Well I’ve been writing this blog for quite a few months now, and to be honest I’m not sure for how much longer I’m going to continue. One things I’ve noticed about online monetization is that there’s an awful lot of noise generated on the subject, which has had precious little impact on how business is actually transacted. This has got me thinking about where is my old speciality, affiliate marketing actually going.
Affiliate networks have been in the news recently with the purchase of Buy.at by Digital Window. Previously I argued that this might not necessarily be part of the consolidation trend that others had spotted, with the benefit of a couple of weeks to think about it, I think that I have revised my opinion.
It’s not often mentioned, but my belief is that Affiliate Marketing was one of the key developments that helped rebuild confidence in online following the dot.com crash. As readers of the news will have noticed, it is now exactly a decade since the NASDAQ hit its highest ever valuataion. Having worked in online through the dot.com crash, and through a couple of recesssions, I can honestly say that nothing was comparable to the crash. One minute there was a thriving industry with eager investors keener to hand over money than drunks at a bar calling last orders, the next just the mess left over from the party.
Affiliate Marketing helped fill that gap, by offering advertisers a way to get online without taking much of a risk or having to invest huge sums in agencies etc. With the growth of Pay Per Click advertising, Affiliate Networks had their first day in the sun as advertisers could now offer a way to empower 3rd parties to make commission only sales for them.
PPC nearly always I feel works back to an effective cost per sale, and advertisers now didn’t have to put large numbers of people onto number crunching, when PPC based affiliates would do it for them, and as they had experience of multiple retailers and search engines, probably far better.
As inevitably perhaps the PPC market became less profitable, as the discrepancies between the cost and the value of clicks began to close, Affiliate Marketing was offered another route to market in the development of the loyalty and incentive affiliates. Now the commission would be given back to the customer either in part or in whole, either as cash, savings bonds, carbon credits, gym vouchers or you name it.
PPC and Loyalty affiliates still make up the vast majority of super affiliates, especially those that work across a variety of different advertisers. These are complemented by others with very specific content who generate good natural organic rankings, and lead generation providers who’ll churn older profiled information in the hope of making a sale.
The truth is though, that the networks haven’t been that great at expanding out from their established publisher base, and in some respects why should they. They after all are there to facilitate a relationship between an advertiser and an affiliate, it is the affiliate’s responsibility then to drive the traffic and make the sales.
Advertisers over the years have become much more sophisticated about performance marketing, and realise that most networks depend on very similar sources for their traffic. Hence margins have been falling, as the override becomes on of the few bargaining tools left, once publisher base and tracking technology come to be seen as interchangable between suppliers.
Cutting override is I believe a short term solution, and one of the reasons I love dealing with agencies. Every year everything else gets more expensive, but advertising rates and overrides have to go down. By cutting the amount of margin, this gives affiliate networks less room to develop and innovate, I know that agencies need to prove themselves and the value they offer to the client, but there must be moer to it than through consistently reducing costs.
Personally I also think it’s a very short term view, which takes online and view’s it as a sector that has already matured, and that the best way to utilize it more effeciently is by squeezing the suppliers. This I believe in incorrect. The last couple of years have shown that online is still very much in flux, and whilst the sources of affiliate marketing traffic haven’t changed so much, user behaviour and in particular the rise of Facebook, video and probably now mobile has.
Search will remain the paramount acquisition method for some time ahead, possibly forever, but you can already feel how it’s being augmented as part of the media mix. For me therefore it is important that affiliate networks embrace this shift rather than simply trying to dig in further into the search trench.
All developments will centre around the generation and acquisition of relevant traffic, but it will also need the networks to take much more of a partnership approach to their publishers, working far closer than previously. CPA advertising will not disappear, it is now a question though of who will be offering it, will it be the networks we known today or completely seperate suppliers.
The networks have the advantage at the moment, through their established relationships with the merchant base. Unless though they show these merchants somethign new, eventually their interest will wander.

Rob MD, One