You should care about affiliate networks if:
- You don’t have the resources to hire a dedicated affiliate manager
- You don’t have an established brand
- You want to explore a market that is non-native to you
- You already understand how affiliate marketing works
If you satisfy the criteria above, an affiliate network is a digital hub where product owners, businesses, and advertisers can connect with affiliates who will promote and distribute their products digitally.
Why should you care?
As a business owner, every second is valuable. Affiliate networks save you time by aggregating a list of vetted, industry-specialized affiliates for you at a cost.
Without an affiliate network, you would need to get an outreach manager and build out the infrastructure to manage and communicate with affiliates.
Once you achieve this to some degree, they (your outreach manager) would need to reach out to individual affiliates, negotiate, vet, onboard, and manage them.
For small businesses, this can be a bad idea.
If you decide to directly onboard affiliates on your own resources, between setting up your own affiliate tracking platform and your first sale, you’ll have spent thousands of dollars before turning a profit.
While there are reasons to go this route, as a small business, you ONLY need to care about sales. Generally, affiliate networks self-regulate by creating product or service categories, vetting for quality affiliates, tracking vital stats and commissions.
The section below describes what you NEED to know about the affiliate networking process in some detail:
How affiliate networks function
48% of affiliate marketers earn at least $20,000 a year.
Why is this relevant?
Well, affiliate marketing is a merit-based business. This means that those who suck at it, don’t stick around.
For you, this means that even without access to the super affiliates who make over $150,000 a year and sell millions of dollars worth of products for their advertisers, you can thrive with the right offer and a few hundred, competent affiliates.
If they decide to promote your products, they’ll have access to a unique link (referral ID) that serves to track, document, and attribute sales activity.
In most cases, all the information about your offer will be made available through a dashboard.
On it, you’ll find a quick snapshot of affiliate performance, how much money you’ve made, and how much you’re paying out to both affiliates and the network.
After this, the affiliate network offers a commission to affiliates for each product they help you sell. This commission may be pre-set by you and will be deducted from the cost price of your product/service.
Affiliate networks make money by charging a flat fee or taking a % of each conversion one of their affiliates generates. In short, these networks do MOST of the heavy lifting so you can focus on acquiring new customers and keeping them satisfied.
Want to grow your affiliate program? Here’s how affiliate networks help:
A pre-screened pool of affiliates in your industry:
Businesses in the US are spending about $4,000 to recruit talent. Affiliate networks eliminate this problem. Here’s how;
Without a network, you would need to commit hundreds of man-hours and management time to find, and onboard the right affiliates.
Instead, affiliates need to undergo an approval process for each individual advertiser program. Not only does this save you (business owner) time, but it also makes the process a lot more efficient by exposing you to relevant creators in your niche.
Instead of managing the process internally, all you need is a statement of your terms (conversion point, price you’ll pay for the conversion, country’s accepted, restrictions on how your offering can be promoted.). That, and your offer presented in a way that’s clear, attractive, and easy to engage with.
Consequently, affiliate marketers must pass the application process and are only accepted if they are assessed to be of high quality.
By helping you filter for quality and fit, affiliate marketing networks ensure that you can onboard thousands of competent, and industry-relevant affiliates almost instantly.
This means that your business can generate a return on investment at a scale that is difficult to match or afford on traditional advertising channels.
Manage one relationship instead of one thousand
One of the most difficult aspects of affiliate marketing is managing people. To this end, companies will spend over 4 billion dollars in 2021 to streamline relationship management.
Managing payments, negotiations, agreements and other aspects of each transaction can be overwhelming. When working with an affiliate network, you don’t have to manage so many people.
Affiliate networks provide all you need for account management, technology, and end-to-end tracking. They offer a variety of payment and reporting options to make it easy for business owners and affiliates to monitor, and adjust their campaign efforts.
Affiliate networks can also help with dispute resolution when there are reimbursement issues due to fake leads or fraudulent orders.
Once you sign up for a network as an advertiser, all you need to worry about is your relationship with the network.
By screening out the affiliate layer, networks help you to save time, resources and spend a lot less on affiliate-related disputes.
Cash-flow retention
In the United Kingdom, 14% of all businesses cannot fulfill their obligations because of cash flow issues. Affiliate networks provide some protection against this problem.
