Affiliate marketing has arguably been around for longer than the internet with referral and reward schemes being used in business for eons.
For those who don’t know, affiliate marketing is one of the most cost effective performance channels in a digital marketer's armory. Affiliates or ‘performance partners’ are only paid on a cost per action (CPA) basis, receiving a commission for every sale that is driven to an advertiser's site. This means that advertisers don’t have to pay a thing until a sale has been made or an action has been taken. The channel also offers advertisers a way to track, report, optimize and pay partners (essentially whoever runs the website, be it a brand, individual or organization) for marketing partnership activities.
So what’s the opportunity?
The affiliate channel already has a strong and mature presence in the United States and Europe. The first affiliate program launched in the U.S. in 1996, with the first affiliate network following shortly after in 1998. Since then the industry has matured and evolved in these markets. Affiliate marketing in the U.S. is expected to be worth $6.8 billion over the next five years; in the UK alone it is already worth $1.6 billion.
On the other hand, e-commerce in Asia is considered a relatively new and evolving market, with the landscape having its own rules, consumer behaviors and characteristics. Consequently, there has been little, if any, Asia-specific affiliate marketing activity over the last ten years.
This has led to brands having a fragmented marketing presence through the affiliate channel in Asia, usually involving multiple tools, providers and partners. A lack of awareness, knowledge and understanding has led brands to be cautious when considering affiliate marketing in Asia. When entering emerging markets, brands generally encounter multiple hurdles such as language, local laws and regulations, payment gateways and currency, and most importantly local resources and talent.
Only a handful of global brands have managed to help local partners in Asia Pacific to understand how affiliate marketing relationships work, the commercial model and results tracking methods. Once you get the fundamentals right though, the opportunity for brands can be huge.
To give some perspective, Asia’s e-commerce spending hit US$1 trillion in 2016 alone, and affiliate marketing typically generates anywhere between 5-30% of a brand's online revenue depending on engagement and commitment.
As one of the only affiliate marketing agencies working with global brands across APAC, Neo@Ogilvy operates across 11 markets, and has gradually built a presence across Asia with local employees working alongside some of the largest publishers in their respective markets. The process has not been easy. We had to build business cases for each market, hold in-market events, and educate partners who have never heard about affiliate marketing or how it works. The onboarding process has been fruitful however, with a number of non-traditional partners now working on a CPA, including major banks, airlines, key opinion leaders (KOLs) and local social platforms.
So the opportunity is there for advertisers. What’s next?
First, you need to assess whether your brand is ready. We have seen a number of brands take the leap too early without doing the requisite groundwork and research. Ask yourself – do you have an audience or brand recognition in these markets? Where are your sales currently coming from? Are there particular markets in APAC that have organic traffic or revenue? Do you have a budget for this region?
Brands and agencies sometimes overlook that Asia is one of the most complex regions for digital commerce, and one of the most challenging to penetrate at that. Each market has a unique ecosystem that we must understand before launch. Research and business cases are needed in order to formulate whether it's worth your time and resources. Time and time again, brands simply ‘turn on’ activity in the region and focus on the population numbers rather than having a local strategy, invariably leading to poor results.
Fundamentally brands and agencies are often missing the trick in Asia. There’s definite revenue there; we’ve seen it. Many brands and agencies tend to focus on the smaller markets where there is growth, but it's still in its infancy. We consider China, Taiwan, Hong Kong, Japan, Korea and Australia to be core markets because of their trending growth and consumer engagement with e-commerce.
As the affiliate channel is new in Asia, there is definitely an element of education involved when trying to work with or onboard new partners. This is where agencies or local experts can really add value. Getting it right is worth it from a reach and revenue perspective. And the affiliate channel is ideal when exploring new markets, as it offers a cost effective, low-risk model.
If you remember nothing else from this article, remember this: affiliates are paid only on a cost per action (CPA) basis, so if the partner doesn’t drive a sale, you won't have to pay a thing for that activity. As a brand, it’s wise to work with partners who understand the local affiliates market and its nuances, and be patient as you step through the door.
William Hamer-Jones is affiliate director at Neo@Ogilvy Singapore.