Performance-based marketing engages individuals with presumed expertise in targeting your key persona(s) to drive traffic to your site on a pay-per-action (not pay-per-click or impressions). Think of it as crowd-sourcing your media buys. You, the advertiser, pay for a form fill, a download of your product, or for a phone call of certain duration. I was initially introduced to this market via a browser application, PageRage, in 2009. Since then, I have spent every year working with every size and shape of performance based marketer and advertiser (you!). While there are primary verticals like education, mortgage and dating offers there’s no reason you can’t compete in this space as a viable offer if the economics make sense.
Okay, so everyone says, “My business model makes sense. The economics make sense,” however I’ve found that more than half of all entrepreneurs I’ve encountered don’t keep their main metrics their main metrics. KPIs are KPIs for a reason; focus on these and if they are all performing, you’re doing the right things to get to your next milestone. In the performance-based marketing world, a set of business KPIs might make perfect sense (you can generate form fills on your site for $25 per lead) so common sense indicates that someone with more expertise can do better and earn a margin on this—and you get to do little to no work. Sweet! But not so fast… for the economics to make sense in the performance based marketing world, you need to look at the larger world of offers, not just your model and historical metrics. You can’t look only at your competitors and substitutes and what they’re offering performance marketers out there. For example, consider that the total online addressable market for your product or service can generate a maximum of 250 leads per month and the individual advertising on your behalf makes $10 per lead (he can obtain them for $10 and you’re paying him $20). If another company in a totally different industry earns the marketer $8 per lead and the market size he can reach is 5 times the 250 maximum leads you’re generating, then you don’t have a competitive advantage and therefore would not have a viable offer.
Keep economics in mind at all times. You can learn more about what else is out there on a very basic level by visiting CommissionJunction.com and ODigger.com. It helps significantly to know someone in the industry and to navigate your way in via conversation, not pure online research.
Notice that I steered away from the term “affiliates” and “publishers,” largely because the confluence between the two and their industry of origin. The term “affiliate” originated within the affiliate marketing and affiliate network world whereas the term “publisher” arose from ad network and direct media buy world. When I look at the display advertising value chain (thank you Luma Partners for maintaining these kick ass value chains!), there is only one category distinguishing the performance-based world:
The emergence and continued growth, fragmentation, and re-assimilation of all companies in this space lend itself to the frenzy we all know digital marketing can be. FYI I say “can be” because it need not be. It’s the job of your digital marketing team members, consultants, vendors and partners to simplify this chaotic and fast-paced environment. Utilizing their expertise, this shouldadvise you on what will serve your unique business model and current objectives. If you’re stressed because you don’t know how or if your digital marketing efforts are serving your bottom line, email me at firstname.lastname@example.org.
Back to terminology. The overlap of these terms is reflective of the nature of the ad industry. If the margins make sense (what I’m willing to pay is more than what my marketer can achieve on a cost-per-action basis), then any marketer—pub or affiliate—will work on a performance basis. It aligns incentives. Like most genius business ideas and frameworks, it just makes sense. Beware of the overlap of these terms and when in this space, ask clarifying question to determine who comes from what industry. As you will see, those who originate from the affiliate world have certain styles and tendencies while those from the more traditional advertising world will have their own respective styles and tendencies.
And a tip—be honest about what you don’t know and don’t understand. You’ll get a lot farther faster if you ‘fess up and ask the “Captain Obvious” questions up front while communicating with partners.
Okay, I think I’ve been on the podium log enough. Time to get down to the nitty gritty. Thus far, you have helpful tips and context. Now, I’ll give you what you came for (thanks for being patient), those darn pitfalls:
1) Never ever engage in a conversation with a performance based marketer without metrics. Take the time to invest a couple thousand (or a couple hundred if you’re absolutely desperate) to get some benchmark metrics. Key metrics: conversion rates (at each point in your funnel), cost-per-action for which you’re looking to pay.
2) Be open to all kinds of traffic. Test everything. Sometimes incentivized traffic has a bad rap and rightly so. On the flip side, while you may receive more refunds or complaints, the cost of this traffic on an action basis is so much less that you can absorb these refunds and complaints. Test everything.
3) A/B test your landing pages—always and forever. Never stop. Ever. You’re crazy if you’re not testing right now, with or without paid traffic. Your conversion rate is a serious competitive advantage you can use as a key point of leverage in acquiring, keeping, and growing your performance based marketing traffic sources.
4) Be relentless. Call, follow up, go to networking events, Meetups, Tweetups, and every other kind of on- and off-line event to meet fellow performance marketers. Big conferences in the US include LeadsCon, Affiliate Summit, and to an extent AdTech. You gotta hustle or I can promise you’ll be disappointed.
5) Start slow to go big. Test as many traffic sources and partners as possible. Start with a couple, trim the fat, grow the good stuff, and continue in this pattern. There are huge opportunities in this space, however you can kill all of your opportunity by blowing your entire budget up front if you don’t test and pivot, test and pivot, test and pivot.
There you have it: five pitfalls to avoid from me to you sent with warmest wishes that you have a very merry Boostmas. Change your “I’m not sure of the ROI of my digital marketing” to “I know where every dollar goes and what ROI is hast that contributes to my bottom line.” No excuses not to set yourself up for success in 2013. At eBoost, we love sharing Boostmas with a bow by talking through your unique case. Email me now at email@example.com.
eBoost Consulting helps funded startups and established companies grow through search and social paid advertising. Since 2005 our team of digital marketing experts has been running highly successful digital marketing campaigns with a focus on innovation, results and customer satisfaction.