Depending on the network, your affiliates will get paid per week or bi-weekly. In many cases, your affiliate network will provide initial settlement to your affiliates.
Consequently, they will make deductions from you at the end of the month. For small businesses, the extra time frame on cash-outflows can be crucial.
With so many obligations to suppliers, shippers, and manufacturers, you need some protection. To this end, having a small line of credit with your affiliate network for fifteen to thirty days at a time can help to keep your business cash healthy during the month.
Having a network cover commission payments before getting paid by their advertisers tremendously increases the time value of your money. It keeps affiliates committed and helps with expense forecasting as your affiliate marketing program grows.
Competitor insight
In North America, businesses spend upwards of $100,000 trying to understand the competition.
For a small business, discovering competitor leverage, understanding salient keywords, profitable traffic sources, and juicy audience segments can be difficult to accomplish.
Thankfully, most affiliate networks are helpful in this respect.
Not only do they provide account management, but affiliate networks also offer their clients insight. Networks can provide benchmarks for performance among other participants in the same industry.
Some affiliate networks offer analytical services that provide a range of data and insights, including revenue by channel, cost per click, cost per lead, new deals vs. retained clients, market analysis, industry trends, and network performance by niche.
Because most small businesses lack true product/value distinction, they need to understand the competition. Having the right affiliate network can give you all the information you need to frame your offers at the consumer layer.
Here’s what you give up when you work with an affiliate network
Lack of granular data and transparency:
Companies are spending $20 billion on data solutions every year. Among them, affiliate networks also make an investment to this end.
While some networks will give you surface-level analytics about your campaigns (affiliates, commissions, sales, etc.), others prefer to screen out those details.
As a business owner, understanding how your data performs is key. Knowing which traffic sources work, what audiences your affiliates segment, and information about click-through, website traffic, etc.
Unfortunately, affiliate networks don’t benefit from collecting or providing you with granular data. This means that you have limited ability to respond if an affiliate is promoting your brand in a harmful way.
Although this is an acceptable trade-off in the absence of tons of money for advertising campaigns, in business, having data to work with is always better.
Low to no relationship opportunity
When managing direct affiliates, you’re reaching out to individual affiliates, building out custom solutions based on their audience and negotiating directly with them.
While networks screen out the stress of managing hundreds of complex negotiations with affiliates, they don’t provide any information or personal details about who your promoters are.
This means that even when you make sales, you have no means of identifying who your most successful affiliates are and how they make it work aside from maybe a subid that the network passes to you to identify them.
In direct affiliate marketing, you’re more likely to build and maintain a long-lasting positive relationship with your affiliates. However, you also need to manage, negotiate and keep them happy on your own resources.
Knowing what’s most important for your industry and niche will guide your decision-making process here.
If you’re selling media products or dabbling in services that are high-trust, and high ticket, you may need to stay clear of an affiliate network. This is the case because, in that business, your associations are primarily important.
However, for commodities, products, or digital services, an affiliate network will provide the barebones requirements to get your sales in until you have enough resources for a more robust solution.
Intense competition
This year alone, 19% of businesses will fail in their initiatives due to competition.
For better or worse, affiliate networks are marketplaces. This means that you are essentially one in a pool of millions of products, services, and offers that affiliates can decide to promote.
Not only is this a low-commitment environment, but it also means that you’re most likely competing with other businesses in your niche.
In an environment such as this, your best performers are most likely guided solely by profits. This means that if your copy, creative, and (or) offer does not generate immediate returns, they will move on to products that will.
It also implies that you may experience regular revenue dips from your affiliate network as a minor lag can quickly lead to de-motivated affiliates and a scramble to other products that are in high demand.
That said, the intense competition of an environment such as this will force you to refine your offer and optimize it for high impact.
Conclusion
If you’re looking to promote your product or service using affiliate marketing, there are a lot of benefits to finding the right affiliate network. Some of them include access to specialized affiliates, analytics, and the cash-flow incentive.
However, there are also trade-offs you must consider before you commit to one network or another. Lack of data, personal touch, and high competition can impede growth on a network.
When it comes to affiliate networks, your only leverage is your offer. In crafting your offer, make sure to consider the competition, industry trends, consumer behavior, and other macroeconomic variables as they will determine success or failure in the long run.