Member Q&A Series : Affiliate and Partnership Marketing Trends & Outlook

On March 24, 2021 Research & Resources

IAB Member Q&A Series:
Affiliate and Partnership Marketing Trends & Outlook

The publication of the recent IAB Australia Affiliate Marketing Australian Industry Review 2021 provided the market with an up to date understanding of how clients and agencies are using affiliate and partnership marketing, their investment plans for the year and metrics being used to assess activity. In this article members of the Affiliate Marketing Working Group discuss the findings within the review and what it means for the market.

David Glasgow, Director, Navigate Digital | Chair, IAB Affiliate Workgroup

Both the results of the Review and other data in market has highlighted the huge growth that online commerce had during 2020, has this meant that new types of companies are trialing affiliate and partnership marketing? What types of new clients have you seen enter the market?

2020 brought about a lot of uncertainty but also a lot of growth for online sales. This had the effect of shining a light on affiliate and partnership marketing. Paying on performance, increased accountability of marketing spend, and strong ROI, makes the channel very attractive during difficult periods. This increased attention is coming at the perfect time. As an industry, we are better equipped than ever to help companies get the most from partnerships. The IAB’s work in research and education is helping brands better understand affiliate marketing, and we have more networks and agencies that can deliver opportunities for all kinds of sectors and company sizes. It’s also worth noting that we are growing in terms of professional experience, with 30% of respondents working for brands and agencies having over 5 years’ experience in affiliate marketing. The result is that more companies are investing in the channel. Last year, 68% of those surveyed recorded increased revenue through the affiliate channel specifically.

It’s not just on the advertiser side that we are seeing new companies enter the market. Publishers, that would normally rely on traditional advertising methods, are also realising that affiliate marketing is a great way to monetise content. Not only do they have easy access to thousands of Australian brands through the networks, but affiliate partnerships are more versatile than ever, with brands looking past traditional CPA type models. Large media houses, editorial websites, and marketing technology providers are all turning towards affiliate partnerships. We’re also seeing an influx in brand-to-brand partnerships, as companies realise that they can work with complimentary brands to drive new customers.

We’ve certainly seen an increase in interest in the affiliate channel from smaller-sized companies, as well as companies that are now having to focus more and more on their online revenue streams. But the appeal of affiliate marketing has always been strongest for brands that want to stay one step ahead of the competition, and who are most driven by creative, smarter ways of working.

Sarah Kelly, APAC Marketing Director – Partnerize

What was the most surprising finding in the review? Explain what it means for the industry.

Successful partnership programs have a diversified array of partners and each partner type provides unique value across the customer journey. This made it interesting to observe the association of value as a question in the survey.

Cashback and loyalty were rated as the most valued partner type. With loyal bases of followers that can be reached at scale, and rich targeting options, brands seemingly favour the value of this partner segment.  But contrary to this, is coupon and deal partners, who were rated the second least valued partner type. These partner types, too, have wide follower bases and the ability to drive volume at scale not only across their mediums, but also across their social networks. However, audience demographic and behaviour by partner type is often overlooked. Additionally, more sophisticated coupon partners have the ability to hone in and target specific audience segments to deliver value that aligns to a brand’s KPIs. For example, this partner type can help you significantly increase AOV or liquidate inventory. Nonetheless, there still appears to be a stigma surrounding this partner type purely because of their classification.

Content partners were perceived as the second most valuable partner type. Unsurprising, as these partners tend to drive favourable new-to-file customer acquisition rates. Yet when it comes to compensating them, 85% of respondents said they’re still paying out on last-click only. Unless they’re now paying content partners on a CPA, this means that the partner they value significantly is actually missing out. 

Ultimately, what the data highlights is the opportunity for marketers to lean in and understand the inherent value of each partner type, the need to establish a diversified partner composition to reach target audiences and the respective optimization of each partner type to deliver desired value.

With existing affiliate marketing clients looking to increase their investment and new advertisers adopting this channel, how can publishers tap into this revenue stream?

As the investment in both online acquisition and the partnership channel increases, this presents a great opportunity for publishers to position themselves not only as a source of revenue, but also as a conduit to drive new customer acquisition in a highly efficient manner. For example, one of the key findings from the survey was that Return on Investment (ROI) was the most important measure of success for advertisers in 2021, equal only to volume of sales, with new customer acquisition closely following.

