Where Affiliate Fits In The Digital Advertising Mix

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About six months ago, I took a job in account management at CJ, the affiliate division of digital advertising giant, ValueClick. Since then, I’ve found myself explaining the affiliate space over and over again to people who, every day, surf the interwebs mostly oblivious to the ad-backed digital ecosystem that makes it all possible.

At its core, digital advertising is about businesses paying to have their company name, message and products spread across the internet. This is typically executed in the form of text and banner ads such as the AT&T banner across the top of the screenshot below.

techcrunch publisher with at&t display ad

In this case, AT&T purchased a banner ad on TechCrunch.com (the website shown here). At&T (the advertiser) is paying TechCrunch.com (the publisher) to show this ad on their website. This, my friends, is digital advertising.

Three Types of Digital Advertising

There are three types of digital advertising that you can easily relate to: search, display and affiliate. Search advertising is made up of the ads that you never click on in Google. There are typically two or three of them highlighted at the top of the page and usually a bunch more down the right side. Believe it or not, people do click on them (though no one I talk to ever seems to) and when they do, the advertiser (e.g. AT&T) pays the search engine, like Google a certain amount for that click. Search advertising is easy to spot because it always shows up in search results and 99% is in the form of text ads.

On the surface, display and affiliate advertising can be a little more difficult to distinguish. They both appear on websites that we all visit every day. They both include a mix of banner and text ads, and the same advertisers (e.g. AT&T) typically leverage both channels.

The best way to distinguish affiliate from display advertising is to understand how publishers (e.g. TechCrunch.com) get paid in each channel.

What is Display Advertising?

In display advertising, publishers are almost always paid based on a CPC (cost per click) or CPM (cost per impression) basis. In case you’re wondering, an impression is when a site visitor views the ad (yes, we can track that). So, in the display model, advertisers pay publishers for clicks and views.

What is Affiliate Advertising?

Affiliate advertising is known as a CPA (cost per acquisition) channel. This means that advertisers typically pay publishers only when the visitor completes a purchase on the advertiser’s website. Publishers only get paid when a visitor clicks the ad then goes on to make a purchase. In case you’re wondering, my division is the one that develops the technology infrastructure behind this process for optimizing performance and tracking clicks. I work on a team of strategists that work to help advertisers maximize their revenue and effectiveness in this channel.

Publishers decide whether to engage in display or affiliate based on the intent of their visitors. For instance, say you are visiting your favorite news site. Whether it is TechCrunch, Yahoo, USA Today or The Wall Street Journal, your intention is almost always to consume news. Since you visit a site like that to explore and learn, chances are not very good that you will end up making a purchase as a result of that visit. This is exactly why TechCrunch is getting paid by AT&T when users view or click the ad above. Despite the fact that the ad shows pricing, the goal (reflected in publisher compensation) is brand recognition and messaging, not about directly driving a purchase.

Now let’s say that you are shopping for a new phone service and you have narrowed your search down to two options, Verizon and AT&T. Both services seem good, but you want to get the best deal possible. Are you going to turn to your favorite news site and hope that an ad appears with a good deal? Of course not! Most people will type something like “AT&T deal” into their favorite search engine. That is when you will come to a site like this:

affiliate and display ad on techbargains publisher site

Here you see that you can get a free LG G2 or Moto X from AT&T. If you click on that link and go through to the A&T website, then TechBargains (the publisher pictured) will get paid for that sale.

Publishers Cross Channels

As you can see, the primary difference between affiliate and traditional display advertising is how publishers get paid. Publishers decide how to engage with these models based on the intent of their users. That doesn’t mean that every publisher sticks with only one of the two models. For instance, if a news site is reviewing a product, they may include an affiliate link to that product because this would have a higher chance of driving a purchase and earning them a lucrative commission. Likewise, coupon and deal sites that typically skew toward affiliate may serve display ads to earn money off of the many impressions (views) that they can generate from their deal seeking audience.

Questions? I’m happy to answer any you may have in the comments section below.

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