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4 Things Publishers Should Know About the "Link Economy"
Posted on November 2nd 2013
There’s an active “link economy” online, but most people are only peripherally aware of it because it’s still a relatively new concept.
Links are a fundamental piece of any publication’s business. They provide financial support for publishers to operate their sites - and they also help generate traffic and sales for online merchants. But, despite its overall importance to the Internet marketing industry, there are probably some things that you don’t know about this “link economy.” For example, you may not have heard the term “link economy” before!
Understanding how to effectively use links not only benefits YOU, but the industry as a whole. Here are some basics to clarify all of the above and provide a roadmap for optimizing your efforts:
1. Merchants & publishers set affiliate link prices. Kind of.
Different merchants pay different amounts for links that are selling the same product—one size does not fit all in the link economy. For example, Amazon may pay $1.00 for a link to a new MacBook Pro, whereas eBay may pay $0.50 for the same product; each advertiser decides on a price given their specific internal costs.
The challenge for publishers is finding merchants that offer the highest payouts and putting those links on their page, because publishers don’t always know who is offering the highest payout.
2. How merchants set the price
According to a new whitepaper from VigLink, a link monetization and optimization company, most merchants use the formula “Earnings Per Click = Conversion Rate x Order Value x Commission Rate” to determine how much they will pay for an affiliate link. “Pricing of clicks is set by the buyer (the merchant),” explained VigLink. “They look at their margins, the competition, their marketing budget, then set a commission rate of, say 5% and wait for the clicks to roll in.”
3. Optimizing your links makes you money and fuels the link economy
As a publisher, you should always try to share the highest paying links on your site. Not only will you make more money for yourself, but you will also help to drive up the prices other merchants are willing to pay.
As VigLink explains, by using the highest earning links, you will help force merchants to offer competitive payouts. Advertisers will be willing to pay more for your links in order to compete.
4. There are tools to help publishers find the highest paying links
Finding the highest earning links manually can be a time consuming process. If collecting loads of data and auditioning different advertisers to create a master list isn’t appealing, there are tools on the market that have already done the work for you. Companies like VigLink have already aggregated and analyzed data and developed software that will insert the highest paying links into your site.
The link economy today is fairly inefficient, mainly because publishers simply don’t understand the value of their links. “The market is woefully inefficient, highly complex, and publishers are not capturing the full value of their links today…As clicks shift from low-paying links to high-paying links, merchants will act to find those missingclicks, doing what they can to bring their prices up, along with their publisher’s earnings.”
Are YOU sure you’re using the highest paying links available on your site right now? Shouldn’t you be?