Performance over-performs when it comes to value. As the IAB’s second annual survey into the value of the channel pointed out in January, advertisers spent £1bn in 2013 and generated £14bn in sales, so a £14 return for every £1 invested.
Yet the affiliate marketing model is still overlooked or not understood as the key player it really is within the marketing mix, something The Drum has been documenting since 2012.
But things are starting to change. Increased confidence, education and a move towards improved attribution modelling are all encouraging further spend in the channel.
As part of a performance marketing feature published in The Drum's 15 October issue, we ask industry players how affiliate marketing can sustain itself, and what to expect from the industry in 2015.
The current problem faced in the affiliate marketing model is that in the planning stages of a campaign marketers don’t always value the content supplied by affiliates, ie why incentivise a consumer when they might have purchased anyway? And is the lifetime value of these consumers as good as those that took out the product or service without an incentive?
To integrate better into the marketing matrix, affiliates need to harness their historic and live data sets. They have access to huge sets of data, knowing what products and services consumers have purchased, from finance to telecoms. While there are obviously challenges, in order to evolve, this data needs to be commoditised and plugged into wider trading desks and RTB buys.
There are a number of ways that affiliate marketing can sustain itself. We need to continue to be the most efficient and effective channel by demonstrating how affiliate activity fits within the customer journey beyond the last click and the role affiliates play in generating valuable sales and supporting customer retention.
There is also huge market potential in terms of attracting more publishers to the channel by reducing complex barriers to entry and providing publishers with better tools to help them promote advertisers in the form of simple to use, intelligent display and native ad formats. There are only 12,000 active affiliates in the UK market; we feel there is a huge market potential that is currently being missed.
I think the affiliate channel needs to have a larger share of voice when it comes to advertisers’ budget planning, but in order to do this we need to gain a better understanding of where affiliate activity appears within the customer journey. The affiliate channel is well established as being an expert at closing the sale, but less recognised for the role it plays in driving brand awareness and interest. As a channel we have exclusive reach across thousands of quality content sites and this needs to be better understood and communicated for us to gain that voice.
One of our clients recently presented to our wider account management team and said something that really struck a chord. He said affiliates needed to be better at telling stories. In a sense our most compelling asset, payment on performance, is also our achilles heel. We’re seen as a sales channel, lines on a spreadsheet rather than the exciting creative channel that we truly should be. We’ve always been strong at appealing to the head (numbers delivered consistently month on month), but we need to be better at connecting with the heart and exciting senior marketers that affiliate is much more than this. There are significant budgets out there that we can tap into if we approach affiliate marketing with a more creative message.
It’s critical we re-double our efforts to protect existing affiliate revenue. I’ve seen a gradual chipping away of commissions and aggressive attribution strategies that aren’t about insight but are cost cutting exercises. It’s also worrying that traditional industry players are offering a range of other digital services that could potentially cannibalise affiliate revenue, presumably they’re less concerned as they can mop up the marketing budget via these additional channels. An area that will develop is our attitude to cross-device as more and more insight filters through about how consumers are transacting across multiple platforms. Additionally I would hope that new business models will emerge that optimise the mobile experience from a cost per acquisition point of view.
The cornerstone of affiliate marketing’s sustainability is that it is not a channel, but a way of paying for advertising. Therefore it is already integrated into the other channels as we have seen affiliates work on an arbitrage model and publishers accept performance based media buys. I do believe that performance advertising needs to be looked at more holistically with the other channels and needs to be seen more as a way to structure media spend.
The near future holds the merging of other forms of media into the performance marketing channel. As we have seen, arbitrage has become common in search. Over the last 12 months, we have seen the increase of display media buying, comparison shopping and more structured as performance media buys. The future of affiliate marketing is the integration of performance payment terms into the fibre of other media channels.
This article was first published in The Drum's 15 October issue.