When setting up an affiliate program, each merchant/advertiser gets to a point when they need to decide which creatives to offer affiliates to use for the promotion of the merchant’s products/services.

If I were to rank merchant creatives in order of importance (to affiliates), and it were a retail-oriented web merchant (employing a pay-per-sale remuneration model), my list would look as follows:

1. Text links
2. Data feed (or individual product links)
3. Banners
4. Widgets, search boxes, etc
5. Video
6. Flash

Interestingly, it isn’t unusual to see an affiliate program without any text links at all. That’s no good. Historically, text (i) have a significantly higher CTR (clickthrough rate) than banners, and (ii) they almost always convert better. Why “almost”? Well, apparently much depends on the type of an affiliate program.

Here’s some interesting data I’ve just collected for merchants (and affiliates) to review and compare:

Performance of Affiliate Links
(PPS affiliate program / retail merchant)

Performance of Affiliate Links
(PPL affiliate program / insurance vertical)

So, in a B2C affiliate program of an e-tailer we see that:

1. Product links have the highest CTR (as expected)
2. Text links outperform all other links (I’ll comment separately about Flash below) on CTR and CR (conversion rate)
3. Banners have the lowest CTR of all other creatives in the program
4. Flash links show a surprisingly beautiful CTR, and an excellent CR of over 7%, but, in all honesty, the sample is too small to make any final conclusions on this one

In a B2C affiliate program of an insurance company we see a very interesting picture (one that is somewhat different from the above-described one):

1. On the CTR front text links outperform banners with a truly impressive lead (60% vs 0.3%)
2. But on the CR front banners seem to be significantly more effective than text links, having a 7+ times better conversion (5.28% vs 0.74%)

Conclusion: By all means, practice an assortment strategy when it comes to affiliate creatives. Cover all of the above, and beyond (see below), and let affiliates experiment with different kinds of links.

It is unfortunate that we weren’t able to compare video creatives to the above-mentioned ones (the network that these programs are on doesn’t allow for video ads yet). Just yesterday, eMarketer has published results of a study which revealed video that ads have an 83% higher dwell time than non-video ads (57 seconds for video, and 31 seconds for non-video creatives). It would’ve been really interesting to see how their CTR and conversion rate compares to text, banners, and other types of affiliate links.

Additionally, we haven’t been able to include widgets, search forms, and other types of creatives in the above comparisons.

If you have any additional creative comparison information, or any other thoughts on the subject, please share them in the “Comments” are below.

Five days ago Nielsen reported a 10.5% year-over-year growth in the number of online video viewers — “from 127.6 million unique viewers in February 2009 to 141 million in February 2010.”

Two days ago I’ve found out about the birth of a new affiliate network — a video-centered network, founded by John Ferber,  the co-founder of Advertising.com.

So, I reached out to John to interview him on this new venture of his; and here is the interview:

GP: Over the weekend I’ve learned from a friend about the Video Performance Network which was launched about 3 months ago. She was really excited about starting to work with you, saying that your stive is “to establish an ethical video affiliate network.” Could you please tell me more about VPN?

JF: The Video Performance Network is fairly self explanatory in it’s name — we focus on the video advertising format and servicing advertisers whose campaign focus is ROI based. We provide high revenue earning potential for the sites that have video placements available yet have been turned down by other video networks who deem their sites not prime candidates for Brand Advertisers who prefer to only buy on premium, known (non-UGC) content… We have more than 60 campaigns for our publishers all providing high quality and multiple format video creative solutions.

GP: The stats on the popularity of online video is simply mind-blowing. An average US Internet user watches 182 videos a month, and 82% of US Internet users are doing it. Seems that you have certainly chosen the  right niche. What other information can you share with advertisers and publishers on online video, and especially the conversion rates that it tends to generate? How do video creatives compare to banners or text links?

JF: On a generalized basis, video creatives get a higher click through and overall conversion rate than any other creative format. This is primarily driven by the fact that video creatives include Sight, Sound & Motion, whereas most banner ads for instance only have sight, and maybe motion, a text link only has sight, etc… The combination of all three major components of Sight, Sound, and Motion create a more effective advertising format. We have seen click through rates that are 10-50x greater than a typical banner and conversion rates upto 10x greater through video creatives.

GP: I see that the majority of online video is currently being served through (and watched on) sites like YouTube (which alone serves 1 Billion videos a day). Do you allow affiliates (and advertisers) to use videos from YouTube, Viddler, and others, or is having a raw file a must?

JF: We are very open, we provide video creatives in every major file format as well as IAB standard. We have 15 second videos, 30 second videos, Auto-Initiated Play, Auto Initiated Sound, User Initiated Sound, etc for all of our clients campaigns. Our publishers are free to use them as they see fit, and it’s within the service guidelines of any third party services… We are creating new videos on a daily basis — many times to a publishers specifications/request.  If a publisher can use our playerless videos, or even allow multiple videos to be served up in the same placement and optimized based on revenue, great!  If they require a raw format such as FLV or MP4, or if they want to serve the videos themselves, we can accommodate that as well.

GP: I see that you’re using HasOffers as your affiliate tracking platform. What made you pick them from all the other platforms available on the market?

JF: We felt their feature set and overall quality of the platform and their customer service combined with cost made them the best choice for our affiliate tracking platform provider.

GP: You’re calling yourself a “CPA network”, a term that has quite a bit of negative popularity attached to it. What do you put into these words; and how else apart from being video-centered do you differ from other CPA networks out there?

