- Posted on 4 July 2016
Affiliate Marketing is constantly re-inventing itself
It has often been declared dead, yet it’s still alive. Affiliate Marketing is here to stay! According to a survey by market researcher Forrester – which was created by the Rakuten Affiliate Network, this sector will be growing annually by 10 percent between 2016 and 2020, in the US alone.
The consulting company PricewaterhouseCoopers estimates that sales made together with partner programmes on the UK-market will increase from 984 million euros in 2016 to about 1 billion euros in 2019.
From Cocktail Party, to a Billion Dollar Business
Amazon’s founder Jeff Bezos was asked whether it would be possible to sell relevant books from his online store, directly on another webpage. Rumour says this idea emerged at a cocktail party 20 years ago and was quickly implemented. In July 1996, Amazon had already launched its’ first affiliate programme and just one year later, more than 60.000 partners offered the e-commerce giant’s products on their webpages. Thus, Amazon’s rapid growth can also be ascribed to their Affiliate Marketing concept.
In the last years, more companies have used this simple principle of online marketing, while continually developing and refining. However, an essential element is the commission, which the publisher/“affiliate” gets from the advertiser/“merchant”. Affiliates provide advertising space on their website, which promote the merchant’s products or services.
The commission paid, depends on the agreed remuneration model or the actions of a customer. With respective parameters (“tags”) within affiliate and links or cookies in the user’s browser, the affiliate can be clearly identified, leading to commission. The different models can range from pay-per-click, purchase or newsletter subscription, to pay-per-view or pay-per-install for software products and apps.
Consolidation, Professionalisation and Innovation, Leads to Constant Change
A consolidation of the fragmented market, with many smaller providers, has been noticed within Affiliate Networks for some time now; this means that eventually, only a few big players – who operate professionally – will be left on an international level. The trend moves towards sheer technology oriented providers with tracking platforms (private network solution), which can be used for the entire analysis of the customer journey. North America and Europe have emerged as core markets however, Affiliate Marketing is now also expanding to South America and the Asia-Pacific region. Although Africa and the Middle East are still underrepresented, local networks are also trying to enter the market. As cost-per-order (CPO) is transparently measurable, (based on the main principle of performance marketing), the cost per transaction is now established as the standard in the developed markets.
New possibilities for big data and cross channel tracking are becoming increasingly important. This shows that the classic attribution model of “last cookie wins,” is impacted. More relevant indicators are now available for advertisers, enabling them to evaluate the performance of different affiliates, across all channels, to create more transparency. By creating a holistic campaign, evaluation of new commission models and budget allocations are possible. This could also lead to a fair payment for the affiliates’ advertising services within the customer journey.
Many different affiliate models have been developed so far, which are combined with the consolidation of the market. Once again, big players emerged with strong professionalisation, and focus on specific segments. Previously, focus has been on content affiliate, due to the requirement of monetisation for smaller web presence. However, nowadays big international companies can be found amongst the top affiliates as well. Different affiliate models emerged from this, and new movements will continue to be included in the industry. In the beginning, marketing measures were adapted from offline to online, whereas affiliates now, also adapt to other online channels and technical innovations.
This is reflected in the increasingly blurred boundaries like Display Media, through CPO-based re-targeting and pre-targeting, or social media. Here, topics just like influencer and video marketing on YouTube, Facebook or Instagram, are getting increasingly popular and are also gaining relevance.
Conclusion: A New Push for Affiliate Marketing
The idea that Affiliate Marketing is continuously reinventing itself, is noticeable in its’ rapid development within the last 20 years. Here, the trend toward high-quality content marketing, as well as the topic “mobile”, contributes to this continuous reinvention. The growing number of downloaded apps has had an immense affect on Mobile Affiliate Marketing. These are mostly refinanced with advertising – at least in the gaming industry. Especially due to the blurred boundaries to other channels, Affiliate Marketing will continue to reinvent itself in the future, through innovative affiliate models.
In a later post, the future of Affiliate Marketing will be discussed in more detail. Stay tuned!
To discuss your Affiliate Marketing strategy, get in contact with us:
Managing Director, metapeople Germany
NetBooster Group CEO