Affiliate Marketing 101 – An Introduction to Transparency

Not too long ago, we wrote about how the difference between coming across as smart and coming across as intelligence impaired often has less to do with one’s actual intelligence and much more to do with their ability to understand and use industry specific jargon. Just as switching one’s beliefs for money isn’t unique to our space (although maybe the rational is), the positive affect of speaking the lingo happens in virtually every industry. It’s more psychological than anything else, and it happens all the time, especially when someone new enters one. Almost everyone has experienced a new boss or senior level employee, highly decorated but totally green to the space. You don’t want to like them or accept them because they haven’t put in their dues. It’s easier when they are more junior, because you like feeling as though you helped shaped them. One of the topics that comes up fairly early on, especially in the affiliate/performance marketing space is subid tracking. We take it for granted, but tracking makes the entire performance marketing / ad network / affiliate space possible. For those relatively new to the space, we’ll walk you through a simple example that sets the way for subids.

We always follow the money, so we begin with a (hypothetical) advertiser Widget.com. They have come out with the latest craze for health products, Woo-Me Tea. They offer users a free trial of the product with enrollment in the auto-ship program. Users sign up for the trial, enter their credit card number, pay a small processing fee, and if they don’t cancel, they will receive monthly credit card charges that correspond to regular shipments of the product. The advertiser works with CPANetwork.com to gain distribution of their product. The challenge for Woo-Me tea is that in order to get affiliates to run their product, they have to take some risk with payout. They might charge the user $6.95 processing, but out of the almost seven dollars, little of it is profit. Even if they made two dollars profit, no affiliate would run the offer for two dollars. A percentage of users who sign up for Woo-Me, will continue with the program, and those that continue will stay on for a certain period of time. Woo-Me crunches all that data to come up with an expected value and carves a piece of that to pay up front for a new sign-up to their trial program. That is why they will pay $20, $30, $40 or more for a new acquisition. The important thing to know is that each user who signs up for the trial, doesn’t necessarily mean guaranteed revenue for Woo-Me. And, it works the same way for many lead generation offers, like online education. A person who requests free information about a school might earn the network $30, but that earned the online school nothing, unless some percent of those leads turn into enrolled students.

With Woo-Me now signed on to CPANetwork, the network must empower their affiliates. CPANetwork has a link from Woo-Me that resembles http://www.woo-me-tea.com/v1. They add a redirect layer in order to capture information. CPANetwork’s affiliates login to their account, see the new Woo-Me offer, browse the available creatives, and select one to run. The affiliate gets a link, and it looks something like, at the bare minimum, http://www.cpantrack.com/affiliateid=1234&creativeid=5678. When a consumer clicks on the link, it records the data with CPANetwork and sends the user to the Woo-Me page. If a conversion happens, Woo-Me shows a pixel on the thank you page that lets CPANetwork know that a conversion happened and it reads the pixel to capture the affiliate id and creative id so that they know who gets credit. There are two challenges with this, one for the affiliate and one for Woo-Me. We will start with the advertiser. Woo-Me sees a bunch of inbound clicks to their site, but to them all visitors look equal. Imagine if CPANetwork had two publishers – Aye and Bee. Aye’s traffic has visitors that when they sign up to Woo-Me stay on for a long-time. Bee’s on the other hand, have little interest and a high percentage cancel during the trial phase. Woo-Me makes money on Aye, but loses money on Bee. Combined it looks about average and within their threshold. What if Aye sends less or Bee more? All of a sudden Woo-Me might start to lose money overall and threaten to stop the campaign, or they might actually have stopped it and told CPANetwork that they won’t work with them again. That’s where the notion of subids come into play. Woo-Me now gives a link to CPANetwork that looks like http://www.woo-me-tea.com/v1&subid=. They now understand that different publishers perform differently, and they want to track those separately on their end. They ask CPANetwork to pass in the affiliate id into the subid field, which they can do easily. Armed with that information Woo-Me can tell CPANetwork that publisher 123 (Aye for example) does well but Bee (125) does not and to turn off id 125.

For publishers / affiliates, subid tracking has an equal benefit. The easiest example comes via paid search. Imagine yourself as a search publisher promoting Woo-Me on one of the engines. You bid on a variety of keywords. Without subid tracking, you look at your day’s spend, compare it to your day’s revenue and see if you made a profit. The challenge comes when you want to scale. How do you know which keywords you make money on and on which keywords you lose money? Ideally, you would want to have the insight so that you could buy more traffic of the kind that makes you money and lower your bids / turn off traffic on the words that lose you money. With subid tracking, now you can. Instead of one tracking link, you can now have millions of unique links. Many networks, understanding the importance to publishers, even offer more than just one subid. They will have a link that includes subid1, subid2, and so on. Not all publishers will need more than one, but it comes in handy especially if the publisher has publishers of their own. Or, sticking with the search example, they might use one subid to reference which search engine and another to reference the keyword. The end result is the same, transparency. And, in an ideal world, transparency would lead to increased efficiency, both for the advertisers, the networks, and the publishers. Not surprisingly, though, it has some unintended consequences that both sides say they want to fix but tend not to. That topic, we will cover in more detail next week as we follow-up on the notion of transparency.