If anyone asks me about biggest trend in affiliate marketing, I say that it’s “globalize or die!” That may sound like a dramatic statement, but I believe it’s true. Global consolidation is happening in almost every industry you can imagine — and the business of online advertising and affiliate marketing is no exception. Just recently, AOL made a bid for European affiliate network TradeDoubler in an effort to boost its position in the burgeoning European online advertising market. I fully expect to see more such consolidation in the coming year — and that’s good news for advertisers, large and small.
Let’s take a quick step back. What is affiliate marketing? I like to think of it as a 100% commission-based online sales force. At its most basic, it is the practice of using one site to drive traffic to another. Those driving the traffic — AKA affiliates or publishers – are rewarded for their troubles on a commission basis. Affiliate marketing has come a long way since its humble beginnings in 1994; Marketing Sherpa estimates that it now generates sales of $6.5 billion in the United States and drives 10% of all traffic to ecommerce sites.
The U.S. online market is heading towards saturation. Jupiter Research predicts that the total number of online shoppers in the United States will peak in 2010 at 161 million. Meanwhile, other markets, and Europe in particular, are still growing at an amazing rate. According to Forrester Research, European shoppers will spend $201 billion online in 2009, an increase of 113% from the 2006 figure of $94 billion.
The message here is clear: now is the time for U.S. retailers to broaden their online reach internationally. You may be sitting there thinking that you’re ahead of the curve because you already sell online overseas. But are you doing enough? Surprisingly few U.S. merchants beyond the big chain brands operate multiple local-language, local-currency ecommerce sites. Even fewer actively market to international shoppers and less than 5% engage in affiliate marketing overseas.
If you’re a smaller company, affiliate marketing can help you to expand overseas without a physical presence. If you’re already a global player, it’s a low-risk way to increase sales and drive online visibility.
If you’ve decided to take the plunge, how do you go about setting up an international affiliate marketing program, and what are the issues you need to be aware of?
1. The “rest of the world” is not a homogenous market.
Forgive me if that sounds obvious, but you’d be surprised how many times I hear talk of Europe as one market, for example. There are 45 countries in Europe, each with its own culture and, for the most part, language. The Asia-Pacific region has 52 countries.
Each country is at a totally different level of maturity when it comes to the Internet. In Europe, Denmark has the highest percentage of Internet penetration (at 78%), and Romania the least. The UK leads the way in online advertising spend, closely followed by Germany.
The old adage of “think global, act local” applies just as much here as anywhere else. Don’t be tempted to organize your affiliate program from the United States or you’ll inevitably run into trouble. For example, while the use of adware is still fairly common practice in United States, it is considered unacceptable in the UK and Germany. Due to a boom in fraud, some affiliate networks go as far charging new affiliates in order to ensure quality and many networks conduct manual checks on publishers before signing them up. Concepts such as data feeds have yet to become established in the less mature growth markets like Spain.
Local knowledge is absolutely crucial to success — and by local, I mean in each country. My advice would be to start with the top three countries in each region — for Europe, that would be the UK, Germany and France, for Asia, China, Japan and South Korea. Set the strategy and brand message at a global level, but implement locally, either by hiring an affiliate manager or engaging with an affiliate network. This brings me to my next point.