Niche Marketing

There is safety in numbers. At least, so hundreds of thousands of websites are hoping. Faced with a softening advertising market and rabid price competition driving yields ever lower, many are choosing to band together in schemes known as affiliate marketing, in the hope that, by combining forces, they can attract a greater share of the dwindling marketing dollars.

Simply put, affiliate marketing means sites of a vaguely similar nature clubbing together to accept the same set of ads from advertisers.

For the advertisers, it looks like a convenient way of getting greater exposure - instead of having to go and hunt out sites with the kind of visitors they want to target, they can gain access to groups of suitable sites at one swoop.

For the sites, it's convenient because they are fed ads through their affiliate networks, instead of having to go out and laboriously track down the advertisers themselves. It is easy to see the appeal.

There is no shortage of affiliate networks. Commission Junction, which claims to be the world's biggest such network with 470,000 sites affiliated to it, UK Affiliate, with 48,000 sites, and a host of smaller names are targeting the UK.

These middlemen claim to take the hassle out of marketing for advertisers. Advertisers are always in charge, stresses Susan Kingston, business development manager at Commission Junction.

While it is easy to see why sites desperate to get rid of their excess ad space at any price should find affiliate marketing attractive, it could turn out to be a dangerous game. The risk is that this method of selling advertising merely cheapens the whole web as a medium, driving down prices even further.

In addition, affiliate networks - where ads are dished out to thousands of websites that share only vague connections in content and audience profiles - seem to make a mockery of that prized tenet of web advertising: the ability to personalise and closely target ads to exactly the demographic you seek.

The most important aspect of affiliate marketing, however, is its close association with the pay-per-result model. This strikes right to the core of the key debate on internet marketing: how should the medium be priced for advertisers?

Pay-per-view, where advertisers pay according to the number of people who see their ads, and click-through rates, where they pay according to the number of people who click on the ads, used to be the standard method of calculating payment. The problem is that people don't click on banner ads any more.

So media sellers deriving commissions on the basis of click-through rates are finding the bottom falling out of their market. Finding they have the advantage, advertisers have pushed this model further and are frequently refusing to pay for mere click-through and demanding deals where they only pay where a purchase is made or a customer requests further information.

There is no reason why affiliate networks have to tie their fate to per-result payment methods. In theory, at least, advertisers should be willing to pay for the exposure of their brands on a wide range of websites, based on the number of visitors they garner, irrespective of whether those visitors go on to make purchases. But as advertisers have used their muscle to squeeze concessions from hard-pressed internet sites, the two terms have become synonymous in the minds of many web experts.

Do advertisers really need affiliate networks on any other basis than pay-per-results? Probably not. It's not as if there is a shortage of websites with cheap ad space, forcing the would-be advertiser to ferret through the undergrowth of the web in the hope of finding an unused banner space.

For struggling sites, affiliate marketing may not be the lifeline it seems. The higher value websites will tend to shun affiliate marketing deals anyway because they detract from the value of their carefully cultivated brand identity.

Only smaller sites will really benefit from affiliate schemes, and these mass, commoditised deals with their meagre returns may not be enough to save them. Drowning men may cling together, but it doesn't make them any more able to swim.

Niche Marketing |