If you say the words “partner marketing” to a group of marketers, chances are they’ll think first of affiliate programs with cashback, coupon, and comparison sites. While it is true that affiliate represents an important segment of the partner marketing channel, the partnership category is actually far larger than a traditional affiliate, encompassing new arenas like influencers, bloggers, performance deals with leading media companies, channel partnerships, and even strategic brand alliances. In short, partnership is enormous and keeps growing every day.
Further, the channel has a long history, from its conception online 25 years ago with the launch of Amazon’s official affiliate program, to where we are today. The channel has become a significant revenue contributor for a number of leading Fortune 500 companies. To understand where partnership is going, you need to understand where it began, and how it has evolved in the past two decades for retail brands.
The roots of retail partnership
Digital performance partnerships first became a “mainstream” channel in the late 1990s when e-commerce became widespread and big brands started to allocate significant spend to digital. Amazon’s affiliate program captured a great deal of business attention, and it wasn’t long before major brands were pouring money into these cooperative selling arrangements. Today, both established Western retail brands and digital unicorns like Alibaba rely heavily on this channel for significant portions of their revenue. In a recent survey that we conducted in partnership with WBR Research, we found that 54% of companies are now driving more than a fifth of their revenue through performance partnerships.
Historic hindrances to growth
Partnerships are marvellously efficient, which begs the question: Why isn’t the channel even bigger than it is today? Part of the reason for that is that in the early days of the first internet bubble, bad actors swindled a host of companies via the partnerships and affiliate channel. In that era, many partners were compensated based on the cost-per-click (CPC) model, and fraudsters quickly developed ways to simulate billions of clicks. Further, the leading networks and solutions providers operated opaquely, so advertisers had little insight into where and when their products were being marketed.
The emergence of big partners
Affiliate started off with standard deals on a cost-per-sale basis. Partners typically were content sites and small publishers and bloggers. As transparency grew and increasing numbers of companies began to spend serious money behind CPA programs, a set of major partners emerged that captured a large share of total spend and leveraged technology for optimisation, segmentation, and other tactics to improve results.
Many of these companies attracted audiences by delivering great value; coupon, cash back and comparison publishers led the way here.
Data-driven marketing takes centre stage
Over time, technology and innovation have transformed the channel to incorporate players that utilise data and even AI, like meta-data sites and aggregators. From there, our industry began to penetrate areas like retargeting and personalised creative, where data on user browsing can have a dramatic impact on targeting and messaging effectiveness.
Commissioning grows up
Today the channel is increasingly diverse, incorporating multiple different payment models, from CPA to CPL to Cost Per Subscription. For retailers, technology has enabled commercial models based on settled sales versus initial leads, increasing the value and profitability of the channel. In addition, marketers now have the power to align commissioning strategies to precise KPIs, like lifetime value, new customer acquisition, and incremental purchases. This is helping to earn partnership a permanent seat at the table because now its programs can align partner interests with brand goals.
As more and more retail brands field programs that blur the line between online and offline promotion, the partnership category has evolved to accommodate this trend. Retailers are now tracking offline conversion activity such as calls to call centres, monetising offline events through the use of trackable QR and coupon codes, and more. Brands are connecting with their advocates to offer special promotions in both online and offline spheres. And technology is making it all measurable and accountable.
Another major development has been in the arena of partner types. From classic affiliates, we have expanded the industry to influencers, channel partners, mainstream media companies, and even strategic brand-to-brand alliances Brand-to-brand is a somewhat newer term in the industry but is one that is becoming increasingly important. Strategic brand alliances have existed for years but have rarely been measured and accounted for with the same rigour as other partnership types. That is all changing fast as marketers demand more transparency.
Three themes seem to be defining the future of the partnership space. First, brands are demanding greater transparency from their vendors and partners. This is across all partnership types, from affiliate to brand-to-brand.
Second, as retailers pursue more brand-to-brand deals, it will now be possible to partner more easily as demand grows and teams form that will manage all forms of partnership, not just affiliates. Technologies will evolve to support this and make it easier.
Accelerating this growth will be a turning tide in the advertising world, whereby retail brands will demand more accountability and transparency with their advertising partners, with more media buys being made on a “per action” basis, such as CPC, CPA, and CPL.
Yet with all this change, the most fundamentally important trait in the business of the partnership is building and maintaining trust with your collaborators. Trust is a key tenet in the channel. For those retailers who build an authentic and strong partnership, it can create a long-term revenue stream for both brands and acquisition partners.