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The Profound Economic Power of a Link

The Profound Economic Power of a Link

Image credit: rukanoga

Image credit: rukanoga

VigLink is an Industry Champion Member of the Performance Marketing Association.  This article originally appeared in FeedFront Magazine, Issue 25.

The balance of power in affiliate marketing is undergoing a dramatic shift. The link economy, today an inefficient and complex market, is rapidly gaining competition, transparency, and liquidity.

Link optimization technology — technology that points links to the highest bidder in real time — is revolutionizing the future of affiliate marketing by letting all the players—publishers/affiliates and retailers—earn the value they deserve.

A fundamental element of the Internet, hyperlinks deliver traffic (and sales) by connecting one page to another. But the value of a link is often grossly misvalued by all the players in affiliation.

The link economy has always provided publishers with a “choice” of whom to link to, yet very limited information for making that choice. Link buyers can’t easily find sellers and sellers can’t find buyers without the assistance of affiliate networks.

Prices are set by the retailers in the form of commission rates, but it is difficult for publishers to know what these prices end up being on a per-click basis, let alone who might be willing to pay more. As a result, publishers end up taking whatever they can get.

Here’s an example of this inefficiency… at VigLink, on behalf of publishers, we’ve sold a lot of links to retailers offering the $99 Apple TV and we have found wide discrepancies in what retailers are willing to pay for the link. One merchant will pay 700 times more for a click to their Apple TV page than another. Can you guess who? Neither can most publishers.

On the other side of the equation, retailers don’t really know what the optimal bid should be to maximize sales and profit.

In the existing link economy, retailers have historically dominated the pricing game, but in an optimized link economy, publishers automatically link to the highest bidder. As link optimization becomes commonplace, the balance of power among publishers and retailers will even out.

In a mature and efficient market, publishers will earn the maximum value for their clicks and retailers will receive the highest quality traffic. The prosperity of the link economy and the future of affiliate marketing depend on technologies like link optimization to thrive.

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