More so than previous years, 2017 is set to be an uncertain 12 months for most industries, but it’s not just Brexit that’s set to flex the workings of the affiliate channel and the networks operating it.
Following the release of Affiliate Window’s whitepaper, ‘Top Ten Affiliate Marketing Trends In 2017’, PerformanceIN caught up with the network’s global strategy client director, Kevin Edwards, to hash out both the opportunities and challenges posed by turbulent times ahead.
In the interview below, Edwards discusses the demand for new technology in order to reap the benefits of mobile, the race for innovation in influencer marketing, the potential risk of encroachment by SaaS platforms, and much more, as we take a swoop over affiliate marketing in 2017.
Firstly, could you summarise the state of affiliate marketing as we enter 2017?
Kevin Edwards: The affiliate model as an evolving, organic entity with programmes that develop slowly over time shows no sign that it will be subject to any major disruption in 2017. However, there are some macro factors that could have an impact. The broader world of performance marketing is pretty mainstream from a digital point of view but over the past year, there have been a few examples where traditional advertising and marketing have introduced return on investment metrics to their campaigns. This could be a ‘penny drops’ moment for many that could gain real momentum in 2017. As the original performance channel, we need to be ready to maximise this opportunity, ensuring we’re speaking in a language traditional marketers understand.
Additionally, I think our uncertain economic times provide both threats and opportunities. I would also hope the UK’s increasingly internationalist e-commerce focus continues apace as this is fertile ground for affiliate marketers.
Could you talk about the role of mobile in affiliate and the issue you mentioned of a ‘sale vs traffic dichotomy’?
KE: Smartphones now drive a significant proportion of clicks within the affiliate channel but I don’t believe the channel has responded in the right way to deliver tools and reports that satisfactorily optimise and measure those interactions. When cross-device interactions are factored in, two pictures emerge. One, smartphones over-index on early funnel transactions which, when tracking across devices, can be seen, but without it conceals their true contribution. And secondly, social media and content generally speaking generate a high proportion of smartphone sales and clicks. Which means the long-tail has a double whammy impact on its affiliate contribution. This can often be overlooked because the volume of sales these affiliates produce are overshadowed and therefore levelled out, by the larger cashback and voucher sites. It returns to the old adage of you can only truly understand the affiliate channel when you drill down into its multiple tributaries.
Where are we at with influencer marketing as an integrated part of performance and affiliate marketing?
KE: Probably in the foothills. It’s an industry we’ve reacted to rather than shaped. This may come as a surprise to many when you consider how latently influencer heavy the channel is. It’s important that affiliate marketers try and carve out a distinct influencer proposition in 2017 and this ultimately is driven by two things, data and performance metrics. Both of these elements are the bedrock of affiliate marketing so the ball is absolutely in our court to bring something unique to the market. There have been some initial first steps that have attracted attention and have now crept into wider network parlance which shows it’s gathering pace as a working concept but we need to bring it life and give it more of a distinctive affiliate voice in 2017.
You referred to the success of voucher/incentive and cashback sites in the industry as “bittersweet”...
KE: There’s no doubt that any form of affiliate model based around consumer incentivisation has been transformational to the channel over the past decade. A handful of affiliates have created significant consumer brands that have enabled shoppers to save countless millions. But the affiliate ecosystem is a delicate one and balancing the needs of a wide range of affiliate types is constant. A new product launch or piece of tech can disrupt the status quo so we need to be vigilant but we also need to continue to diversify the affiliate base. That is why evolving influencer channels, supporting the long-tail and considering alternative payment models is a necessary part of a network’s role in 2017.
Why could affiliate networks be at risk of encroachment by SaaS platforms?
KE: I think the role SaaS plays in the UK regarding network encroachment has been overstated. Well you could say I would say that wouldn’t I? I’m not denigrating their offering or underplaying their success, it’s just that whether the solutions they offer are appropriate for a brand depends on how those brands are internally structured and what they look for in their agency partners. SaaS platforms aren’t anything new, they’ve been around for years now, yet affiliate networks continue to power the vast majority of affiliate programmes in the UK. They’re an important part of the affiliate ecosystem but I don’t think they would position themselves as a pure play affiliate offering in the way that say, Affiliate Window would, so the competition isn’t necessarily head on. I think there’s room for everyone in the market and as long as all our companies continue to drive innovation and constantly raise the bar, that isn’t a bad thing.
Has regulation of the channel been neglected over recent years? What do you think should change going forward?
KE: This depends on whether you mean self-regulation or an awareness of external regulators. The two are intrinsically linked but the first tends to be more narrow in focus, getting our houses in order and the second is based on broader, more sweeping initiatives that may overlap with some aspects of affiliate marketing. I think context about the self-regulatory framework the channel enjoys is important as much of it was pioneering and remains so today, but with changes in personnel over the years and the altering complexion of the channel, it’s important to ensure all aspects remain relevant. I think we will see a redoubling of efforts this year, possibly tied together by an umbrella industry trust seal that will send a clear message about the levels of professionalism the industry operates within. Outside of our own efforts, the growing awareness of industry regulators such as Ofgem and the CMA of digital business models means they will be scrutinising all aspects of online marketing more. This is why self-regulation is so important. If we can show clear intent to enforce best practice this clearly demonstrates to external bodies the right approach.
What could be the impact of the GDPR on affiliate marketing?
KE: It’s too early to say. The GDPR will come into force in just over 12 months’ time and will have an impact on any company dealing with consumer data so it’s most certainly not an affiliate, or indeed, digital question. I think companies will need to consider what data they capture, how it’s stored and how ‘portable’ it is. In other words, if a consumer asks to have any information related to them erased or transferred, companies will need to demonstrate they are able to do both securely and without delay. The key task for the next few months should be focused on carrying out the groundwork. There is plenty of advice out there and I think showing willing and carrying out due diligence goes a long way at the present time. On a practical level, the ICO website is a useful place to start.
Finally, you mentioned the need for ‘new blood’ in affiliate marketing...
KE: I think most people who have managed affiliate programmes have probably been challenged by their advertiser clients about where the next new affiliate opportunity is coming from. I make the point in the whitepaper that ten years ago there was much more unchartered territory for affiliates to optimise so to assume new, disruptive models will emerge every few years may be unrealistic. Also consider that the large affiliates who initially had one route to market now offer multiple opportunities to engage with consumers along the path to purchase, be it on desktop or mobile. In this sense perhaps the new affiliate blood will come from existing business models rather than a new technology. Looking at the performance from Affiliate Window over the past year or so we’ve seen traditional news publishers really grow in size and stature as they look to diversify their revenue streams. Perhaps, like influencers, the new affiliate models are actually under our noses; it’s more that it’s up to networks to adapt their businesses to offer viable solutions.