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It's crucial that advertisers take advantage of as many different publishing models as possible. Alison Guise Commission Junction.

Affiliate marketing has come on in leaps and bounds since the days of one-man bands building web sites and bidding on keywords in their back bedrooms. E-commerce web resource E-consultancy estimates that the sector grew by 60 per cent last year, with advertisers now dedicating up to 30 per cent of their online marketing budget to affiliate programmes.

In the past, the growth of the industry has been largely driven by affiliates exploiting two relatively simple techniques. The first involves setting up a web site carrying text links or banner ads aimed at driving traffic to an advertiser's e-commerce portal. The second sees the affiliate bid on a series of pre-arranged search terms in order to expand the number of paid-for listings on which an advertiser's brand name will appear.

Things are changing rapidly, however. Consumers are growing intolerant of web sites that fail to add value to their online experience. Meanwhile, the cost of keyword bidding continues to rise as an increasing number of advertisers exploit paid search. These factors are forcing affiliates to look towards new channels to drive traffic on behalf of their clients. "Five years ago, the affiliate marketing industry was characterised by guys living at home and running web sites in their spare time for pocket money," says Kevin Cornils, chief executive of Buy.at. "Now, the sector comprises big publishers with content-rich web sites."

The first signs of change came last year when Google decided to alter its search technology to improve the quality of web site landing pages. The move helped weed out irrelevant search results in favour of more content-rich sites. As a result, affiliates have started to become more like established online media owners, re-inventing themselves to focus on user-retention and offering advertisers benefits beyond simple sales leads. "Affiliates are concentrating much more on content so they can build repeat visits and maximise their commission," says Oli Matthews, managing director of Online Media Group. "They are rapidly becoming brands in their own right."

By establishing themselves in vertical content sectors, such as finance, gaming and travel, affiliates can target consumers with relevant text links and display ads. However, e-commerce advertisers need to ensure that they provide affiliates with high-quality creative featuring a strong call to action. It is also recommended that brand-owners open up their application programme interface so their affiliates can make use of relevant content from the destination site. Affiliates need to think about how to engage consumers in order to drive them through to an advertiser's site with minimum wastage. "The majority of internet users are fatigued by banners and are not easily persuaded to click through to merchant web sites," argues David Hall, head of client services at Digital Window.

The proliferation of content-rich web sites aimed at improving the consumer experience has put increasing pressure on affiliates specialising in search engine optimisation (SEO). Rather than just buying large volumes of traffic through paid search, affiliates are now focusing on highly optimised landing pages that can push their advertisers up the natural listings. SEO affiliates can also reinforce a brand's organic search efforts by squeezing out competitors that would otherwise site alongside them on the results page. "SEO affiliates need merchants to help them do their job by providing a good flow of information and creative with which to populate their site," adds Alison Guise, UK country manager at Commission Junction.

Price comparison

A growing number of affiliates are going down the price comparison route. Sites including Kelkoo, Moneysupermarket and PriceRunner allow advertisers to display brand ads or links at an advanced stage in the purchase process with a high click-to-conversion rate. "Using price comparison sites as part of your affiliate marketing programme will increase reach and ultimately drive transactions," says Maz Darvish, chief executive of Affiliate Future. "It will also help to raise brand awareness."

Loyalty sites are also an effective way for affiliates to drive traffic. Cash-back co-operatives work by passing on part of the commission they earn on online purchases to the consumer. These sites allow advertisers to target a cross-section of customers who have a deep level of trust for the brands they interact with. Paul Nikkel, co-founder of the Quidco web loyalty scheme, believes cash-back co-operatives fill a necessary intermediary role between retailers and consumers. "Internet users are placing a higher premium on honesty from the companies they engage with online," he says.

A large number of affiliates are turning to email to drive traffic for their clients, but merchants must provide their affiliates with an email template containing official branding and pre-approved copy to maximise the chances of success. "Email is the perfect format in which to generate traffic for clients, providing that the activity is on message and on brand," says Kenneth Lillie, head of search and affiliates at TBG London.

The growth of the affiliate marketing sector looks set to continue unabated. Forrester Research predicts that online spending by UK shoppers will reach in excess of £52bn by 2011, compared with £29bn last year. The pay-per-acquisition model developed by affiliates is also in increasing demand across the online industry, leading many to claim there has never been a better time for affiliates to diversify. "There are a lot more ways for affiliates to drive traffic to merchant web sites than there used to be," says Matthews.

This is good news for advertisers, with affiliates now able to offer a more comprehensive service potentially spanning paid-search, web content, SEO, price-comparison sites, cash co-operatives and email. LateRooms, the discount hotel

booking service, is one of a growing number of brands keen to make its affiliate programme as diverse as possible. In an effort to drive online bookings from consumers, the brand works with a wide range of affiliates across a number of disciplines. "We realised straightaway that we needed to be flexible in our use of different channels to make our affiliate programme a success," says Duncan Barraclough, affiliate marketing manager at LateRooms.com. "A one-size-fits-all approach just isn't feasible." LateRooms claims its affiliate programme now generates between 12 per cent and 15 per cent of its online bookings.

As the affiliate marketing sector expands beyond text links and paid search, the onus will be on advertisers and networks to examine the performance of each individual channel within their affiliate scheme. Once a brand owner has a view of the overall cost per acquisition of its affiliate activity, the marketing team can look to optimise the programme by increasing spend on the channels that are performing well, and reducing investment in those that aren't. "It's crucial that advertisers take advantage of as many different publishing models as possible," says Guise. "Using different channels minimises the risk of your programme falling flat."

The benefits of combining channels to maximise web traffic and drive online sales are clear. However, the growing complexity of the affiliate sector increases the need for advertisers to put strict guidelines in place to prevent their brand being abused. The industry has done a lot to clean up its image over the past few years, eradicating underhand dealings and establishing best-practice guidelines. Despite this, brand-owners need to define clearly what their affiliates can and can't do. "It is essential that advertisers put stringent measures in place to protect their brands and ensure that their affiliates don't go off message," says Mike Glegg, UK sales director at TradeDoubler.

Pay-per-click affiliates are used to tough restrictions on keyword bidding, but advertisers need to define the use of brand images, logos and copy across all emerging affiliate disciplines. "Companies spend millions building a brand," says Lillie. "For affiliates to jump in at the last moment with ad copy that is not on brand message is unscrupulous and dangerous."

The diversity of the media being used by affiliates to generate traffic for merchants also increases the need for advanced tracking technology capable of ensuring that the affiliate receives the right commission for its part in driving an online sale (see technology feature, p54). "It is difficult for a single affiliate to exploit a multi-channel campaign," explains Mike Teasdale, planning director at Harvest Digital. "The risk is that a banner campaign run by an affiliate will drive traffic through a keyword search that may be linked by another affiliate. The normal rules of the last click wins will not in this case reward the affiliate for their contribution to the sale."

Affiliates have demonstrated their ability to deliver results for online businesses and they have also diversified beyond paid search to embrace new channels capable of driving online audiences. But they can't afford to stand still. The ever-evolving internet, with new opportunities appearing on the horizon every day, will keep providing affiliate marketers with uncharted territories to conquer.