Creating Win-Win. The Future of Affiliate Marketing

In the first part, we discussed the mechanism of affiliate advertising and its differences from performance-based advertising. Continuing with Nextedge Dentsu's Manabu Nimiya and Dentsu Inc.'s Tomohiro Kawai, we'll explore methods for driving conversions through affiliate advertising.

*Nextedge Dentsu Inc. became "Dentsu Digital Inc." on July 1, 2016.

Developing messages that get chosen on comparison sites

──Tell us about affiliate creative.

Kawai: While a client's product has several features and messages to convey, we consider whether the appeal points match the users gathered on the media.

For example, if you run three different creatives—A, B, and C—each with distinct appeal points on a given platform, the results will vary. If the users on that platform are seeking A, then running B and C won't drive results. From the publisher's perspective, that means no revenue. So, based on user data from the platform, the creative team crafts expressions that resonate with those users.

Ninomiya: On price comparison sites, emphasizing low prices is often most effective. However, for products like PCs, highlighting specifications can sometimes drive conversions.

While tailoring creatives per user is challenging, we submit appropriate creatives tailored to the media and product, then change and test them after a set period. Programmatic advertising automates segmentation and A/B testing, but affiliate marketing requires manual verification.

Kawai: That's precisely why it's crucial to accurately understand user characteristics and create creative assets from the outset. If results aren't achieved initially, it can become difficult to sustain medium-to-long-term efforts.

As it becomes commonplace for consumers to research products on comparison sites before purchasing, securing placements on websites that compare products/services or feature them in ranking formats is a crucial opportunity for brand awareness and comparison consideration. Achieving results is necessary to secure long-term placements.

 

Establishing a cooperative framework through meetings involving advertisers, publishers, and advertising agencies

──What strengths are unique to Dentsu Inc.?

Ninomiya: Affiliate networks operated by ASPs and publishers manage operations efficiently based on affiliate-related data. At Dentsu Inc., we go further by analyzing the combined impact of digital advertising, TV commercials, and other channels to drive results.

We also have Dentsu Inc.'s research data and marketing intelligence. Furthermore, Nextedge Dentsu Inc. operates at the forefront of SEO, SEM, social media, display advertising, and analytics. By providing valuable insights beyond affiliate marketing, we create benefits for both ASPs and publishers.

For example, suppose a client has weak SEO for a specific product. If standalone SEO measures prove difficult due to the client's site structure, we can implement a strategy where affiliate sites strong in SEO create landing pages tied to that keyword, directing traffic to the client's site. It is precisely because we can offer perspectives unnoticed by ASPs alone that a cooperative framework between ASPs and media outlets becomes possible.

Kawai: It's crucial to share information while facing the same direction. Typically, advertising agencies act as intermediaries, making direct discussions between advertisers and publishers rare. Amidst this, both sides expressed a desire to hear directly from partners they wanted to collaborate with.

Therefore, we started holding regular joint meetings involving the client, the media company, and Dentsu Inc. By meeting face-to-face, we create a space for communication focused not just on individual profit, but on building a win-win relationship and growing together. This allows us to align our direction and collectively strategize towards larger, medium-to-long-term goals. The benefits are clear: advertisers gain visibility into medium-to-long-term objectives, while media companies can more easily project medium-to-long-term revenue.

Furthermore, a sense of "I'd do it for that person" emerges among both advertisers and media companies. This is an area where people truly become crucial, and the speed of communication has increased, creating a positive flow.

Ninomiya: Joint meetings are crucial because they involve both advertisers and publishers in devising strategies to boost performance, significantly increasing the likelihood of success. Dentsu Inc. also wants to actively promote and engage in this.

Methods for improving EPC beyond just raising pay-per-click rates

──What kind of improvements do you make to affiliate strategies?

Ninomiya: In affiliate marketing, we evaluate profitability per click using the EPC metric (EPC = Affiliate Commission Amount ÷ Number of Clicks). Comparison sites fundamentally operate by attracting visitors to their site and then sending them to the advertiser's site. However, in affiliate marketing, revenue is only generated upon conversion. If visitors are sent but don't convert, the site earns nothing.

