To Affiliate Or Not, That Is The Question
Part 2 — Show You The Money!
Today, good digital marketers are steadily adopting affiliate, or performance marketing, strategies. Budgets for affiliate marketing are growing as competitive, if not, better ROI’s are being seen for campaigns.
Traditional digital marketing campaign, like display and retargeting are getting a bit of a bad rap these days. In my opinion, a little unjustifiably, but we can’t ignore the effect of ‘click fraud’, ‘viewability’ and ‘ad blocking’ (I am going to cover these three in much more detail in a future post) on the digital marketing space. Programmatic, Native and Social Media are the new buzzwords of today’s digital advertising lexicon and with good reason. Native serves as a way to combat ad-blocking; programmatic is filling up more than just remnant inventory as it grows; and Social Media, well we all know the popularity of that!
What’s great about affiliate marketing is it driven by DATA! Affiliate marketers are proud of the fact that everything can be analysed and then OPTIMISED to try and achieve the best ROI’s. Because, at the end of the day, WE win if YOU (advertiser and/or publisher) win.
So in Part 1 I shared a definition of what Affiliate Marketing is. Below is a nice graphic I came across on the old web thingy, which, really captures the essence:
It’s wonderful virtuous circle isn’t it? Well that’s the beauty of Affiliate Marketing. And it looks simple too right? Well, when you look at it like this is does. In a simple scenario, with the fewest players in the game, it seems obvious that it’s a ‘no-brainer’ for brand or agency marketers to use Affiliate Marketing channels. It’s even more enticing, when guys like us at AdRelated, focus on getting the ads on the most relevant content out there, using contextual methods to choose the right offering to the reader.
But sometimes, people don’t understand where the pay-off is:
“Hands up if you really understand how affiliate marketing works. Now keep your hands up if you understand whether or not it’s right for your business. My guess is that there aren’t too many hands left up at this point”.
This quote was taken from an article back in 2013. Not that long ago, but still indicative of the nature of the struggle we face here in the MENA region. Most forms of online marketing channels have a ‘direct offline parallel’, for example, paid/display ads is akin to print advertising and SEO spend can compare to shop-front real estate. But for Affiliate Marketing, other than a ‘refer-a-friend’ schemes, there is no real direct comparison.
That’s where I come in (pat’s himself on the back). Well, that’s the core reason I wanted to write these posts. Affiliate Marketing until now has been nothing but a footnote in marketing class at business school (someone correct me if I’m wrong, it’s been 6 years since I went :-) ). But with ever increasing pressures to fill up the sales funnel, Affiliate Marketing can be extremely beneficial for all businesses, whether you’re a start-up that has little or no marketing budget, or a large brand looking to target new untapped customers or regain old customers who’ve passed you by via other ad channels.
So where is the pay-off, as I mentioned above? Well, Affiliates work on a commission or a ‘Cost Per Action’. That means that if we send the client (the brand) a ‘lead’ who then ‘converts’ to either things like a buying a pair of shoes, or an email sign-up or a test drive booking. Then the affiliate gets a commission. That cut, is the ‘cost’ in that action. Sometimes it’s a percentage of a transaction. Sometimes it can be a fixed fee for a lead. Simple right! So you as the brand/advertiser can decide, ‘how much am I willing to spend, to get that sale’.
Of course, different advertisers, in multiple sectors, have various cost and margin structures but you know, at least roughly, how much you can afford to let someone else bring you a lead. The better the Affiliate is to bring you good quality leads that convert, the more you would be willing to pay out to keep the leads coming. And the cherry on the top of this cake? Well, you’ve not spent a Dollar! Because it’s performance based, you’re not paying the affiliate any upfront fees, or paying for clicks (CPC) or impressions (CPM).
As content providers adapt to the ever changing landscape of digital advertising, where, for example, ‘NATIVE’ is gaining traction vs traditional display, affiliate marketers have an amazing opportunity to show off their technology and offerings.
This is no clearer evidenced in the news that $4 billion has been invested into Affiliate companies worldwide. Where was the money spent? Well mostly in some very big acquisitions. Commission Junction (and all its subsidiaries) were acquired by digital marketing firm Conversant (formerly known as ValueClick) which was then acquired by data marketer Alliance Data for $2.3 billion. Ebates was then acquired by Japanese ecommerce firm, Rakuten, for $1 billion. And, most recently, eBay Enterprise Marketing Solutions acquired AffiliateTraction, which combined, were acquired by investment firms Banneker Partners and Permira Funds for $985 million.
Custora, a predictive analytics e-commerce company, says that Affiliate Marketing will affect 14% of all e-commerce purchases in the USA; and If Forrester’s prediction that by end of 2016 US e-commerce sales will hit $279 billion then you have a Affiliate Marketing affecting $39 billion in sales. Not bad for the ‘black sheep’ of the online marketing world!!
Next in Part 3 — ‘It’s Complicated!’ A closer look at the ecosystem and the different players.