and Services grew to an estimated 24% to a value of £274m by the end of 2008

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 During 2008, combined UK Usability and Accessibility markets were estimated to be worth £214m.  The value of the UK market for e-commerce technology is likely to be around £540 million during 2009.  The UK market for web analytics was valued at £78 million through 2008.

3.3

Market Trends CPA model goes from strength to strength Overall, the cost-per-acquisition (CPA) model continues to be a major strength within this market as companies focus on performance-based marketing and seek to lower their risk. Merchants and publishers are continuing to see an increase in CPA activity, as advertisers come under greater economic pressure to achieve a good return on investment from their marketing spend. As an example, BSkyB announced last year that over 50% of all its online ad budget would be placed into CPA media – and it fully expects this proportion to increase as time progresses.

Consumers turn to voucher-code and cash-back websites A major trend in digital marketing in the last two years has been a noticeable rise in consumers using cash-back and voucher code sites to save money. This is because people are becoming more conscious about their shopping habits and are actively trying to reduce their spending on various good and services. Over the past six months , especially leading up to (and during) the Christmas retail period, traffic to such sites has been meteoric. Below is a screenshot from Google Trends showing the search data for the term “voucher code”.

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4.

Strengths, Weaknesses, Opportunities & Threats (SWOT) This section contains a „SWOT‟ analysis for the affiliate marketing sector, focusing primarily on networks and agencies.

4.1

Strengths  Affiliate marketing has proven itself to be a highly cost-effective channel, especially given the CPA model that continues to drive it  The performance-based model continues to attract merchants. – Despite the recession, the affiliate marketing channel continues to have a strong growth rate, which is testament to its strength as a marketing channel.  According to the Econsultancy / R.O.EYE Affiliate Marketing Survey Report 2008, 46% of merchant respondents view the channel as very cost-effective. – 29% agency respondents said that affiliate marketing drove high volumes of traffic or conversions for their clients. This was second to paid search at 58%.

4.2

Weaknesses  For some company directors, affiliate marketing still has a “grubby” stigma attached to it because of unscrupulous behaviour by a minority of affiliates . – Despite this, the industry has done well to shake off misconceptions and to become an accepted and respected marketing method – although it is recognised by most experts that there is a long way to go yet.  Affiliates who have gone against the wishes of merchants by bidding on brand names have tarnished the image of the industry and made some merchants very wary. Brand protection challenges are a major issue. – Trust and perceptions of the affiliate marketing channel can be an issue for many merchants, as the affiliate channel can be abused and exploited by unscrupulous affiliates.

4.3.

Opportunities  Affiliates seem reasonably very positive about the economic crisis providing an opportunity for growth, with 55% of respondents from 2009 UK Affiliate Census saying this. – The entrepreneurial spirit of affiliates means they can see a way of making money where others are pessimistic or see disruption to the status quo.  Other opportunities are becoming increasingly apparent, such as mobile, social media and video channels. Social shopping sites, such as Osoyou, together with social networking sites such as Facebook, allow merchants to reach groups of self-selecting users. Many believe that social networking will be the major driver of further growth in the online advertising sector.

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Affiliate Marketing

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5.

Tips and Pitfalls

5.1 Introduction: Finding the right network In order to identify the most suitable network - or networks - for affiliate marketing it is important to understand that different networks have different selling points, in terms of both their technology and their services. This chapter, in addition to the detailed company profiles and market positioning charts contained in the next sections, will help you focus on what your company needs and help you to find the right match. It is also worth consulting our Affiliate Marketing Request for Proposal (RFP) template.

What the networks say “Clients are placing a higher value on the CPA model over other forms of online marketing. We believe that clients will give more consideration to the types of affiliates they work with, e.g. whether they use voucher / loyalty sites and how much they incentivise networks, as every penny will have to be justified.” Helen Southgate, dgm

5.1.1 Can affiliate marketing help you to meet your sales and marketing objectives?  Can affiliate marketing help you to reach and exceed your business targets?  What advantages will affiliate marketing have over other types of online marketing, for example pay-per-click (PPC) or display advertising?

