DMO Global's Elizabeth Lloyd analyzes the recent acquisition of U.S.-based affiliate marketing company LinkShare by Japan's Rakuten.

With Japanese based media company Rakuten, purchasing LinkShare, will affiliate marketing in Asia take over CPM?

Last month, Rakuten, Inc. -- Japan's largest online shopping mall -- announced its intention to acquire New York-based affiliate marketing services provider, Linkshare at a price tag of 425 million U.S. dollars. Historically, the pay-per-performance model has not been as widely embraced in Asia Pacific as in the U.S. However, Rakuten's acquisition of Linkshare is a very strategic move as it will pave the way for future investments and acquisitions in the international affiliate marketing arena.

According to Hiroshi Mikitani, chairman and chief executive of Rakuten, "LinkShare's performance-based marketing expertise across affiliate, search and email capabilities provides Rakuten with an excellent first step to launch our US operations and continue our international expansion."

Tom Taulli, Forbes journalist and Instream Partners analyst, says this of the deal: "as for Linkshare, I think the deal will be a big boost to CPA (costs per action). Rakuten spent a lot of money -- all in cash -- for Linkshare and will need to get a return on its investment. Basically, Rakuten will go global as much as possible with CPA -- and this will likely start in Asia."

With affiliate marketing being a top source of online customer acquisition methods in the U.S., one must wonder why this form of revenue and lead generation is not as popular in the Asian Pacific.

Kevin Huang, CEO of Hong Kong-based online ad agency Pixel, feels that the main issue underpinning the deal is a lack of ecommerce transactions in Asian, and that this is due to Asian users not being comfortable with online transactions. "We feel that most users in Asia still prefer to browse rather than buy online," Huang said.

This preference is evident when one takes a look at China, which has a very cash-oriented economy. Few Chinese have credit cards, which makes transactions with customers outside a particular locality quite difficult. According to the China Business Weekly, the nation's credit card holders now number two million, a mere fraction of China's 1.3 billion people.

There are many initiatives taking place to penetrate this expanding credit card market. For example, online travel agent Ctrip.com recently announced the launch of a travel credit card with China Merchants Bank Co. Ltd. Additionally, companies like eBay's Paypal online payment unit have hired consultants to figure out how to tap into this Chinese credit card market.

Another challenge that affiliate marketers face when trying to penetrate the Asia Pacific market is the lack of site-specific and demographic knowledge. As Kevin Huang observes, "most advertisers will have to really understand their consumers, the demographics of each site, and be able to customize offers for each type of user they reach. In Asia, we find that most advertisers have yet to understand this and be able to optimize their campaigns on the fly."

Will CPA in APAC be comparable to what it is in the U.S.? Huang believes that it will take more of a hybrid model: "It will become more and more popular, or, rather, there will be an increased request from advertisers, and many sites will become open to [CPA] as time goes by. However, I don't believe that it will be similar model as in the U.S. For Asia, I believe that it will be a combination of a base set up fee plus CPA components -- as opposed to the U.S., where it is strict CPA deals."

Much like the enormous opportunity China presents to entrepreneurs worldwide, the Asia Pacific region gives affiliate marketers a chance to establish a new form of online marketing. With Asian online media moguls such as Rakuten paving the way for affiliate marketers, it will be certainly be interesting to see how the CPA model will develop overseas.

However, it is evident that to run successful CPA campaigns in Asia Pacific, one must be well versed in specific demographics and know which offers are likely to perform best in particular countries. For example, U.S.-based health and beauty products are quite popular in Hong Kong, while social networking offers are widely embraced in Malaysia.

Elizabeth M. Lloyd is Chief Marketing Officer of DMO Global, a leading affiliate network solely dedicated to serving international and multicultural markets. Lloyd's work on international online marketing has been highlighted in numerous publications as well as in academic curricula for MBA international marketing programs worldwide. DMO Global is a wholly-owned subsidiary of Dragon Media Online, Inc.