Guest comment: Removing the payments headache from affiliate marketing

Affiliate marketing has fast become a billion pound industry. As one of the most direct performance-driven marketing techniques available, it is enabling brands to raise their profile online and, crucially, deliver measurable returns. However, as the industry booms internationally, it is accompanied by several challenges which marketers need to overcome. One of the most fundamental but little discussed challenges is related to payments. The problem is two-fold: First, in this increasingly global industry, how can marketers ensure that they pay affiliates based around the world efficiently and within a reasonable timeframe? Second, how can marketers tap into the potentially lucrative ‘long tail’ of micro-affiliates without incurring unnecessary payment costs?

According to EntroPay’s annual survey conducted at the ad:tech and A4U Expo events in September and October 2009, 34 per cent of affiliates are not happy with how quickly they receive their commissions. Conversely, 71 per cent of merchants and networks are satisfied with the speed with which they pay out commissions. Clearly, there is a large gap in expectations between the two ‘sides’.

This gap is intensified when cross-border payments are involved. Using bank transfers can be sufficient within the UK, but it is unpopular with some overseas-based affiliates that find receiving UK payments costly. Going back to our survey, nearly a third of merchants were not happy with the costs associated with their payments processes. These costs can often be as high as £25 per transaction – both in terms of processing costs and the administrative effort needed to make the payment across regional borders.

The payments problem is further complicated when you put micro-affiliates into the equation. Marketers have not, until now, tapped into this ‘long tail’ because it is perceived as uneconomical, with the administrative and cost implications of working with multiple micro-affiliates cancelling out the potential revenue benefits.

As a result, many brands impose thresholds – often as high as £100 - that affiliates must meet before they are paid. Whilst this is generally not an issue for larger affiliates, micro-affiliates often rely on the revenue generated by their marketing activity to pay for web hosting and search advertising in order to maintain their online presence. Typically micro-affiliates struggle to meet brands’ imposed thresholds, leading to frustration and a lack of incentive to promote traffic to a brand’s site. However, micro-affiliates do have the potential to drive significant traffic and marketers are missing a trick by not collaborating more closely with this growing community.

One option for merchants when addressing these dual payment challenges is to implement a global payments system through MasterCard or VISA prepaid card schemes. This approach offers a single international solution that is cost-effective, simple and secure. In addition, prepaid solutions can overcome the high administrative costs associated with global payments such as issuing cheques or making international wire transfers.

By adopting a standard global payment process, merchants and affiliate networks can increase the speed of payments, particularly across borders. Payments can then be issued in a variety of currencies to allow affiliates to claim their funds in whatever currency suits them best, which also serves to reduce foreign exchange fees for merchants.

Brands and networks should also consider integrating payment processes with their affiliate management software. This allows brands to manage their accounts, see who needs to be paid and send payments all in one process, thereby increasing the speed and ease in which payments are made.

In short, in order to get the most out of their affiliate marketing campaigns, marketers must now focus on nurturing the relationships they hold with their affiliates, regardless of size or location, and this includes paying affiliates securely, reliably and on time.

By Alex Mifsud

CEO

EntroPay

www.entropay.com