Affiliate Marketing Machine

A study on affiliate marketing that indicates online marketers will spend $2.1 billion on affiliate marketing fees, with U.S. online affiliate marketing spending reaching $3.3 billion in 2012. That figure includes the aggregate cost of running an affiliate program: affiliate network fees and affiliate commissions. Evans estimates that the affiliate space is growing at 9 percent.

A report from Evans in December 2008 says a growing number of retailers will increase spending on holiday sales-driving tactics like promotions and online advertising. Twenty-seven percent of online retailers will increase spending on affiliate marketing (a 14 percent increase over the previous year) whereas 18 percent will increase spending on banner advertising.

Sitting smack-dab in the middle of that affiliate equation are the networks. The networks' job as trusted third party means they are acting as an intermediary between advertisers and publishers. Serving multiple constituencies requires being a lot of things to a lot of parties. The networks are partners, matchmakers, facilitators, data keepers and more.

The major networks have many things in common and perform most of the same basic functions, including tracking technology, reporting tools, payment processing and payment aggregation.

While each network also has its own specific terms and conditions that must be adhered to by advertisers and publishers, most of the networks have agreed to some basic rules about overriding affiliate commissions and what constitutes flagrant violations of the basic tenants of affiliate marketing.

However, each of the major networks has developed a slightly different flavor. Some are geared towards big e-tailers, others focus on lead generation and still others tend to work with major catalogers. The reasons why an advertiser or publisher chooses a specific network can depend on a variety of factors.

It's like having a choice, between Pepsi, Coke, and RC Cola - and in some cases, Fresca.

For advertisers, the choice to work with one network over another can depend on a range of factors, including additional services offered, the technology platform used, the cost of setting up a program, the customer service and the quality of publishers in the network.

Each network has its share of loyal advertisers - large and small. Although there is some amount of churn, where merchants switch their programs from one network to another, that process can be complicated, disruptive and time consuming, so it's not all that common (like customers switching mobile phone carriers). Some advertisers run programs on multiple networks, but in most of those cases one of the networks seems to act as the primary one.

Most affiliates tend to maximize their earning potential and work with several, if not all, of the major networks. Some affiliates work with just one or two based on preference about payments, advertisers in the network and commission rates.

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