As a partner, now is the best time for you to work directly with your advertisers to showcase your ability to align to their objectives and goals, whether it be scaling revenue, driving efficient acquisition or delivering lifetime value through profitability and margin control. By having this conversation right from the start, you’ve positioned yourself not only as a partner that’s thinking beyond standard revenue growth, but one that’s eager to drive the right customer and value for that particular advertiser, and therefore increase the potential of your own revenue stream for the long term.

The study also showed that 68% of respondents were investing more into the channel in 2021. This presents a great opportunity for you as a publisher to show that you desire to form a true partnership that achieves the goals for both the advertiser for yourself.  When advertisers and publishers form a true, direct relationship, the possibilities for revenue and more are endless.

Sophie Metcalfe, Publisher Development Director – Awin Global

A large percentage of payments are being made purely on the last click model; do you feel this will change in the coming years?

According to the IAB surveys in both the UK and Australia (2021), rewarding affiliate partners on last-click remains overwhelmingly the attribution model of choice (86% in the UK and 85% in Australia). There are numerous other reward schemes based on multi-attribution, alternative actions or differing timeframes.  

 There is no one size fits all approach. Advertisers should look at attribution alongside their customer behaviour and review periodically to maintain relevancy in alignment with the change.  

The advancement of tracking capabilities and access to more granular data points opens a better understanding of the types of customers coming through affiliates, their contribution to other channels, and better flexibility with reward schemes. From the survey, some programmes are beginning to explore alternative attribution models, 14% in the UK and 7% in Australia.  

Some notable attribution model examples are first-click attribution, ‘bathtub’ or ‘U-shaped’ (weighting commission split towards the first and last click), linear, time decay, basket freezing and commission on influence or assist – clicks in the middle of the journey. Naturally, there are pros and cons to each.  

For example, the Bathtub model benefits a range of affiliate types, and it encourages top-funnel promotion and strong conversion and highlights who introduced and closed the sale. The con is ‘consideration’ publishers or those in the middle of the funnel are unfairly rewarded. Splitting commission into smaller pieces becomes less appealing to publishers, including content publishers who are favoured. The model cannot be applied for all publisher types, i.e., cashback, where there needs to be upfront knowledge, and consistency of commission amounts to manage customer expectations. 

In the same way as the last-click model, the first-click model is single-source attribution and arguably simplistic, telling only one part of the journey. 

These are just a few examples. Many custom variations can be implemented depending on a particular retailer’s customer habits and how value is defined.  Any definitive shift will come from a deeper understanding and confidence of the channel value. 

Considerations should be, the incorporation of CRM data (repeat purchase information, average spend, loyalty scheme membership) and tracking more against each transaction beyond new vs existing and into product, location, device, number of items per basket and the period of metric measurement. 

An additional consideration is how customers interact across the channels and where affiliate contributes, which paves the way for non-discriminatory de-duplication logic which maintains cost-efficiency while nurturing engagement.  

Combining and cross analysing the data enables the assessment of lifetime value of new customers introduced by the channel, and the importance of customers introduced by a publisher type or even by an individual publisher. 

Understanding these elements empowers advertisers to apply flexible and informed reward schemes to the appropriate pools of partners. As discussed, attribution models applied to an entire programme are unlikely to benefit everyone equally, whilst it’s not practical to have each publisher type on their own. Therefore, alongside knowledge, flexibility is vital. Embracing alternative commercial models (post view, soft click, tenancy, top-ups, payment on click, payment on influence) should form appropriate commission discussions to help support upper funnel publishers whilst enabling the rest to function and remain engaged. 

Emma Bhatti, Head of Advertiser Management – Commission Factory

The Review highlighted that many marketers are not yet preparing for the loss of third-party cookies. How do you think the industry can do more to help marketers to prepare? 

The survey response regarding this area highlights the importance and urgency to better inform and educate advertisers and agencies of the impact of the retirement of third-party cookies. We need to do a better job of making it clear and concise for all levels of experience and to ensure they understand what it means exactly for them. Tracking accuracy is important not only to ensure correct attribution and measurement of channel performance, but to also to maintain strong long-term relationship with partners. For the advertisers, this may mean they need to implement alternative or additional tracking methods to accurately track all sales in all browsers.  

Whilst the networks have adapted tracking where needed for their customers, the advertisers themselves need to take a more active approach to this matter, talk to their network or partners about their current tracking set up and what (if any) updates they are required to undertake for 100% tracking accuracy. We would strongly suggest getting a technical contact involved in the conversations early on and for marketers to do the research and understand the impacts fully so that they can better educate their internal teams and other business units. 

