Encouraging advertisers to treat their affiliate marketing programs appropriately I’ve always said: “They are serious marketing campaigns and must be treated with all seriousness.” To prove affiliate marketing’s “seriousness” a good starting point would be an analysis of the ROI it yields.
Yesterday my “in UK affiliate marketing’s ROI is £11 to every £1 spent” Tweet picked up really well, but since it quoted British stats, I decided to also analyze (and bring you) the U.S. data to which I have access.
I sat down and took a look at 9 different affiliate programs that AM Navigator manages in the United States (we manage international ones too, but here we focused specifically on US-based ones) across 5 affiliate networks: Commission Junction, LinkShare, eBay Enterprise Affiliate Network, ShareASale and WebGains.
For the calculation of my basic ROI I have used the following formula:
Affiliate Program ROI =
(Gross Net Sales – Advertiser’s Investment) ÷ Advertiser’s Investment
The “Advertiser’s Investment” was calculated as a sum of affiliate commissions and affiliate network’s fees.
And here are the results that I’ve arrived at:
Program #1 (CJ): $6.43
Program #2 (CJ): $14.09
Program #3 (CJ): $5.64
Program #4 (SaS): $7.33
Program #5 (SaS): $7.33
Program #6 (SaS): $5.94
Program #7 (SaS): $7.13
Program #8 (WG): $6.99
Program #9 (EEAN): $7.28
———————————-
Average ROI: $7.15
Obviously, my Sample was fairly small, and I did not factor in Customer Lifetime Value, or Profit Margins, but even by looking at the above numbers one can get a pretty good idea of the ROI range to expect, with an average being $7.15 net brought in per every $1 spent.
If you run an affiliate program, and can share your ROI via the “Comments” area below (anonymously is fine), I would highly appreciate it. I know my readers would do as well.
It would be especially interesting to also get network level data on this. Regardless of the affiliate network’s size, they can easily perform a network-wide analysis, coming up with an across-the-board ROI number. This can further help validate the viability of affiliate marketing as a powerful way to advertise online (and even offline).
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Hi,
I’ve got a question – what do you mean by gross sales – the amount of sales that include approved sales as well as voided transactions? There is a difference between Gross sales and Net sales in ShareASale. Please specify.
Thanks.
Katerina, great catch! It was net sales (only approved and valid sales) that I was using my calculations. Formula corrected. Thank you!
Thanks for the article, Geno!
I look forward to the webinar with you on the 22nd of October.
Funny you should mention it! I haven’t even blogged about it, but you already know. Good to know. I hope you’ll find it of use!
BTW, what ROI are you seeing in your ShareASale affiliate program?
Just purchased the Affiliate Manager: One hour a day book and waiting for it to arrive. I am new to the space but was curious about how long you had been managing these accounts before you were able to reach these kinds of ratios…
Reiser, first of all, thank you for purchasing my book. I hope you will enjoy it; and I would really appreciate your Amazon review of it once you’re done with it.
Re the age of the programs: Great question! The oldest of the analyzed programs was launched in early 2007, while the newest – just a month ago. Interestingly enough, regardless of the program’s age, the ROI is always very close to that $7 average.
Hi,
I am a little confuse about the formula you use. I am going to give you an example:
if you make 5000£ net sales. and the Advertiser’s Investment is 500£ … the ROI is 9£? (5.000 -500)/500
do I understand you well?
thank you in advanced
Correct, Pablo. This essentially means that per every £1 invested the merchant received £9. Technically (in your example) per £1 spent, they got £10 back. However, because the £1 was their investment, the “return on investment” is £9 (or £10 – £1).
Clever Geno!
thanks
I have more than 100 online shops tracked in Spain. I can not delete the purchases that are not “real” , but my experience show me that they are not more than 10-20% of the total. But also, we cann’t track the sales made by users surfing “with no cookies activated”, users clicking on a offer at the office and buying later at home, etc. So, I think the figures are quite accurate.
With this numbers the average ROI these merchants have on Spain is 7.5€. The range goes from 40€ (merchants that only buy traffic to TV products and have a 1% conversion rate) to -1€, Merchants that with 2.000 clics (0.10€ CPC) makes 1 sales. The latest one are new and are not going to be more than a few months buying traffic.
Let me know if you need more details.
best!
Pablo
Pablo, I am definitely interested in hearing more. Check your email. 😉