Performance Marketing Definition
Monday, March 31st, 2008The following is a working definition, and not a legal definition. Performance marketing can best be described as a way for a publisher to receive payment for referring visitors to an online business.
By providing reviews, price comparisons, or other merit-based information, the Website guides the customer to another Website where they may or may not purchase a product or service. The publisher Website is funded if a sale or desired transaction is completed.
A less direct form of performance marketing is the publication of Website banner advertisements. In this case, the publisher allows banner ads to be placed near informational Website content. When a visitor clicks on the banner and buys a product, the affiliate site is paid a referral fee. Not all banner ads are pay-per-sale, many are pay-per-click and also pay-per-view.
In “A Practical Guide To Affiliate Marketing”, by Evgenii “Geno” Prussakov, affiliate marketing is defined as follows:
“Affiliate Marketing is basically performance based marketing, whereby affiliates/partners promote a merchant’s product/service and get remunerated for every sale, visit, or subscription sent to the merchant. The most frequently used payment arrangements include: pay-per-sale, pay-per-lead, and pay per click compensations.”
According to Prussakov, Amazon.com started its original marketing program BuyWeb in 1994, and its current Associates Program in 1996.
Lenspricecompare.com, along with many other price comparisons sites, uses the pay-per-sale model to refer products and services to site visitors. Lenspricecompare.com refers visitors mostly based on contact lens prices, and is funded for sales generated through referrals.
Performance marketing has existed on the Web since large-scale commercialization began. However, as states try clever ways to “tax the internet” they are using performance publishers as an excuse to create a business nexus in the state. This has backfired in New York where thousands of marketers were told by out of state retailers that their marketing efforts are no longer needed. In these cases, New York State lost the nexus, the income tax, and the marketers’ income. This is what happens when lawmakers make laws about businesses they know little about.
Taxes are necessary for governments and services to function, but let’s not bite off the hand that feeds us!