To improve EPC, one strategy is to increase the payout amount per conversion. But if the advertiser can't raise their payout, it often seems like there's nothing left to do. That's not true. For example, you can check if there's a mismatch between the ad itself and the landing page's messaging, or if the landing page users arrive at is designed to make taking action easy. Making improvements like these can boost the conversion rate, increasing the payout the advertiser can afford to give the publisher. This is how you can improve EPC. The key is to focus on improving efficiency when using EPC as a metric.

For large comparison sites listing product information, while they often integrate directly with the client's product database, simply linking the data isn't sufficient. It's crucial to enhance the quality of the provided product database by incorporating trending information into product descriptions and adding valuable user-centric content like campaigns and coupons.

For example, when selling T-shirts, if many people search by brand name, including the T-shirt brand name in the product title increases search hit rates. Other small improvements, like adding "free shipping," also contribute to affiliate results.

Kawai: When consumers compare options, if your appeal is identical to competitors', your chances of being chosen decrease. We sometimes propose and implement changes to the wording or presentation style, based on competitors' selling points. Prominent elements like titles are especially crucial. Similar to listing ads, you must carefully consider what answers you provide to users' needs.

Ninomiya: Depending on the platform, overly long product descriptions may get truncated with "..." at the end. It's crucial to always be mindful of how your content will actually appear when creating it.

Of course, false claims are unacceptable, but overly subjective statements are also problematic. Evaluations like "Number One in Popularity" based on third-party research can provide a strong push for users to convert.

──What specific approaches work for incentive sites?

Ninomiya: For incentive sites, highlighting media-specific benefits is crucial. For product sales, this means promoting models exclusive to a specific outlet, limited price ranges, or exclusive coupons. For membership registration, emphasizing exclusive benefits for new members boosts sign-up rates.

If comparison sites target people already interested in the product, incentive sites focus on making users feel special. Since competitors might take away results, it's crucial to differentiate by offering unique benefits specific to your platform.

 

Evolution of the system itself is necessary to avoid being left behind by other digital initiatives

──How will affiliate marketing evolve going forward?

Kawai: We need to move beyond affiliate marketing in isolation and discuss its utilization within the broader digital strategies of the customer journey. This involves examining the impact of TV commercials and the interplay with other initiatives.

In recent discussions, we explored how to leverage affiliate marketing by hypothesizing user paths. For example: users analyzing digital behavior data to compare options before visiting the client site for details; or users watching TV to become aware, visiting the client's website, then checking comparison sites for reviews.

Ninomiya: Communication between advertisers and publishers is crucial for affiliate marketing, and that's one of its strengths. However, while other digital strategies are rapidly evolving systemically, affiliate marketing remains largely unchanged from its traditional systems.

The reason behind this is that affiliate marketing is also used by individuals, so it must prioritize simplicity and ease of use. Ordinary people won't use complex features or detailed settings; if it's too difficult to use, individuals might abandon it. Going forward, if advertisers alone can systematically optimize their approach, I believe affiliate marketing could evolve like other digital advertising.

For example, if a user views multiple comparison sites A, B, C, and D, and ultimately converts on D, the performance-based payment is only made to D. The assists from A, B, and C before reaching D are not recognized. This situation lowers the motivation of A, B, and C, so I believe we need to consider a system that can evaluate assists.

Just as other digital initiatives evaluate the path to conversion through attribution, affiliate marketing also needs to assess the journey leading to conversion.

──Are you proposing new standardization for affiliate marketing?

Ninomiya: Precisely because the affiliate industry is mature, certain structures have become fixed. Within this context, Dentsu Inc. aims to take the lead, collaborating with ASPs, publishers, and tool vendors to establish new affiliate standards. As Nextedge Dentsu Inc., we want to invigorate the affiliate industry and plan to provide strong support.

Kawai: As an advertising agency that understands both the advertiser's desire to have their ads displayed and the publisher's need to receive performance-based compensation only when applications come through their site, solving these challenges is one of our missions. We want to drive this forward as the Dentsu Group.