Online affiliate marketing programs have existed for years, allowing publishers to get paid for touting products and services, and merchants to pay for obtaining new leads and customers.
While this has been a proven system for increasing web traffic and sales, affiliate marketing has yet to become a widely accepted marketing tool in the advertising industry. Affiliate marketing only represents about 5% ($13 billion) of the $260 billion online advertising industry. There is a lack of transparency between affiliate marketing networks and their stakeholders, creating a lack of trust between parties and unnecessarily high service fees.
The Inefficient Affiliate Network
Because it is fairly inefficient for businesses to attempt to leverage affiliate marketing on their own, they often turn to an affiliate network to access potential customers across a wider range of demographics and industries. These affiliate networks act as intermediaries in the process, helping to track clicks, leads, and sales on publishers’ sites while making applicable payments to publishers for producing these results.
While the function of an affiliate network is to aid companies in reaching more potential customers, it does so at an added cost to companies, thereby decreasing any potential profits which could come from new customers. Affiliate networks can charge 10-25% for their services, with publishers often waiting for weeks or months to be paid out by networks.
Another issue with affiliate networks is potential fraud or negligence in tracking information, leading to misreporting of web traffic and misattribution of sales. This issue severely skews statistics and payments between merchants and publishers in a way that can never be fully verified. Since affiliate networks are closed systems, they do not have to report information regarding payments and clicks to stakeholders using the system, leaving stakeholders at the mercy of networks to report accurately.
Using Smart Contracts and Blockchain in Affiliate Marketing
There are several solutions on the market for decentralizing affiliate marketing networks.
The premise behind using blockchain in affiliate marketing is simple – every click, lead, and sale is accurately tracked through smart contracts and unique identification, which can never be manipulated or changed, ensuring data quality and fraud reduction. This transparency has the potential to revolutionize affiliate marketing and bring a level of trust to the industry which has yet to be seen.
Additionally, since all actions are automated via smart contracts and completed on the blockchain, fees can be drastically reduced and democratized across the network–no matter the size of a merchant or publisher.
However, all of the current blockchain solutions have one common flaw: the use of a pre-existing blockchain which is not scalable.
Blockchain technology-based affiliate marketing tokens such as Affchain and Reftoken operate in the confines of the Ethereum blockchain, where transaction lag times and high gas costs are inevitable with the growing use of the network. In fact, the virtual collectible game Cryptokitties slowed the network to a halt last year, leaving questions on how Ethereum will manage to scale and handle transactions at a sufficiently fast speed.
A blockchain-based affiliate marketing solution, Attrace, utilizes its own blockchain and smart contracts to track and analyze marketing information. It serves as the backbone for the platform’s affiliate marketing services, providing a network capacity of 2,000 transactions per second on a delegated-proof-of-stake (dPoS) blockchain consensus model.
As blockchains evolve and need to make decisions in the best interest of their parties, more widely used chains such as Ethereum are at risk of making decisions that may not be in the best interest of affiliate marketing stakeholders. The Attrace blockchain, however, completely eliminates this risk.
How Does Attrace Work?
The Attrace affiliate marketing process is transparent and extremely straightforward.
First, a customer clicks on an advertisement which takes them to a merchant site. While this is happening, a subcontract is opened on the Attrace blockchain containing information about the publisher and customer.
Next, the customer makes a purchase on the merchant site, with the subcontract registering the purchase on the blockchain. Data from the purchase is stored on the blockchain before the purchase is approved by the merchant where it can be utilized in future marketing efforts.
The merchant approves or rejects the sale, with the transaction completion or rejection recorded appropriately. If the transaction is completed, the publisher gets paid immediately in fiat currency by the merchant, with the merchant sending 0.5% of the publisher commission to the Attrace network as a fee.
It’s Time to Move Affiliate Marketing Forward
It has been a long time since the affiliate marketing industry has seen major improvements. The methodology of affiliate marketing networks has proven to aid in sales and web traffic for merchants while giving publishers a source of income at the same time. Yet, there is a lack of transparency and trust which is plaguing the industry.
Blockchain-based affiliate networks are solving the biggest problems of the industry, by utilizing smart contract technology to improve efficiency and reduce costs for all parties involved.
Projects like Attrace, Affchain, and Reftoken see the potential growth for affiliate marketing as long as the intermediary is removed and businesses are able to create an affiliate marketing network organically with the help of the blockchain technology.
Images courtesy of Attrace, Shutterstock
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