Given the fact that I just had a feature interview in the GQ Magazine this month, I can totally relate with the article from Internet Retailer on how affiliate marketing is becoming sexier (Just kidding!! 
)
First of all: What is Affiliate Marketing? My definition of it is: The use of third party specialists who are capable of targeting audiences on behalf of advertisers/merchants and who are also willing to take financial risks in the delivery & performance of the traffic, in the form of no/low upfront fees and instead higher backend/success payments (commission).
This applies to both offline and online environments, incidentally, as I notice that many affiliate marketers are now even using TV ads, with unique URL’s, to drive traffic to merchants (I saw this in the USA).
Some quotes from Internet Retailer:
Affiliates also are beginning to change the way they operate, moving to nontraditional venues such as social networks and customer reviews, says Kerri Pollard, vice president of client development at Commission Junction, a unit of ValueClick Inc.
“They’re really following wherever the consumer may be,” she says. “We’ve seen a lot of change in the consumer with the onset of Web 2.0 and user-generated content. We’re seeing publishers going in that direction.”
I must disagree with Kerri’s quote (sorry Kerri!), as I believe that affiliate marketers have always “Followed the money!”, and what we’re seeing now with respect to affiliates moving into non-traditional venues, is not a change in the way they operate - this has always been the case! The only difference is that now the volumes and access to the audience is becoming worthwhile for affiliates to operate there, whereas 18 months ago, it was not.
I’m typically a Jerry McGuire/”Show Me The Money” type of guy, and I believe that the reason that Clicks2Customers became a highly successful Paid Search Marketing company, is that we always followed the money! Many affiliates tried to diversify with alternative search engines, etc - and in some cases they were successful - but we just followed Google (and Yahoo to a lesser degree), as they grew (and still have!) the lion’s share of the search market and gave us the best Return on Effort (which is a good read!).
One of the things that drives the affiliate marketing industry, is the fact that most affiliates understand online marketing far better than any merchants do - bust mostly only in their specific niches (PPC, Email, Display, SEO, etc), and given their willingness to take risks and test new avenues for reaching audiences, affiliates will find pockets of traffic that most merchants are unaware even existed.
Back in early 2003, when Google started taking off with Adwords, most of the growth was initially through affiliates, as evidenced by all the ads with “Aff” (which was subsequently made redundant), that Google actually had to lay down affiliate policies in order to reduce the amount of affiliate advertising displayed on a set of results at any point in time! Merchants suddenly figured out where the affiliate traffic was coming from, and followed suit by launching direct campaigns on Google. This is why Adwords really took off so quickly, in my admittedly biased opinion
However, some online retailers are hesitant about using nontraditional venues, Pollard says.
“Right now, the Web 2.0 world and the user-generated content side are a little scary, especially for some of the bigger brands,” she says. “As they look at the affiliate as an extension of their customer acquisition efforts, they’re making sure as they’re reaching this new consumer that they’re also keeping their brand management guidelines in mind.”
The bigger brands tend to be the most concerned about the possible downside of affiliate marketing in social networks and other nontraditional venues, she says. “There’s a little more dipping the toe in the water with the bigger brands,” she says. “But a lot of them are on the innovator side and willing to see the positive and negative.”
Web 2.0 is going to open up a realm of possibilities for affiliate marketers. Here Kerri is quite right - in that merchants are quite scared of how to tackle Social Networks and Web 2.0 - affiliates are certainly not! The number of avenues for online marketing in general is increasing daily, with Yahoo announcing today that they have just launched SmartAds, and even the most sophisticated merchants will argue that they cannot keep up, or even have the budgets to test everything.
I’m written many posts in the past, and even spoken at conferences proclaiming how affiliates are (and will be) making a lot of money through widgets, desktop/web applications & the like. Affiliate revenue driven applications will certainly be a major driver, and even in Synthasite, we’re looking to enable developers to make money by creating widgets for other users - and if they find a way to make money out of it through affiliate links - then good for them!
Jamie Birch, over at Revenews, wrote a piece on video newcomer, Nuuvy.com, and how it will allow affiliates to use video in order to promote product!
The future certainly bodes well for Affiliate Marketing…
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I would argue that even for the best affiliates, not every campaign is successful - hence the presence of risk. I agree that risks can be mitigated, but not removed, IMHO.
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Vinny , please bold the financial risk part on your blog post and make it red!
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