The 80 / 20 Rule in Affiliate Marketing. Does it still apply?

How important is your contribution?

[Whitey]

Years ago in a bricks and mortar business, we used to talk of the 80 / 20 rule. That is , 80% of business would come from 20% of channels or partners - in both acquiring and distributing product.

Yesterday, i spoke with a couple of big affiliates that still echoed these thoughts. One mentioned that the top 4 affiliates provide around 80% of their affiliate business ( SEO and PPC ) .

Is the 80 / 20 rule alive and well amongst most affiliate suppliers?

If so, has that increased your sense of importance?

[edited by: Whitey at 5:11 am (utc) on April 27, 2007]

[Greenboy]

The 80/20 rule is in full effect for me, but it's more like 80/10. For the merchant that I work most closely with and make the most money with, the top 7 out of 76 products get at least 90% of the clicks and create about 80% of the revenue.

[Crown_Guy]

GreenBoy,

You mean 90/10 right?

[Greenboy]

No, actually the numbers do not have to add up to 100. The first number is referring to the percentage of profits or income that is generated by the second number, which is the percentage of channels or products that are responsible for the profits or income. Theoretically, a business could be operating under an 80/80 rule, where 80% of the profits are due to 80% of the channels. This would be the logical case, where the business is perfectly balanced. Of course each number could be anything from 0 to 100.

The 80/20 rule just happens to be the case for a lot of businesses - the fact that it adds up to 100 is purely coincidence.

[ronin]

The "80/20 rule" describes the Pareto Principle.

The original observation was in connection with income and wealth. Pareto's noticed that 80% of Italy's wealth was owned by 20% of the population. He then carried out surveys on a variety of other countries and found to his surprise that a similar distribution applied.

It also applies to a variety of more mundane matters: we wear our 20% most favoured clothes about 80% of the time, we spend 80% of the time with 20% of our acquaintances etc.

The Pareto Principle [en.wikipedia.org]

If the parameters in the Pareto distribution are suitably chosen, then one would have not only 80% of effects coming from 20% of causes, but also 80% of that top 80% of effects coming from 20% of that top 20% of causes...

Which leaves you with 64% of your AM income coming from 4% of your AM channels.