As with any new medium, the growth of mobile is creating lots of new opportunities to make money.  One area that is getting a lot of interest at the moment is mobile affiliate marketing.   There is clearly huge potential from this business model which could tranform the economics of mobile web and app publishing if it takes off.   At the same time, huge new opportunities for individuals to make money on mobile could open up.  In the hyper-growth mobile markets in the developing world, this could create a whole new industry for entreprenuerial individuals to generate income from the mobile platform.   For those involved in the mobile industry who have the knowledge of mobile web and apps this could be a huge personal opportunity – in the same way that affliate marketing benefited the early web industry workers who started playing around with sites.   However, there are real questions about the maturity of the affiliate marketing business model on mobile at present, and a number of barriers remain.

Affiliate marketing a key revenue generator in the online market

In the online / PC – focused world affiliate marketing is well established as a key source of revenue from a range of different sites and services.  Revenue is generated by sending users to carry out a transaction on another site or platform – for example to a retailer or airline.  The advantage to the site is obvious – they dont have to carry any stock themselves (as an ecommerce retailer would) or deliver the actual service (as an airline or ticketing agent would).   Sites can work with a range of different providers, creating a very flexible operating model.  Taking a share of the  value of the goods and services provided (typically in the low % points) can deliver a significant CPA (cost per action) payout for each transaction for the publisher, especially for high-value items (travel, financial services for example).   Similarly, for lower value items, a high volume of referrals can also deliver scale of revenue.   So – taking this business model to mobile could unlock a range of additional income streams for the industry.

Major sites such as Trip Advisor (Travel) drive most of their revenue from the affiliate model, but what is more interesting perhaps is that 10000s of individuals have been able to earn a living from it.  The characteristics of the affiliate business model that we noted above (no need for inventory, flexibility) have made it a great way for individual web entrepreneurs to generate income.   With commodity tools like wordpress and google ads individual affiliates can quickly create an online business in a niche they are interested in based on affliate marketing.

So – the question is – are the conditions right for this business model to move onto mobile?  For a number of reasons, it does seem like 2011 is the year that mobile affliate marketing will take off – creating huge new opportunities to make money for businesses and individuals.

The conditions for making money from affliate marketing on mobile are coming into place

A number of trends and enablers are coming together in 2011 to support the emergence of the affliate business model on mobile – growing usage, media buying opportunities, affiliate networks on mobile and mcommerce taking off.

Growing Usage

Mobile has reached a critical mass in terms of consumer adoption.  Mobile web usage is growing at triple digit rates and has moved from the early adopters into the mainstream, with services like facebook and twitter driving adoption of mobile internet.  At the same time, Apps have hugely increased consumers uptake of mobile services and provided a distribution and discovery channel for different services.  This has created the fundamental platform for mobile affiliate marketing that has been lacking in the past, when compared with the web.

Media buying opportunities

Having a mobile audience is all very well, but useless as an affiliate marketer if you can’t reach it.  The growth of mobile ad networks such as admob has created a channel to reach consumers in an increasingly targeted way – for example by handset, country, operator and demographic.  This allows marketers to target their mobile audience to particular offers.  At the same time, the growth in mobile search has opened up more buying opportunities in terms of search engine marketing buys.  Previously, the volume of mobile searches meant that there was limited volumes of this type of inventory but the growth seen on google mobile and other search engines has changed this.  As a result there are now plenty of channels for reaching consumers with commercial services.

Affiliate networks on mobile

Affiliate networks provide the transactional glue that links consumer , marketers and merchants.   However, to date, the major networks such as TradeDoubler, Buy.at and Commission Junction have been slow to move onto mobile.  This is partly due to lack of demand but also because their underlying tracking technologies did not work in the mobile environment where things such as cookies are not as reliable.   There have been a couple of mobile focused affiliate networks active for a while including mobpartner and sponsormob.  Howevever, 2010 and 11 have seen a massive growth in other mobile-focused affiliate ad networks including Kissmyads, Moolah Media, Apprupt and others.  In addition, the online networks have also made a bigger effort to make their services compatible with mobile – Linkshare has said that it aims for all its services to work on the platform.

Mcommerce taking off

This Christmas was the first time that mcommerce really started to get traction.  Not only were consumers using mobile but they were starting to buy on it.  Players like eBay, Dominos Pizza and others all reported huge surges in spending via mobile apps and sites.  Big retailers like Marks and Spencer and Tesco in the UK started to launch mobile commerce sites and apps.  All this means that spending and retail are starting to move onto mobile – creating the opportunity for marketers to make money – whether that’s big mobile publishers or apps or kids in the garage or bedroom.

Barriers to making money on mobile still remain

Despite all this, there are still some major barriers to affiliate marketing on mobile.   As a result, a lot of marketers coming from the online world are finding that their fingers are getting burned.  This is really the subject of another post but in summary the key roadblocks include:

The lack of an effective Mobile SEO strategy – in the online world many affiliate use organic search engine marketing/ SEO as a channel.  However, on mobile it is very hard to rank in the search engines with a mobile-only service – google typically prioritises PC-focused sites in the mobile search results

High value offers still missing – whilst mcommerce has moved onto mobile there is still a lack of really high value offers to promote.  Travel, financial services and retail typically do not provide mobile affiliate programs which are dominated by lower value items such as apps, mobile content and so on

Technological hurdles to tracking transactions – as noted above key technologies such as cookies are still unreliable on mobile which is preventing

Merchants slow to roll out services – amazon runs one of the biggest affiliate programs on the web but still does not allow mobile sales to count towards the total, probably for reasons of tracking.  With big players like this being slow to move, this means that the rest of the merchants also have less impetus to make sure their own inhouse network or affliate network partner is tooled up for mobile.

Successful affiliate strategies and techniques still being developed – online there are lots of well developed approaches to making money from afffiliate marketing via things like PPC arbitrage or in certain sectors.  However, on mobile these are still very nascent so there is less information and experience about what works and what does not work.  For example, the mobyaffiliates post on using mobile network targeting to increase conversions is a good example of useful learnings.

So – whilst the time is right to start looking at the affiliate marketing model on mobile it is by no means easy to make money on the platform just yet.  We’ll be covering some of the emerging success stories here on mobyaffliates in the coming year.