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Although affiliate marketing was first conceived over a decade ago, here in China it is only really become ‘mainstream’ in the past 3-4 years.

The fundamental premise of affiliate marketing is simple: the merchant (advertiser) only pay’s when they received a desired action. This action is typically a sale or lead. However, this is only half of the story. The other half of the story is the affiliate side; the online publishers that run the merchant programs. CPA is still regarded radical at this point in China as many online publishers resist the move towards CPA revenue models as they are deemed to be uncommercial or a risk- as it could erode the more traditional cost per day (CPD) rates.

In part, these issues have occurred because our online marketing industry is not well regulated, there is a definite sense of learning on the job by a lot of Chinese merchants and affiliates are either too greedy or have poor understanding. This has led to a lack of confidence in affiliate marketing. Every constituent in this eco-system questions the value; the value for the merchant and value for the affiliate. Even now, Chinese affiliate marketing is largely a leap of faith for merchants and online sellers- there is little in way of transparency.

Most affiliate networks will run a CPA campaign on their network but there is a fundamental lack of transparency. For example, merchants have little insight into what the networks are paying the affiliate (online publisher) for each action. If the network is taking a bulk of the action price as a ‘fee’ then the affiliate could try and ‘top-up’  by sponsoring dubious practices such as click fraud and digital scamming to raise their potential revenues.

Affiliate marketing in China is still largely misunderstood and before we go any further as an industry, we need to stop and take stock of where we are. I would argue that the affiliate networks need to provide a code of conduct, move towards open management - potentially name and shame affiliates on their networks that cheat. Further, make the fees and action prices paid to affiliates open. Then the affiliates are not played off against each other and the merchant can get a clear view on the revenue splits. Of course have tiered programs but as long as it is transparent we can show everyone where the value is.

2010 should be the year to re-educate merchants accurately and honestly so that they know what to reasonably expect from the affiliate channel. Only then can they effectively form an integrated plan, which includes affiliate marketing. As it has always been for us, the focus across the board should be on long-term as opposed to short-term successes. The encouraging news is that the increased focus on affiliate marketing due to last years slow down has already caused positive change.

There are many merchants who are moving towards affiliate marketing programmes (such as those on U2Mee) and I am seeing an unprecedented level of activity. So the learnings are there and this collaboration amongst all parties in the industry will be key to cementing the value of affiliate marketing in online marketers' minds.