JF: The A stands for Action, and we are all about that, our advertisers pay us for something. More than just an impression, whether it is a click, or a lead submit, etc. While we recognize that may have some negative connotation, we feel that we are providing a strong value to the publishers who have video advertising inventory out there but are unable to attract brand advertisers to it because of perceived quality or other types of concerns. The fact is that branded advertisers are only buying 5-10 percent of the total video advertising inventory available and as such we provide a valuable solution to the other 90 percent of the publishers out there to maximize their revenues from the fastest growing source of content online. Many of our publishers earn equal to or more on an effective CPM basis than those on a premium network.

GP: Thank you for your time, John.

Interesting survey data has been published by eMarketer.com with a reference to an August research conducted jointly by Internet Retailer and Vovici Corp.:

As look through the above statistics, the two things that I see in it are:

1. Social Media Channels Are Top Priority

While I am not entirely sure why “Blogs” and “Consumer ratings” have been mentioned separately from “Social Marketing” (I would argue that these two represent a Social Medium each; see my Types of Social Media to Use in Marketing post), it appears that the exploration of Social Media is currently the top priority for US online retailers.

2. Affiliate Marketing Includes Most of These

While it is unlikely that any affiliate will happily engage in “Live chat” with customers, and/or do the merchant’s work of “Product personalization”, the top four “applications” on the list are right up the affiliate marketing alley. In addition to a decision to explore these channels on their one, online retailers should realize (but will they if no one explains it to them?!) that affiliates can also effectively promote them through Social Media, distribute their videos, give them excellent exposure in their niche/product-specific blogs, and even help obtain additional ratings and reviews (some put such tools together by themselves, while others could definitely use advertisers’ help with this). With proper attention to the affiliate marketing channel, the employment of the top “applications” can be considerably more efficient, and happen on a much wider scale.

I am tired of seeing the affiliate marketing industry being misrepresented as just another one of those get-rich-quick schemes! Hundreds, if not thousands, of websites are full of promises of helping you turn in a quick buck if only you buy their eBook or, even, join their affiliate program. Twitter is also full of tweets on “easy cash,” “lazy affiliates,”  earnings of “$1000+ a day,” etc. So is YouTube… Furthermore, a Summer 2008 article in Entrepreneur.com read that affiliate marketing “may possibly be the absolute laziest way to make money because it doesn’t require you to have a product, make a sale or ever have any interaction with customers.” [source] The author seemed to equate all of affiliate marketing to pay-per-lead programs, but in this post I will not focus on this flaw in his argument. I want to pause and ponder on that first half of his statement where he suggests that affiliate marketing “may possibly be the absolute laziest way to make money.” C’mon! This is a huge misrepresentation that does not do justice to what one of the most sophisticated elements of e-marketing consists of!!

Let me make my point in a video:

Affiliate marketing is neither a recipe for easy cash, nor “the absolute laziest way to make money.” Getting to the pinnacle always involves a lot of hard work, and I do not know of one super affiliate who has not spent endless hours in front of their monitors, or has never been burned and lost money on ineffective campaigns or poorly converting merchants.

If you disagree, my challenge to you is this: post your arguments below, and I will entertain every one of your comments. I promise to respect your point of view, and do everything possible to understand where you’re coming from before posting my reply. If, however, I see no opposing views (which I explicitly welcome here) expressed, my case will only be further proven to be true.

Today is the day when I’m starting to use videos in my blog, and I have decided to devote the first one to a question we’ve been discussing with Nancy (aka 2busy) via e-mail after she posted this comment of hers in my blog. After reading her comment I came up with a term “merchant naivete”. By analogy with the ecological naivete, it characterizes merchants that start their affiliate programs (i) without any Terms of Service (naively entrusting the promotion of their brand to whoever decides to join their program), and (ii) without any affiliate manager to actually manage the program (naively presupposing that it is the affiliate network’s responsibility to manage it). Both of these facts can (and often do) lead to deadly consequences.

Here is my video on the subject:

Nancy has shared with me that she has “evaluated 29 new (Jan 2009) affiliate programs, and found 17 with no terms at all, some claiming that they were professionally managed by a trusted third party.” 7 more programs “had some unusual terms, maybe PPC Restrictions but no real TOS” and “only 5 had full TOS and detailed PPC restrictions.” Wow. Stagerring stats! They do correspond to what I myself discovered when conducting an analysis of 100 affiliate programs for “A Practical Guide to Affiliate Marketing” back in December of 2006. I documented that 51% of the affiliate programs lacked Terms of Service (TOS) agreements altogether, 36% had extremely generic ones, and only 13% had full affiliate program agreements in place. In Nancy’s smaller sample the spread has roughly corresponded to mine: 60% had no TOS, 23% had very generic ones, and 17% had TOS in place. Over 2 years have passed, but things haven’t changed much. The sad fact is that they have actually worsened. The merchants that have no affiliate program agreements now say (and often believe!) that they are “professionally managed by a trusted third party,” misunderstanding an affiliate network for an affiliate program management agency [read about the differences here]. They make themselves vulnerable to those affiliates that are just waiting to feast on another new merchant’s affiliate program who has no clue what he/she is doing.

Nancy said that “whenever possible” she “would rather work with programs that are managed by people who know what they are doing,” and I believe, this summarizes the approach that the majority of serious affiliate marketers take. When an affiliate program is run an an ‘auto-pilot’, it is wide-open to unethical affiliate practices that we speak about daily. “No terms at all shows a poor understanding of the arrangement that they have with the network or a poor understanding of affiliate marketing,” says Nancy, and “in today’s economy it can make all the difference between survival of the program and failure.” I could’ve not expressed it better!