What a pandemic can teach us about affiliate revenue
Dennis O'Reilly, Head of Partnerships at Button, Button, Jul 16, 2020.
An interesting dichotomy has played out in advertising these past few months: since the end of March, Covid-19 has crunched traditional ad budgets, while mobile usage and online sales surged as people digitized their lives.
Even now as cities sputter back to life and markets notch new highs, publishers are left reeling. The New York Times expects digital revenue to fall by 55%. Globally, ad budgets are set to fall by 31% this year with many of the biggest spenders deferring campaigns. On the other hand, app usage is up significantly year-over-year and e-commerce penetration is seeing step-change growth.
Randall Rothenberg, The CEO of the IAB, who sets the standards for online advertising, put it frankly to publishers in May: “You need to diversify your revenue streams. Period.”
Enter affiliate marketing
In a traditional affiliate setup, publishers earn by driving sales from content on their sites and apps. Advertisers pay a percentage of sales — not views or clicks — to publishers in the form of commissions. This industry is set to grow more than 10% annually, according to Forrester and hit $8.2 billion in spend by 2022. Covid will likely hasten that timeline.
In contrast, advertisers are pivoting and pulling TV spots and branding campaigns — traditionally the lionshare of ad budgets — due to fear of appearing insensitive, opportunistic or capitalizing on an awful situation. Whereas in affiliate, every dollar is trackable against return, it’s relatively risk-free (pay per sale), and the content itself appears organic and contextually relevant.
See the trove of BuzzFeed affiliate articles helping people in the pandemic with lists like “19 Cute Non-Medical Masks” to buy online, or Business Insider’s The Best Hand Soap reviews.
Drop, a Toronto-based startup and app publisher, rewards its users as they make purchases from their app, earning revenue through affiliate relationships. To date, they raised $75 million and generated over $350 million in sales for advertisers. They plan to reach 10% of the US millennial market in the next year on the rails of these commerce setups.
“We’re seeing a dramatic increase in advertisers who want to spend through channels that can deliver measurable results,” explained Matt Himel, Drop’s Head of BD and Partnerships. “Being able to surface relevant and personalized content to our members gives our partners reassurance that they are talking to the right consumers, at a time when that matters most.”
The heavy hitters have also taken notice. Shopify and Pinterest teamed up with a ‘Shop’ tab that exposes a million merchant sellers to their massive user base. Facebook launched Shops and Instagram Checkout, and Google now offers free product listings instead of paid ads.
Building an affiliate powerhouse
All publishers should take bites out of BuzzFeed's playbook on building an affiliate powerhouse. The fact that most haven’t, and still earn 90% of their revenue from ads, is not purely a strategic choice against affiliate.
Direct-sold display and CPM budgets have long ruled the roost, but a major reason affiliate comprises a fraction of the pie is because it hasn’t been properly consolidated with other marketing data and measurement platforms. Advertisers and agencies, who hold the purse strings, action on the ‘measurable’ data they have access to — ad-based data that is clear, readily available, and importantly, trustworthy.
Until recently, affiliate data hasn’t been. Further, adding it to one’s stack has been a tough endeavour, obscuring this channel to the detriment of affiliate teams and affiliate publishers.
If data were water, affiliate’s was murky
There’s been little tooling to test if downstream actions are incremental, no deduping of clicks back to initial media sources, and a lack of benchmarking against the go-to yardsticks — search and social. For example, affiliate marketers are still hard-pressed to find impression and click data against spend. When we consider the world of mobile affiliate, this confluence turns opaque.
Advertisers tell us paid installs driven by affiliate appear organic because taps haven’t been integrated with MMPs to attribute. We hear sales are lost as users jump from web to app, causing redirect links to overwrite affiliate network link parameters. Since low funnel affiliate clicks are not deduped against upper funnel media tactics, affiliates get blamed for ‘stealing’ purchases. This has been disproven through countless holdout tests by CJ and Awin, but unlike in Facebook, ‘incrementality’ testing is arduous and often not worth the people power it costs.
It doesn’t help that affiliate teams are often siloed from broader marketing divisions because their commission-based business models don’t fit into click- and impression-based attribution structures. How do you reconcile paying an influencer a percentage of the sale she drove when that customer clicked on a Facebook CPC link a week earlier? It’s hard!
This is why Button and Adjust’s latest partnership is so important. Incorporating affiliate sales and install data into Adjust dashboards will empower advertisers to make more informed decisions because they will clearly see how affiliate interplays with other top-of-funnel traffic sources.
One brand heading in this direction is Calm. Calm is the most-downloaded meditation app in the world, and advertising it in as many places as possible in today’s climate should be a social good.
They’re a mobile marketing machine but are just beginning to dabble in the affiliate space to capitalize off unique partnerships that drive revenue.
“We manage our channel mix to maximize return, so attributing revenue back to its source as accurately as possible is critical,” said Erin Hassey, Director of User Acquisition at Calm. “As we expand outside of our traditional mobile ad channels, it gets a lot harder to measure the value of a channel apples-to-apples against our existing stack. Being able to bring affiliates into that stack helps us better invest in the affiliate space for the true value it brings.”
Those who can fold affiliate into the digital marketing family stand to benefit from three clear advantages:
- It diversifies their advertising mix with commission-based actions, which are durable even during pandemics, not to mention a disappearing IDFA.
- It creates one-to-one partnerships with strategic publishers with the same level of data fidelity.
- It provides a clear return on investment, as cost is a percentage of revenue.
Without proper data consolidation, affiliate will continue to live out in the cold. Sidelined advertisers will stick to tv and digital brand dollars, and publishers will be punished by losing needed ecommerce revenue.
This type of monetization is more crucial than ever, as we’ve seen with Covid-19. Weaving affiliate into the larger fabric of a digital marketing mix will shine a light on the underrated channels affecting the customer journey for brands, offer publishers diversified revenue less reliant on ads, and customers a great user experience.