Where does the affiliate marketing channel stand today?
I recently attended a dinner with a number of peers and they all had very different views and opinions on what affiliate marketing stands for in 2015. This highlighted a niggling concern I have had for a while; the lines have blurred between what affiliate marketers have responsibility for in the digital and marketing landscape versus display, social, search, email, and so on.
Even those that work in the channel find it hard to have a unified consensus on what it actually means. If we as the industry leaders are confused, then so is everyone else. So, here is my two cents on what I think affiliate marketing means in today’s digital world.
To understand where we are now, it is important to look back to 1994 when the affiliate marketing channel was born. The USP and differentiation for the affiliate channel in those days was that it was remunerated on sales only. Commission was only paid to the affiliate if a sale was made, making it a risk free channel for advertisers. In the early days, this was particularly valuable for advertisers as they could rely on affiliates to sit within the Search Engine Results Pages (SERPs) on their behalf, allowing the affiliate to take the risk of conversion.
This created a group of extremely talented affiliates whose main aim was converting customers and securing a sale. The affiliate channel diversified beyond just search, into display, content, niche interest, price comparison and eventually cashback / reward and voucher, through which we now see a large percentage of spend running (57% according to the latest IAB OPM study).
Today, affiliate marketers remain the conversion experts and the majority of affiliate activity is paid for on a cost per acquisition basis, i.e. only when a sale is made. This Pay-per-Sale (PPS) payment model is still a unique part of the affiliate channel, but now it has to evolve beyond that. The model lends itself favourably to the end of funnel converters – cashback, voucher, price comparison sites, but less so to the hundreds and thousands of affiliates who drive quality traffic and customers higher up the funnel. That’s not to mention the number of affiliates who lose out on remuneration because they are overwritten by the advertiser’s own brand search, retargeting or email activity.
What does the affiliate channel look like in 2015?
So what does the affiliate channel look like today? And what will it look like in the future if it’s not just about PPS?
Think of the affiliate channel as a microcosm of the digital landscape. Within the affiliate space, you can find all aspects of digital and traditional marketing, from search, SEO, email and social, to display, content marketing and promotions. So why should you work in the affiliate channel and not just go direct to those other channels?
The affiliate channel provides you with an exclusive and diverse reach that you can’t access through other disciplines and allows you to test in a risk adverse manner. Whilst, the majority of affiliate sales result from cashback, reward and price comparison channels advertisers also have access to tens of thousands of content sites which are inaccessible via any other channel. Accounting for 50% of the channel in terms of number of affiliates these bloggers and content sites alike, are what make the channel unique. We can match an advertiser to a network of affiliate websites and automate one-to-many relationships as well as nurture and support relationships with the bigger affiliate partners. Can you name another marketing channel with the ability to do this at scale?
In addition to managing and connecting advertisers with hundreds of affiliates, the affiliate channel also provides a wide range of innovative technology in data feeds, detailed tracking and attribution technology, a range of tools for affiliates to use to help convert customers, mobile tracking, cross-device tracking, content seeding and sampling…I could go on and on.
Finally, the last component needed in defining the channel lies within the affiliate networks themselves. Affiliate networks are a platform for both affiliates and advertisers that allow the smooth running, coordination and management of a tailor-made affiliate programme. For advertisers this means a programme that reaches thousands of affiliates who promote their brand to the customers they are trying to engage with. The networks provide the specialised resources and technology to execute a large number of campaigns across a diverse affiliate base.
On top of this, affiliate networks offer an account managed service that is delivered by a group of expert consultants in the channel, from either an advertiser delivery, affiliate management and recruitment, or a technology perspective, and more often than not, all three.
What does the affiliate channel look like beyond 2015?
Lastly, it’s worth addressing the future of affiliate marketing. The channel has been around for over 20 years and continues to grow and develop year-on-year. It has stood the test of time because it is a dynamic channel that adapts to its current environment, seeking to innovate and progress.
The channel has been and will continue to be an incubator for new technologies with tech players such as Criteo, VE Interactive and SaleCycle all initially dipping their toes in the water via the affiliate channel. We can expect to see programmatic techniques appearing within the channel as it evolves and continues to drive efficiencies for advertisers. The channel will continue to attract new and exciting affiliates to work with and explore new ways to support advertisers in their digital marketing strategies. The payment model will always be predominantly about PPS, last click attribution, but I expect the channel to also develop further attribution and payment models such as Cost-per-Click (CPC) and Cost-per-Mile (CPM), aligning with other marketing disciplines.
Affiliates can and are driving valuable traffic higher up the consumer journey, and those advertisers that embrace that in the affiliate channel will be most successful in acquiring customers via all of their digital and offline channels.
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