5.1.2 Do you require an affiliate network (or networks) to help you?  Do you have the expertise, resources and access to the technology which will enable you to run your affiliate marketing in-house?  Do you want total control over your entire affiliate programme without being tied to any third-party terms?  Do you have access to a software package which will give you the best chance of succeeding?

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Affiliate Marketing

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5.1.3 How can you integrate affiliate marketing within your overall marketing strategy?  Do you have the internal buy-in and co-operation to ensure that your organisation is looking at affiliate marketing within a wider framework?  Is your approach to affiliate marketing in tune with your wider acquisition and retention strategies?  Do you know customer lifetime values by marketing channel?  How will any branding benefits of affiliate marketing be taken into consideration when judging the success of campaigns?

5.2

Introduction: Finding the right agency If you are a merchant looking to use an agency for your affiliate marketing activities, the following considerations need to be made.

What the networks say “Agencies will become more prevalent and relevant to the affiliate marketing sector and for this reason, we have developed a dedicated team in the UK. Agencies have started to invest in more resource and are taking on more responsibility for their clients‟ programmes and we are seeing some terrific results which we are keen to build on.” Alison Guise, Commission Junction

5.2.1 Do you need an agency?  What kind of online marketing activities do you run? 

A large-scale operation or a small, niche business?

 Do y0u have agencies or consultants running other online campaigns for you?  Do you have an allocated budget to outsource external marketing activity? – Will this cover any agency costs or fees?  Is this service an add-on or do they have a dedicated team working on affiliate marketing?

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Affiliate Marketing

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6. Network Market Positioning Charts 6.1

Explanation for charts Chart 1: Business Focus & Geography The vertical axis charts to what degree the network has an exclusive focus on the UK versus having a more international outlook (for example in the United States and/or wider Europe). The horizontal axis charts whether the profiled company is exclusively an affiliate marketing network or whether the affiliate network is part of a broader suite of marketing services available to the client. The light blue circle denotes the company‟s current position while the dark blue circle reflects their medium and long-term aspirations. If the circles are in the same position, the company is happy with its current market positioning and has no plans to change. A company positioned in the bottom right quadrant has an affiliate network as part of a wider offering and is currently focused exclusively in the UK market.

Chart 1 – Business Focus and Geography

UK and beyond (e.g. Europe and US)

Where we are going

Where we are now UK only Exclusively an affiliate network

Affiliate Marketing

Affiliate network is part of a wider range of marketing services

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Chart 2: Pricing This chart shows the pricing model of the profiled network. The vertical axis indicates whether or not affiliates have to pay to belong to a network. The horizontal access charts the balance between performance-based charges and setup/management costs. A network positioned as shown below will not charge affiliates for belonging to its network. The merchant will only be charged based on performance (in the form of over-ride fees).

Chart 2 – Pricing

Affiliates pay charges

Where we are going

Where we are now Free for affiliates Performance-based pricing only

Affiliate Marketing

Set-up and management charges

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6.2

Network Company Positioning: Summary Diagrams Business Focus & Geography

Affiliates pay charges

1

Free for affiliates Performance-based pricing only

1

2

Affiliate Window

affilinet

8

9

Online Media Group (OMG)

Paid On Results

Affiliate Marketing

Set-up and management charges

3

4

5

6

7

Clash-Media

clixGalore

Commission Junction

dgmAffiliates

Linkshare

10

11

12

13

Platform-A

TradeDoubler

Webgains

Zanox

Page 14

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Pricing

Affiliates pay charges

1

Free for affiliates Performance-based pricing only

1 Affiliate Window

8 Online Media Group (OMG)

2 affilinet

9 Paid On Results

Affiliate Marketing

Set-up and management charges

3

4

5

6

7

Clash-Media

clixGalore

Commission Junction

dgmAffiliates

Linkshare

10

11

12

13

Platform-A

TradeDoubler

Webgains

Zanox

Page 15

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7.

