All under one roof: The pros and cons of in-house affiliate management

As brands become more digitally savvy, many are looking to take greater control of their affiliate strategies by bringing affiliate management in-house. Technology is facilitating this – but what are the pros and cons? Katie McQuater takes a look.

Performance marketing is essentially quite simple in its premise, yet the industry itself is ever more complex, with numerous players and options now available to advertisers looking to invest in this valuable space. Change is necessary for the survival of any industry, and this is no more accurate than in the performance marketing space. As advertisers become more digitally savvy, technology solutions providers are stepping in to shake up the conventional affiliate models the performance marketing industry has, until now, relied upon. Technology platforms such as that supplied by Performance Horizon Group (PHG) are allowing advertisers to manage their affiliate programmes in-house, as opposed to the traditional route of going through an affiliate network. As reported in The Drum’s last performance supplement, published in May, these platforms can help advertisers track, manage and optimise conversions driven by partners across multiple channels in real-time. Apple, for instance, recently dropped its US and Australian affiliate network partners in favour of PHG, citing global expansion plans and “improved reporting tools” for the move.Many brands are eyeing the opportunities presented by this self-managed approach, with greater control over their affiliate strategy being one of the most appealing benefits for advertisers. Another big driver of this approach is a more direct relationship with affiliate partners, which can speed up communication, facilitating dialogue and driving sales. Control, richer data & more direct relationships“Our customers increasingly want direct relationships with their top partners and more advanced technologies to execute one to one strategies driving growth,” says Sean Sewell, co-founder and business development director, PHG. “What we are continually hearing from marketing leadership is the need for control, transparency, connectivity, better data and incremental growth.”“The UK market is quite mature and, taking the latest Internet Advertising Bureau (IAB) numbers into account, nearly 60 per cent of a programme’s revenue is driven by a small handful of partners. Mature affiliate programmes resemble steady heartbeats. Incremental volume is key, and in the UK landscape at least, a proven way to generate that increase is being able to provide the brand and their partners with the ability to consume richer data to better inform and drive actions.”According to Sewell, brands armed with this data can empower their partners to drive increased sales. This direct relationship may also be preferred by the affiliate; as part of LBi’s affiliate survey conducted in November 2012, the agency found that 49 per cent of affiliates would prefer to work with a brand or agency directly rather than via an affiliate network. Further to that, this direct approach means the brand retains ownership of the relationships, according to Impact Radius managing director Michael James: “On a network, you rent relationships. With an in-house programme, you own them.”Cost saving is another advantage of bringing an affiliate programme in-house. According to James, research conducted by Impact Radius shows that it saves clients between 50 and 75 per cent in cost over the traditional affiliate override model (the fee paid to a network) through a licence fee. With an affiliate network, the more sales you make, the proportion of override never changes, but James argues that in many cases, networks aren’t doing anything to warrant those extra sales, saying: “It’s better to have a model which steps up more gradually according to the number of conversions or clicks being tracked.”Investment, resource & scale – 
are the networks unrivalled?Scale and resource is certainly an area in which the networks have the upper hand. With their years of experience, magnetism for new business and ability to connect advertisers to a large volume of publishers, there’s no denying the powerful role networks play – it cannot, according to Affiliate Window’s strategy director Kevin Edwards, be replicated easily.“Networks will always have the edge as they can offer many more services that a brand will have to figure out for themselves,” says Edwards. “Many affiliates don’t like working with dozens of platforms and partners and will choose to work with a handful of companies with wide reach, such as a mainstream affiliate network. We’ve seen advertisers move programmes in house and affiliate sales drop, leading them to come back to their network.”Compliance is another area where the benefit of a network’s knowledge and investment comes into its own – invested in with a six figure sum annually by Affiliate Window, it’s an area likely to be overlooked by many advertisers without the right resources and expertise. “It is often overlooked but I can’t stress enough how compliance needs to be a central pillar of any affiliate programme,” Edwards explains. “We remove unethical publishers almost daily, and in-house advertisers must ensure they have the tools and processes in place to protect their brand and legitimate affiliates.”Mark Haviland, managing director of Rakuten Marketing – recently announced as an umbrella brand for Rakuten Linkshare and Rakuten MediaForge – argues there are many benefits to networks, the biggest being their great relationships with publishers, something many advertisers may not have the time and resources to facilitate. “Being able to connect advertisers with millions of publishers is certainly where networks have the upper hand. These relationships are invaluable for advertisers, as creating a successful partnership is a key ingredient to creating an effective campaign. With in-house affiliate management it is beneficial for brands to build those personal relationships with publishers directly but the cost and time spent to facilitate this may not be viable for all advertisers.” Further to that, Haviland argues that networks bring an outside perspective to campaigns, offering “tailored insights” and advice “based on their data”.“Networks also have insight into the wider digital landscape. It would be difficult for a small team to manage this in-house and acquire this wider, long term view,” he says.Affiliate Window’s Edwards echoes this view, arguing that in-house solutions often try to commoditise the tracking, reporting and payments services offered by networks, but fail to see the bigger picture of the network’s role. “Affiliate marketing is what networks do and they’ve typically invested heavily in the infrastructure around the basics that self-managed solutions typically don’t offer,” says Edwards.The choice of approach to affiliate management is a complex decision, and one that should not be taken lightly by brands. As the channel continues to grow, more advertisers looking for success within performance marketing may choose to turn away from the status quo. But what’s clear is that whether or not the in-house approach is favoured by brands, the new models inject something different into the market – which, in the long term, will serve as a driver for growth.This feature is published as part of The Drum's most recent performance supplement, sponsored by Affiliate Window.