By Sultan Riaz | @Riaz_MediaWhiz | Marketing Coordinator
It’s not much of a stretch to state that performance marketing is the future of online marketing. The 2012 IAB Internet Advertising Revenue Report indicates that more than two-thirds of all marketing transactions will be paid for on a performance basis. Total U.S. spend on performance marketing will grow by almost $5 billion, to $25 billion in online advertising revenue, versus 2011 spend.
Peter Klein, who is head of MonetizeIt, the MediaWhiz affiliate network, has been in performance marketing since the early days of the industry. With nearly 20 years of experience, he has seen the industry grow into one of the most highly demanded forms of marketing. In addition to his duties running MonetizeIt, Klein also oversees MediaWhiz’s AdNet Display Advertising and Data Acquisition divisions.
He recently sat down with us and discussed the state of performance marketing and how they can help your business more profitably engage, acquire and retain customers.
Sultan Riaz: Let’s start with the basics: What is affiliate marketing?
Peter Klein: Affiliate marketing is a type of performance marketing that involves advertisers, publishers and an affiliate network. An advertiser is typically a direct response client/brand that has a product that they want to sell or generate leads for. The publisher, also known as an affiliate, is the one that actually conducts the marketing via the media channel they specialize in. The affiliate resides between the two entities. It acts as everything from operations, compliance, technology, tracking and media planner.
The three marry together nicely to form a kind of performance marketing ecosystem where everybody shares in the profits and work towards driving marketing results
SR: In the “CMO’s Guide to Affiliate Marketing” you listed five benefits of affiliate marketing. In particular you noted that performance marketing generated $21 billion in revenue in the United States in 2011. Do you see this growth continuing?
PK: Performance marketing is definitely growing, and it will continue to grow over the next 3-5 years. The IAB study that reported the $21 billion revenue in 2011 also shows that approximately 80% of all online marketing is paid for in some form of cost-per-sale (CPS) or cost-per-action (CPA). I have seen studies showing that performance marketing in 2012 is on pace to generated upwards of $25 billion.
Performance marketing, as an industry, is very strong; it’s here to stay. More brands and more direct response companies are spending their marketing dollars in performance marketing.
It’s all about return on investment, which can be measured in return on investment (ROI), return on marketing (ROM) or return on advertising spend (ROAS). These measure a specific metric and are directly measureable to results.
It’s important for online marketers to get into performance marketing and really try to hit core metrics that are important to their brand. Whether it’s sales, client acquisitions or another measure, performance marketing allows you to reach your specific goals.
SR: Why should a company invest into performance marketing?”
PK: It’s critical to test out performance marketing. Not every ad budget is infinite. If you’re going to start working in offline traditional media, such as TV, radio or print, try to set aside a small amount for a performance marketing test campaign. Performance marketing provides quick, quantifiable results and plenty of information that tells you if the campaign you’re running actually works.
It’s critical for you to test a campaign before diving into it. It’s easy to get started with a performance marketing campaign and it’s simple to generate results. Based off of those results you can spend more or less.
SR: When a company decides to make that investment into performance marketing, what channels should they focus on when investing into performance marketing?
PK: Not every client allows every type of marketing. If I had to rank the best performance marketing channels for ROI value, they would be in the following order:
Search Engine Marketing — This is the best-performance performance marketing channel for brands because consumers are actively seeking something they are interested in.
Display Advertising — There are a lot of banner ads out there. Consumers are actively looking and clicking on them. They are clearly interested in what brands have to say and advertise via display ads.
Email — The advertisement goes directly to your consumer’s inbox. When email is used in a performance marketing campaign, the consumer actually has to look at your content, click on it and take an action.
Getting someone to take an active action is the best measure of the success of any marketing campaign.
SR: In the “CMO’s Guide to Affiliate Marketing” you describe a five-step process that CMOs should follow when launching their affiliate marketing program. How strongly do you believe these steps need to be followed in order to run a successful performance marketing campaign?
PK: I think the five steps are very important, not because I wrote them, but it’s the same advice I would follow.
I won’t reiterate the entire thing, but the first two steps are very important. What do you want? Define your goal; you must know what you want to accomplish, whether it’s to generate sales, leads or page views.
When you understand your goal, then you can continue down your path. Perform consistent due diligence. This is applicable to everything in life, but it’s particularly important to know about the affiliate network you are dealing with. Get the background of an affiliate network. Find out how long it has been in business and the types of media it specializes in. Research the company’s financial history. Really do your homework and find someone that meets your needs, and then you can proceed on to the next step.
Once you found your goal and network now it’s all about getting out there. You do so by establishing a budget, testing, optimizing and following that process through.
SR: What are some of the biggest mistake you have seen in affiliate marketing campaigns?
PK: I have been in affiliate marketing since 2000 and I have made tons of mistakes. I think some of the bigger mistakes I have seen come from a focus on capitalizing on short-term revenue and not striving for the long term. I’m not saying you shouldn’t focus on making money for your client. But you need to find campaigns that will be stable, long lasting and build long-term strategic partnerships.
The other piece is understanding the advertiser’s needs. It doesn’t really help if you are just going to run a campaign by throwing everything in it and your main focus is solely making money. Performance marketers need to ask their clients about their goals. You won’t get every detail, but the information you do get helps inform the campaign you create. That will lead to better results in the long run and more money for you.
The other thing which I talk about a lot these days is compliance. There are a lot of good and bad people out there. If you’re changing something by either altering an email subject line or anything else, just let your campaign manager know. Most of the time people have good intentions. Affiliate marketers are entrepreneurs. We want to try new things. But it’s absolutely essential to get permission from your campaign manager before making any changes.
SR: What do you believe is the future of performance marketing?
PK: Performance marketing is now and the future. I see more brands and direct response clients putting their money into online marketing, specifically performance marketing, and why shouldn’t they? They get ROI and they figure out if the campaign is working pretty quickly.
The whole world is online; when we look globally some places are growing faster than others.
Performance marketing becomes a more valuable asset to brands and marketers with the growth of mobile. Traditional forms of marketing, such as TV, radio and print, are important, but they are not as relevant these days.
People want information immediately; they want to be able to call someone with click-to-call features, which are a hallmark of affiliate marketing. People want to be able to look up information in regards to location; for example, searching for the nearest store for an Apple product.
I see all businesses, especially all online businesses, shifting toward performance marketing. The days of impressions, cost per thousands and billboard advertisements are dwindling. The money is going to keep shifting into online performance marketing.
Peter Klein is SVP of media services at MediaWhiz, and head of MonetizeIt, the MediaWhiz affiliate network. He can be reached at email@example.com. For more information about performance and affiliate marketing, visit MonetizeIt.com.