By: Aaron Holland
Social media, email, online shopping, Do-It-Yourself (or DIY) videos, and direct-to-consumer subscriptions are exceedingly changing the way people do just about everything. The vast majority of people are on their computer or smartphone throughout the day for one reason or another, and businesses are utilizing this access to potential customers in every way: ads on social networking sites, content on popular video sites, business websites, and the increasingly popular affiliate marketing campaigns. Entrepreneurs should be aware of what affiliate marketing is, the different forms this type of promotion can take, the pros and cons of affiliate marketing, and the legal considerations that come with affiliates.
Links or Coupons: What is Affiliate Marketing?
Affiliate marketing, sometimes labeled as affiliate partnerships, is a model of advertising that allows brands/businesses to partner with individuals or companies that can easily promote to wanted consumers. While somewhat interchangeable, the associated individuals or companies can be known as endorsers, influencers, publishers, or simply affiliates. These affiliates typically earn a commission based on sales of a product or service that they are endorsing through various channels.
Channeling Your Inner Market
Affiliate marketing can find its form through different channels using different types of endorsers. Social media influencers usually utilize a product or service, post about its use, and contain a unique coupon code in their post to be used when purchasing said product or service. Every time that unique coupon code is used by a consumer, (which is beneficial to the customer) the influencer gets a percentage of the profit for that sale.
Website backlinks are a popular type of affiliate marketing that is usually a win-win for all involved. Similar to the coupon code structure, popular websites, social media influencers, or online videos can include a hyperlink that directs a consumer to a specific product or service. The link is tracked, and if a purchase is made (or sometimes even just when the link is clicked), the affiliate receives a commission. It is beneficial to all companies because the publisher receives a commission, and the business receives visitor traffic.
Is Affiliate Marketing for your Business?
There are many benefits to affiliate marketing. However, because no marketing solution is perfect, there are a few flaws and drawbacks to it.
The major benefit of this type of marketing is the cost to begin or even maintain. Typically, affiliates are paid on a commission basis. Other than some free products or services that are given to influencers or bloggers to review, there is no upfront cost to acquiring affiliates. This type of marketing is sometimes referred to as revenue-sharing since the promoters only receive a payment if your business gains revenue from their link or coupon code.
A significant drawback to affiliate marketing is the sometimes difficult task of setting up the infrastructure to track the number of consumers that affiliates bring to your business. While coupon codes can usually be measured, backlinks are generally more difficult to maneuver, since the data must be tracked, and internet privacy issues can become apparent. However, there are affiliate networks that can do the legwork for you for a fee.
Affiliating Your Business With The Law
Many of the legal considerations that come with affiliate marketing stem from internet privacy concerns that are rampant throughout the internet-based world that we live in today. Being acquainted with the major players (legislation) that impact internet privacy can help your business avoid pitfalls when utilizing affiliates for promotions.
Legislating Privacy for Consumers
A robust Privacy Policy that explicitly states data collection and usage policies is a necessity for any business website. Three major regulations that involve the protection of consumers’ personal data online are the California Online Privacy Protection Act (CalOPPA) of California, the Personal Information Protection and Electronic Devices Act (PIPEDA) of Canada, and the General Data Protection Regulation (GDPR) of the European Union. CalOPPA requires any company whose website collects personally identifiable information to feature a conspicuous privacy policy, specifying the exact information collected. Canada’s PIPEDA requires companies to obtain an individual’s consent when they collect, store, use, or disclose personal information. Think of the “Cookies Disclaimers” that litter the websites you visit nowadays. The EU’s GDPR generally relates to the technical and organizational measures that enterprises must adhere to for protecting personal information.
These laws and others like it also require companies to disclose the use of affiliates. These disclaimers should be found in your website’s privacy policy and each affiliate should have a disclaimer to post as well. Some examples can be found here.
Mind Your (Affiliating) Business
The United States’ Federal Trade Commission (FTC) regulates the compliance of data collection, privacy policies, and advertisements for businesses. According to the FTC, it is the responsibility of the business to make sure that they and all of their affiliates are in compliance with applicable regulations. This means that your business needs to make a reasonable effort to monitor everything that your affiliates say and do online with regards to your business or products.
Final Impressions for Influencing Growth
- Growing form of marketing due to an increase in social media and online shopping
- Usually cost-effective, especially when starting out
- Utilize the channels and affiliates that best suit your business
- Provide robust privacy policies that include an affiliate disclaimer
- Receive legal assistance for explanations of legislation or privacy statements
Aaron Holland, at the time of this post, is a rising 3L at Penn State Dickinson Law. He currently serves as Event Coordinator for the Federalist Society and is interested in entrepreneurship law and litigation. Aaron is a devoted husband, father of a two-year-old daughter, and a United States Marine.
Sources:
https://www.accelerationpartners.com/resources/guides/affiliate-marketing-101/
https://marketingland.com/compliance-affiliate-marketing-industry-211439
https://www.businessofapps.com/affiliate/networks/
https://www.privacypolicies.com/blog/caloppa/
https://www.privacypolicies.com/blog/pipeda/
https://www.privacypolicies.com/blog/gdpr/
Photo Sources:
https://allaround.digital/blog/what-is-affiliate-marketing/
https://www.privacypolicies.com/blog/affiliate-marketer-privacy-policy/
