Affiliate Marketing has always been known as a performance-based channel. Its very ethos is for affiliate publishers to earn a commission when a sale or lead is converted by the advertiser. Both advertiser and publisher work in good faith to form a mutually beneficial partnership; the advertiser permits the publisher to use their creative assets and content, while the publisher essentially works for free until a sale is generated.
However, in stark contrast, many publishers are distancing themselves away from calling themselves “affiliates” instead preferring the term “media partner”. In essence, there’s nothing wrong with the terminology, but it’s not just the name they’re changing. A large portion of “traditional affiliates” now charge a tenancy for placements on their site, and in some cases, decline to work with some advertisers altogether, making it harder than ever for new entrants to the market to get a foothold in our ever growing industry.
Of course, there’s some logic to why publishers are moving to this model – the discrepancy over commission payments. Over the last year or more we’ve seen many reports of advertisers paying 0% commission for existing customers, sale items or even product categories, while at the same down reducing their default rates of commission. It’s little surprise then that publishers are looking for alternative revenue streams to cover the shortfall in earned-commissions.
Losing touch with the performance model
With that being said, do both sides ruin the very mechanism of affiliate marketing? A once purely performance-driven industry, where a publisher promotes the advertiser in return for a commission on sales or leads, is now advertisers negotiating a rate for advertising, like they would in any other publishing mechanism, for example, a magazine. While an advertiser still has the ability to track performance, the very essence of performance marketing is vanishing before our eyes. With the addition of GDPR, the larger publishers who are implementing these business models are the same publishers who are set to benefit even further under the new regulations, increasing their market share and becoming more dominant in an already dominated market.
The biggest challenge for the industry is getting back to what our industry is known for – performance-based partnerships. Once there was a time smaller, emerging brands could build their entire business using affiliates, given the lower risk to getting their name out there to an audience, and rewarding their partners for sales, building solid partnerships but also helping the publisher themselves to evolve. For new entrants now, only already-recognisable names have the best rates of success. In some cases, publishers refuse to even add a new advertiser onto their site without a criteria list being met. And even if you get on, the cost to promote an offer can start at several hundred pounds. This means for our emerging brands now, the channel they could call on for sales on a commission is now disappearing, and fast.
The solution comes from collaboration
The solution is that of a simple one but almost seems impossible to implement without the buy-in of the industry. The most obvious solution is for networks to disallow the tracking of 0% rates through their platforms, but even go one step further by having ‘minimum pay-outs’ by category or by sector. In return, publishers could remove the tenancy barrier, instead reverting back to the days of traditional CPA increases to negotiate for exposure and placements. I, of course, exclude some cashback sites, where all of their earned commission is paid out to the customer. The publishers also need to be stronger in enforcing minimum commissions, with the support of networks, thus removing the growing need to charge for the tenancy to meet sales targets.
This requires the collaboration of agencies, advertisers, network and publishers to work together to find the approach that both supports the larger, established brand as well as the small and emerging. If we take the latter away, more publishers will become reliant on even fewer advertisers. Couple that with the economic uncertainty and the difficulties some of these advertisers are facing, we could find ourselves working in a ticking time bomb, particularly if more key advertisers go under.
The second alternative is to change the payment model. Paying on a CPC rather than a CPA solves the issue for publishers as they’re getting paid for driving traffic to an advertiser. It’s then up to the advertiser to convert the traffic, although this requires further scrutiny of the type of traffic publishers are sending and what assurances advertisers have on the quality of traffic. Without regulation, this model could get out of hand and lead to more issues in the long-run.
Whatever the solution, one thing is clear – in order for the industry to continue to succeed, we have to get back to the model we’re known for – performance-based partnerships, something ThoughtMix is leading the way in with effective affiliate management, building brighter partnerships between advertisers and publishers.