In the UK market, the affiliate community has responded to tracking concerns through a publisher board, addressing standardising tracking and working with the networks to increase visibility to affiliates on advertisers who have alternative tracking methods in place and those who do not. Most networks are sharing this information with publishers in Australia too and we would encourage publishers to also be vocal on this topic and share their point of view. 

As an industry, we need to continue to help marketers to understand tracking in simple terms and provide them with the options for tracking in a cookie-less ecosystem.  Increased transparency and one to one communication (the platforms, affiliate partners and advertisers and agencies) around tracking requirements will help make everyone accountable for a sustainable future for the channel. Ultimately tracking accuracy is what all marketers want to achieve for better optimisation and ensures that affiliates are rewarded fairly for their activity. 

Lalisa Fungtammasan, Marketing Manager APAC, – Rakuten Advertising 

With existing affiliate marketing clients looking to increase their investment and new advertisers adopting this channel, how can publishers tap into this revenue stream?

With the accelerated growth of e-commerce brought about by the global pandemic, publishers undeniably have a prime opportunity to expand their advertiser network and forge new partnerships. There are many ways publishers can leverage this growth, including key methods such diversifying their publisher models, utilising new affiliate technology and exploring non-traditional commissioning methods.

Publishers can further monetise their site by adding more customer touchpoints. This can be achieved through tapping into different publisher models other than their main monetisation method. For example, Honey, a browser extension with coupons as their primary publisher model has diversified its revenue stream by introducing Honey Gold rewards program. Stepping into the loyalty publisher model allows the site to increase its customer touchpoints and in turn, tap into a network of advertisers who may only utilise this publisher model in their affiliate marketing program.

Technology is the crux of the digital industry, and affiliate marketing is no different. Content publishers can consider adopting new affiliate technology such as Skimlinks, a platform that automatically affiliates product links from online retailers. This will allow publishers to not only automate their affiliate program, but also reach new advertisers via these platforms and in turn, generate yet another revenue stream.

As more brands become accustomed having affiliate marketing as part of their strategy, publishers can use this opportunity to explore other commissioning methods beyond the traditional cost-per-acquisition (CPA). Providing brands with non-traditional, non-CPA options will enable a full funnel reach from first-click to flat fees. With a majority of brick-and-mortar stores now operating as per usual, pre-pandemic times, it’s important for publishers to also consider exploring online to offline options to capture entire customer journey.

Publishers now, more than ever, have a chance to find new ways to boost revenue and form new partnerships. The current affiliate marketing landscape is ripe with opportunity, and it’s there for the taking.

Many of the marketers in the research had an appetite for their affiliate and partnership marketing to be more integrated with the rest of their advertising activity. What opportunities does this offer the industry?

With ROI and incrementality on the radar for many marketers in the industry, it’s no surprise that the appetite for affiliate marketing has grown in recent years. This means many opportunities are up for grabs for advertisers and publishers alike, including executing full funnel marketing activities, forming closer partnerships and making the most of data.

Creating a cohesive, full funnel marketing strategy has never been simpler. Advertisers now have the ability to reach customers at all stages of their shopping journey through affiliate marketing, from casually browsing to completing a transaction. In a world where brands want to see conversion for every marketing dollar spent, the affiliate channel can provide this transparency across the full funnel. The capability to track performance from influencers through to cash back publishers will continue to attract marketers to this channel and provide an opportunity for growth for the industry.

The integration of affiliate marketing into many brands’ advertising activity also offers publishers the opportunity to form closer partnerships with advertisers. Both parties can align their objectives and create a unified marketing strategy, which in turn provides a more holistic experience for the customer. By working towards a common goal – whether it is ROI, site traffic or brand awareness – the affiliate channel enables both advertisers and publishers to see exactly which marketing activity is performing best, giving both parties the chance to optimise and add more value to their advertising spend.

As the affiliate industry continues to evolve, the consumer data pool will continue to grow. This provides an opportunity for advertisers to target consumers on another level. Advertisers can utilise cash back publishers’ data to create hyper-targeted campaigns based on transactional data, reach their ideal audiences and apply personalised rewards for each consumer. For the industry, this means even more effective affiliate marketing campaigns which ultimately leads to even better results.