A slice of the GBP83 million pie.....that's what's in store for affiliates!

We are beginning to talk serious money here. E-consultancy's recent report on Affiliate marketing in the UK has some staggering projections. Affiliates are forecast to drive sales worth GBP1.35 billion to merchants this year, more than double the amount that was generated last year (GBP600 million).

But what's probably more exciting to us affiliates is the revenue projected to be generated as commissions for ourselves-- a not so insignificant GBP83 million. I reckon this estimate is based on the commissions driven through the affiliate networks (Commission Junction, Buy.at, DGM, etc.) . And if so, the actual commissions could be much higher because most affiliates also promote independent affiliate marketing campaigns worldwide. In all probability, we are looking at something in the region of GBP100 million. Now, isn't that exciting?

All the above numbers suggest a few things very clearly (I will list them anyway even at the risk of stating the obvious):
a) Affiliate marketing is growing at a phenomenal pace. More and more merchants are turning to this method to drive their sales
b) There is an immense opportunity for affiliates to make money
c) As this opportunity gets bigger, the challenges for affiliates will mount

The last point is not intended to be a dampener--- it is a forewarning to affiliates to be prepared to get more creative and sophisticated to be able to capitalize on the opportunities offered.

With affiliate marketing, the onus of generating sales shifts to the affiliate. The merchants will definitely look at the numbers and the sales generated, but the "how" of the sales generation is (in most cases) upto the affiliate.

In a slightly less competitive environment, this wasn't as much of a challenge as it will be when more and more affiliates try to leverage their websites to drive sales. How can each affiliate attract a steady stream of traffic cost-effectively that will convert well and purchase the merchant's product? What marketing channels should the affiliate use? How can the affiliate track the spend closely and optimize marketing? Simply put, affiliates will also have to differentiate themselves going forward in their thinking and operations, as much as the product and service companies have to do.

If you look at the first set of impressive figures, there's one thing that struck me. Affiliates will earn about 6% of total sales generated for the merchants as commission. This is pretty good as long as the marketing costs are low. Challenge is: can we affiliates continue to do keep the costs low?

Those that do will get the biggest chunk of the wonderful 100-million pie that we are talking about, while the others will have to make do with crumbs. And the time to start thinking about how to do it differently and better is now, when times are good.

Enjoy the business.

Until next time,

Ben Flux, Traffic Junction

posted by Ben Flux - Traffic Junction @ 10/06/2005 08:28:00 AM