Affiliate Marketing

With the rise of Internetworking a new form of search marketing has evolved. This new method of advertising is one of the best innovations in the electronic world and is commonly referred to as Affiliate Marketing. It proves to be a remarkable source of profit due to the critical mass of customer it helps to acquire over a relatively short time frame. The combined power of this tactic and the vast number of people online can give a strong boost to a company's marketing strategy.

Affiliate Marketing programs are simple alliances or contracts between online merchants who want to broaden their reach beyond their own website. This is a type of fusion marketing, but usually with more partners, less personal contact, and a financial connection that is absent in standard fusion marketing arrangements. Affiliate Marketing and its various elements will be discussed in further detail in the next section of this report.

Using affiliates - other websites who agree to sell or market their clients offerings in return for a slice of the action, a client merchant can quickly achieve the critical mass of customers it requires. This compared to the traditional means of promotion (advertising, sales promotion, etc.) is not only cost efficient but also effective. "Affiliate programs are one of the most powerful marketing tools available," said Steven Rothberg, CEO and founder of CollegeRecruiter.com. "Basically, it moves advertising from being an expense to being more akin to a cost of goods sold. In other words, rather than paying out a lot of money and hoping that it works, you're only paying out money when you know that it has worked."

The market for affiliate marketing has seen significant growth in previous years and is estimated to grow by another 60% to reach Ј2.16 billion by the end of 2006 . Brands are placing more value on affiliate marketing and are increasing the support they give to affiliates. Affiliate programs have now become an important part of many merchants' marketing arsenal, given its cost effective nature.

However, issues such as managing affiliate programs; making sure that partners are well selected and fit the corporate strategy; promotions are well-designed and constant monitoring of results to ensure goals of the program are being met, are still critical to the success of an affiliate program. Affiliate marketing is considered to be an ideal acquisition vehicle but its role as a retention vehicle needs further examination. It is also critical to understand a merchant's evolution in their marketing programs, as this severely impacts the role of any aspect of their program.

From the standpoint of the company using the affiliate program, this is a marketing strategy with huge potential to attract traffic and generate sales. From the standpoint of affiliates, they now have a practicable source of additional revenue in exchange for a small piece of advertising on their website.

Over the past few years the effectiveness of affiliate marketing has come under question. More specifically the question that many marketers want answer to is regarding affiliate traffic being able to convert any better than traffic coming from targeted search engine terms. In this paper I empirically explore the affiliate marketing networks (varying in their size and incentive schemes for publishers, and functioning in different industries) affect the overall lead generation process for a firm. More specifically this paper will try to explore whether it is useful for an affiliate to have a choice of many different networks or should an affiliate just concentrate on one or two main networks.

The research questions that will be explored in this paper are as follows:

* Does an affiliate network increases the amount of website traffic visiting the website?

* Does an affiliate network improve the ranking of merchant web sites in the search results of search engines like Google?

* Does having a number of affiliate networks increase the amount of traffic? Does the increase in traffic offset the additional amount incurred in subscribing to so many networks?

* Does concentrating on one or two main networks (like LinkShare, Performics,