$4.2B of Cake Crumbs in Affiliate Marketing Commissions

$4.2B of Cake Crumbs in Affiliate Marketing Commissions by Michael Bendit

{2:43 minutes to read} Affiliate marketing is a lot like selling bonds on Wall Street and almost as difficult to explain. In Tom Wolfe’s classic novel, Bonfire of the Vanities, about the unfulfilling life of bond trader Sherman McCoy, the protagonist’s wife conjures up this unforgettable analogy to explain daddy’s job to their daughter:

“Just imagine that a bond is a slice of cake, and you didn’t bake the cake, but every time you hand somebody a slice of the cake, a tiny little bit comes off, like a little crumb, and you can keep that. […] If you pass around enough slices of cake, then pretty soon you have enough crumbs to make a gigantic cake.”

Although it’s not nearly as gigantic as the bond market, affiliate marketing generated $4.2 billion in fees and commissions in 2015. According to a Forrester Research study commissioned by Rakuten, one of the world’s largest affiliate networks, this figure is projected to grow 10% a year through 2020, to an even more gigantic $6.8 billion.

In the affiliate marketing world, the bond trader is the publisher who redirects a reader to an e-commerce site and collects a commission on any sale attributed to that initial redirect. To see this process in action, search Google for any product you might be interested in buying, followed by the word “reviews.”

$4.2B of Cake Crumbs in Affiliate Marketing Commissions by Michael Bendit

I’m an avid tennis player (currently on injury leave) and searched Google for “Tennis Racquet Reviews 2016.” Clicking on either of the top two organic resultswww.tennisracquetcenter.com or www.sportsgearlab.com/best-tennis-racquettook me to a page with reviews of the 5 and 10 “best” tennis racquets respectively, each with a prominent link directly to the product page on Amazon.com.  

Appended to the end of that link is a tag (e.g. &tag=tennisracquetcenter-20) that attributes the visitor to the publisher, who in turn gets paid a commission of 5% to 25% of any sale generated from that referral.

Sounds like easy money for the publisher, right? Well, if you are great at writing product reviews and driving those reviews to the top of the Google’s organic search results, then affiliate marketing might be a great way to make a living.

However, if you have to pay a Search Engine Optimization (SEO) specialist to increase your visibility on Google and other search engines, that will cut into your profits. The same is true if you decide to drive traffic to your review site via pay-per-click advertising.

What should you do if you are marketing a product or service and want to drive traffic to your site? Should you consider paying commissions to affiliates who send buyers your way? I will address these questions in my next blog post—so stay tuned.

Michael Bendit

 

Michael Bendit
Managing Director
Software Development Resources Inc.
888-447-1591
111 Eighth Avenue,
Suite 1500
New York, NY 10011
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