Network Supplier Matrix

Vendor Matrix: A fast guide to services

Services offered Affiliate Management



























Affiliate Recruitment



























Affiliate Support



























Account Management



























Consultancy



























Two-tiered programme



























Private affiliate programme





















































PPC assistance and control



























Competitor Analysis tools



























Merchants that offer drop shipping



























Role-based user levels



























Online Accounting



























Grouping of affiliates into categories









































































































Multi Currency



























Multi Lingual



























Multiple programmes under the same account

Features & Functionality

Different commission based on affiliate performance or group Different commission based on products/services Visibility on Click Through Ratio (CTR)

Affiliate Marketing

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Vendor Matrix: A fast guide to services

Payment model supported/Tracking & Reporting capabilities CPA



























Pay Per Lead (PPL)



























Pay per Click



























Pay per Impression (CPM)



























Offline tracking



























IP-based tracking



























Database tracking (non cookie)



























Real-time tracking





















































Banners & Buttons



























Rich Media



























Deep links to products





















































Pop Ups & Under



























Search Boxes



























Email Marketing



























Pay-per-Call



























Co-registration



























RSS



























Tickers



























Affiliate performance incentives or bonuses

Linking Methods Offered

Product Feeds Dynamic Linking

Affiliate Marketing

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8.

Network Supplier Profiles

8.1

Blank supplier profile

Company Details Company Name Company Logo URL UK Head Office Address Other locations Relevant Contact Names Contact Telephone Contact email Company Proposition Brief Company History Number of UK full-time Employees Revenue for 2008 or last accounting period 2008 year-on-year growth Projected revenue for 2009 Projected year-on-year growth for 2009

USP What sets you apart from competitors?

Clients Merchant list Details of sector specialisation Do you run adult programmes?

Case Study UK Case Study

Services offered Affiliate Management Affiliate Recruitment Affiliate Support Account Management Consultancy

Affiliate Marketing

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Company Details Two-tiered programme Private affiliate programme Multiple programmes under the same account PPC assistance and control Competitor Analysis tools (please give details if applicable) Merchants that offer drop shipping Other

Features & Functionality Role-based user levels Online Accounting Grouping of affiliates into categories Different commission based on affiliate performance or group Different commission based on products/services Visibility on Click Through Ratio (CTR) Multi Currency Multi Lingual Other

Payment model supported/Tracking & Reporting capabilities CPA Pay Per Lead (PPL) Pay per Click Pay per Impression (CPM) Offline tracking IP-based tracking Database tracking (non cookie) Real-time tracking Affiliate performance incentives or bonuses Other

Linking Methods offered Banners & Buttons Rich Media Deep links to products Product Feeds

Affiliate Marketing

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Company Details Dynamic Linking Pop Ups & Under Search Boxes Email Marketing Pay-per-Call Co-registration RSS Tickers Other Where are banners hosted?

Costs and pricing for merchants Initial set-up/technical integration costs What services are included with this? Do you charge a monthly management fee? If so, how much is this? Do you charge for ongoing technical support? How much override / commission do you take? When do merchants get invoiced? Please provide any other relevant cost and pricing details

Policy information What is your policy with regard to communication between Merchant and affiliates? What is your policy with regard to affiliates bidding on brand names? What anti-fraud protection measures do you have in place? What policies and initiatives do you have in place to combat spyware/malware/ adware? How do you vet affiliates before they can join the network? What control do Merchants have over their affiliates?

Affiliate Marketing

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Company Details What visibility do you give Merchants on performance of affiliates? What information does a Merchant have to pass back to your software with regards to tracking a sale or lead?

Other information Please provide any other relevant information

Affiliate Marketing

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9.

Agency Supplier Profiles

9.1

Blank Agency Profile

Agency Details Company Name Company Logo URL UK Head Office Address Other locations Relevant Contact Names Contact Telephone Contact email Company Proposition Brief Company History Number of UK full-time Employees Revenue for 2008 or last accounting period 2008 year-on-year growth Projected revenue for 2009 Projected year-on-year growth for 2009

USP What sets you apart from competitors? Clients Details of sector specialisation

Case Study UK Case Study

Affiliate Marketing

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All rights reserved. No part of this publication may be reproduced or transmitted in any form or by any means, electronic or mechanical, including photocopy, recording or any information storage and retrieval system, without prior permission in writing from the publisher. Copyright © Econsultancy.com Ltd 2009