INside Performance Marketing
PMI is Next Week – Join Us The only two-day event for affiliate marketing, lead gen and biddable media Book your ticket now
Has the Affiliate Channel's Bubble Burst?
Image Credit  Isabel Bloedwater

Has the Affiliate Channel's Bubble Burst?

Ask most people in performance marketing, specifically the affiliate specialism, whether the industry is struggling and you’ll likely hear remarks about it being recession proof or the long-held opinion that it is not prone to the same fluctuations affecting other sectors, but is this still the case?

Only recently, zanox shareholder, Axel Springer, announced its financial figures for the first half of the year. While the performance marketing network’s current situation is unlikely to worry shareholders, it does hint at a certain susceptibility to the European economic climate.

Axel Springer said as much in its half-yearly financial report. Reaching for an explanation as to why zanox’s earnings were almost flat lining, the multimedia company simply reasoned that it was down to ‘market conditions’.

Blaming ‘Market Conditions’

We asked both zanox and Axel Springer to define these so-called market conditions. Did they refer to the performance market? Or was the comment simply pointing a finger at the economic downturn that has been playing havoc in industries and countries the world over?

Both declined the opportunity to elaborate, but the big concern is that it could indeed be both. What if the world’s troubles are starting to hit a bit closer to home and we’re beginning to see the first warning signs of an affiliate channel that’s not as bulletproof as many have previously surmised?

While zanox kept schtum on anything finance-related, we were able to extract the opinion of Stefanie Lüdecke, chief sales officer at zanox, on whether she thought the affiliate industry’s best times were behind it.

Lüdecke described how western Europe was proving a troublesome region because of how integral affiliate had become to the whole of digital marketing and the pressure being placed on transaction fees.

“In the western European countries, as mature markets, affiliate marketing has developed to become a firm component of the online marketing mix,” Lüdecke explained. “On the one hand, this close link opens up additional revenue potential – but, on the other, it increases the margin pressure on the performance-based transaction fees agreed between the advertiser and zanox.”

The Eastern Alternative

Eastern Europe is not in the same situation as many of the countries towards the west of the continent and it’s causing some real market variation, according to Lüdecke, who is eyeing Poland as a route into these greener affiliate pastures.

“Countries such as Poland and Turkey represent strategic growth markets, with Poland opening up the gateway to eastern Europe,” Lüdecke said. Whereas southern European countries in particular, are characterised by a noticeable degree of caution among consumers, also in the field of e-commerce.”

“Against this, there is a very different situation in Europe's northern countries, most of which are able report a positive consumer climate in spite of the general economic crisis.”

Zanox isn’t the only network going through a tricky patch in its affiliate operations. Scandinavian network, Tradedoubler, has been experiencing a testing time too.

Laboured Western Consumerism

While Tradedoubler’s more tumultuous period might be in the past, the signs are there that it too was struggling to grapple with consumers’ reluctance to spend. Yet, if you read deeper into the network’s own financials, you’ll see more evidence of Lüdecke’s own theory.

Tradedoubler’s report mentions a ‘challenging economic climate in most of western Europe’ that ‘continues to put consumer spending under pressure’, so should the headline question not be more specific, has the affiliate marketing bubble burst in western Europe?

Reliance on Profitable Markets

ValueClick, which has US and UK affiliate operations in the form of its Commission Junction network, seems to be prospering in comparison. Its affiliate marketing division’s three-month profits to June 30 grew by over 9% from $29.4 million to $32.1 million.

Pushed for an explanation as to why ValueClick’s recent figures are vastly different to its European competitors, I could point to its strong grip on the US market. However, without being able to see a regional financial breakdown, this is simply calculated conjecture.

There may be untapped affiliate revenue in South America for Tradedoubler and eastern Europe for zanox, in addition to the USA's high profit margins that ValueClick is capitalising on, but where does that leave western Europe?

As large publishers and networks break into new territories, replicating the tried and tested voucher and cashback models, will Europe’s westerly countries simply be left to tread water?

Simon Holland

Simon Holland

Simon is the news and research reporter at Existem. Previously a technology journalist, he now spends his time investigating both future and developing trends in performance marketing whilst producing editorial content for

Read more from Simon

Join over 10,000 performance marketers for the ultimate weekly update on industry news