payment trends and strategies in affiliate marketing - william lorenz/entropay, jason kilby/zanox,...

SIMPLE. INSTANT. GLOBAL

Payment Trends and Strategies in Affiliate Marketing

15th October 2008

Jason Kilby, Key Account Director, ZanoxRaphael Arnold, CEO, NetReferWilliam Lorenz, COO, EntroPay

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© 2008 EntroPay All rights reserved

Agenda

• Zanox: Industry overview, affiliates and how affiliate networks can help

• NetRefer: Payment methods, needs of affiliates and transparency and flexibility

• EntroPay: Making payments, issues impacting payments and how to make cost-effective payments

• Q&A

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Industry overview

• Affiliate marketing sector estimated to be worth over £2bn in sales in 2006 and £3bn in 2007

• Market has suffered in past 12 months• Marketing budgets designated to affiliate marketing has dropped

from 18% to 14% from 2007 to 2008• Proportion of sales ascribed by merchants to affiliate activity

decreased from 16% to 12%

• Merchants still see the channel as very cost effective

Sources: IAB’s Affiliate Marketing Guide, 2007eConsultancy’s Affiliate Marketing Network Buyers Guide, 2008eConsultancy Report

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The affiliates

• Most valuable affiliates, according to merchants:− SEO/Content publishers− Paid search− Loyalty/cashback− Price comparison− Email− Affinity

• Merchants admit their relationships with affiliates have not improved in the past year

• Affiliates need to be paid swiftly

• Payments should be made as easily as possible, as often as possible and in as many currencies as possible

Source: Affiliate Marketing Survey Report 2008, eConsultancy

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How affiliate networks can help

• Affiliate networks act as an aggregator for affiliates

• One network, multiple programmes

• Service

• One stop shop for payments

• Project Olympia

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Payment methods in affiliate marketing

• The two most common online payment methods are:− E Wallets− Bank wire transfers

• Findings indicate that payment methods can have a direct and indirect effect on key issues:

− Commitment, trust and corporate reputation

• In a recent qualitative research study, more than 62% of the respondents cited payment reliability as the key factor affecting affiliate satisfaction with the merchant

Sources: www.gambling-pro.com, 2007Pensa 2005

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The stated needs of affiliates

• Research findings indicate that payment methods do not only have a direct effect on satisfaction but are also a cause for major concern and a determining factor when an affiliate is considering which merchant to partner with

• In a recent research study, affiliates cited the following six factors as being critical aspects of the affiliate merchant relationship

− Transparency− Resource availability – Time money material− Reliability− Flexibility− Communication− Trust

Source: Caruana 2006

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Transparency and flexibility

• 34.7% of affiliates want to be in full control of their activity and commission record

• 76% emphasized the importance of transparency at the beginning of the relationship when trust had not yet been established

• Communication− Affiliates have an implicit need for good communication channels,

communication between themselves and affiliate managers is essential in terms of payments

• Trust− Trust is undoubtedly essential in this partnership – and this can

only be established by the merchants ensuring that they are reliable in terms of getting paid the right amount on the right day at a minimal cost

Source: Polidano 2007

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Resources

• Time, money and skills are all of essence to the affiliate to ensure revenue generation and higher commission pay outs

• Liquid cash− The benefits of these are significant for both parties, where having

liquid cash the affiliate has more opportunity to invest in campaigns and site improvements

• Time− Spending less time hassling over payment issues, the affiliates

have more time on their hands to:• Educate themselves further on issues like SEO/SEM customer

behaviours• Build relationships and further understand their customer base

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The “payment to affiliates” problem has yet to be solved

• A typical affiliate network can spend, on average, £5000 per month on making payments, not including accounting overheads...

• ...whilst a key observation from the last UK affiliate census was that 68% see payments role of affiliate networks as crucial to them

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Both networks and affiliates face a range of problems arising from payment options currently available

Networks have limited options to pay their affiliates around the worldNetworks have limited options to pay their affiliates around the world

• Cheques get lost, are expensive to cancel and administratively costly

• SWIFT is too expensive for even medium-sized amounts

• Some online payment systems do not offer any flexibility on presentation of the payment to the recipient

Recipients dislike many of the available optionsRecipients dislike many of the available options

• Overseas bank transfers & cheques take too long to arrive and clear, and are too expensive for small amounts

• Payment in shopping vouchers is unsatisfactory

• Some online payment systems only offer restricted ways of spending / accessing funds

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Via recipient’s bank account

access

Varies – typically 1 – 5 working

days

>£1000

£2 – £10 dependent on

country & currency

New payment options can solve many of the problems of both networks and affiliates

• With payment options such as the above, we calculate that networks can save up to 50% of their banking costs and significantly streamline their accounting operations

VirtualcardsVirtualcards

Typical paymentvalues?

Typical paymentvalues?

Plasticcards

Plasticcards

BankTransfer

(in-country)

BankTransfer

(in-country)

Speed of accessto funds?

Speed of accessto funds?

Rough cost(to both parties)

Rough cost(to both parties)Can be spent?Can be spent?

Anywhere VISA /

MasterCard accepted online

Instant £1 - £100 £0.50 – £2

Anywhere VISA / MasterCard

accepted - inc. ATM

Instant - after plastic delivered

first time

£50 - £1000 £0.50 – £2 plus plastic (£5)

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Q&A

• William Lorenz Jason Kilby

COO Key Account Director

T: +44 (0) 20 870 3666 960 T: +44 (0) 20 7851 5827

M: +44 (0) 7939 543 766 M: +44 (0) 7944 560 516

Email: [email protected] Email: [email protected]

• Raphael Arnold

CEO

T: +356 2767 3337

M: +356 9906 7009

Email: [email protected]