Brands new to affiliate marketing often need to have the current affiliate ecosystem described in detail. One of the biggest criticisms levelled at the channel is the domination of cashback and voucher code sites. The accusation is that customers are being hijacked by incentives at the expense of both margin and other affiliate partners.
Larger players such as Quidco, TopCashBack, Savoo and Vouchercodes.co.uk should be seen as media owners in the old-school sense of the word, as this makes their value as a partner easier to explain and advocate as part of a publisher strategy.
Like a traditional media property, they have a clearly defined audience, they promote themselves aggressively to grow both their audience and market share and seek to maximise the value of their inventory – for example their web pages or newsletter databases – by promoting relevant advertisers.
But affiliate publishers are in their infancy in exploiting their revenue potential, which limits their ability to work effectively with a broad spectrum of brands.
Mixed media messages
Broadcast media is able to maximise revenues by knowing where it delivers the largest numbers of specific audiences, allowing media buyers to target their advertising accordingly and deliver their client objectives as efficiently as possible.
The net effect of this understanding is the ability to deliver a large number of advertiser campaigns with what, when it comes to TV and radio, is a finite amount of permitted time slots in which to deliver it.
Print media is not so inventory-constrained because pagination is always available if demand exists (can anyone remember PC Magazine in the 1990s?).
Because affiliate marketing has evolved from businesses started by non-traditional media owners, some of the key components that enable other areas of media and online advertising, such as measurement and the collection of demographic data, have been lacking in either whole or part. This limits the amount of targeting opportunities available to advertisers and reduces the sales opportunity to the ‘total audience’.
The key drivers in monetising affiliate inventory are conversion and tenancy. Giving extra exposure to those brands that are known to convert and willing to provide an exclusive incentive is a safe route to ensuring a return on current inventory.
Given the heavy discounting and recent economic times, customers are increasingly seeking deals both on and offline. This has caused the competition for market share and message to spill over into the affiliate channel, making those affiliates with large audiences and databases a key weapon in big-brand rivalry.
This is so much the case that large publishers are now able to charge advertising tenancies in addition to affiliate commission. It is this big-brand bias, allied to the need for greater incentives to compete with the competition, that has given rise to the negative perception of the larger affiliate sites.
Boosting the numbers
However, there are two fairly major tricks being missed – there is much more revenue to be generated, as well as an opportunity to challenge the misconceptions of the code and cashback sectors.
Available inventory is currently limited to a number of newsletters sent to large user bases with little or no targeting, meaning that tenancy fees and brands that are known to convert are generally needed to fully monetise these sends. These are backed up with prominent available positioning in relevant and highly trafficked areas of publisher websites.
This effectively excludes most smaller brands that would like to get involved with larger publishers. This is understandable given that they represent a major risk for the publisher to include on a pure commission basis and often do not have the budget to buy space in newsletters relative to the likely return on investment.
The real value of code and cashback sites is a captive audience of engaged users. These users represent a major slice of available market share and new customers to a big brand.
But code and cashback sites also offer a proportionally bigger pool of potential customers and a branding opportunity to smaller brands, which are keen to grow both sales and awareness via the affiliate channel.
Clearly the big brands are able to take advantage of this audience at present, but what of the smaller merchants?
The major affiliate publishers – and indeed any publisher with an eye on a profitable future – need to look at how other media and channels use their inventories and apply segmentation and targeting to create opportunities that complement and build on what they already deliver.
The ability to target by known buying habits, declared interest, age, gender and geography are all ways of driving smaller, more targeted audiences via communications that should deliver better conversions (and earnings) to the publisher and more cost-effective outcomes for the smaller brand.
The larger publishers are already moving towards this approach. However, when compared with the sophistication applied to the targeting of other online advertising, email and the sort of inventory management techniques applied by broadcast media in order to achieve revenue targets, it is clear there is a long way to go before the affiliate marketplace can deliver its full revenue potential to merchants and publishers alike.
In conclusion, the affiliate channel’s increasing move towards paid-for opportunities or selecting partner merchants based purely on the likelihood of conversion to sale needs to be seen in light of the positives that this can deliver for all merchants that have an affiliate programme, regardless of their size.
There are many examples to be taken from elsewhere in the field of advertising that, when combined with the cost per action/fixed payment hybrid, make the affiliate channel a far more compelling proposition in so many ways, as it is combining the best of the old and new-school with a value proposition that can appeal at the highest levels of the marketing tree.