Following last week’s industry’s response on how performance marketing experts are dealing with COVID-19, we take a deeper look into the impact the global pandemic is having on the affiliate channel.
We reached out to some of the networks and platforms (Skimlinks, Awin, Pepperjam and Rakuten Advertising) to discuss and understand how current trends are affecting brands, merchants and publishers — particularly on business objectives KPIs, program management and general support during these times.
There’s a growing increase of brands and merchants either pausing or closing affiliate programs. Why do you think that is and do you believe this is a necessary decision given the current circumstances?
Dunia Silan, VP Revenue EMEA & APAC, Skimlinks: At the first sign of economic uncertainty advertising budgets are always the first to go. From our perspective, cutting affiliate budget for brands is counterintuitive. This is one of the only channels where they won’t face an upfront cost and brands only need payout to publishers when sales take place.
Readers are engaging more with commerce content more in light of the situation: They want to make sure they buy the right items and publishers are playing a vital role in service journalism. For brands that have products readers need and that can help them adapt to this new reality, commerce content can have real value for them.
We understand why there are changes and try to work with merchant partners to take other measures, such as capping budgets where possible, and if pausing needs to occur, limiting it to specific categories that are not impacted by shipping restrictions.
Kevin Edwards, Global Strategy Director, Awin: There’s no easy answer to this. We have a growing list of brands that currently numbers about 170 who have approached us in the past few weeks to renegotiate or ask for exceptional terms based on what’s happening. The reasons are myriad. There are travel brands with nothing to sell, finance advertisers who are concerned that consumers may be taking policies that leave them uninsured, affiliate managers who are mothballing programmes prior to being furloughed themselves, retailers who cannot cope with the influx of sales and spooked CEOs who have pulled all marketing across every medium.
No one can really argue with many of these points. It’s worth noting that very few programmes – a fraction of one per cent – have closed permanently. Most have asked for a pause (typically two or three months), while they take stock. As always, as long as this is done with transparency and as much notice as possible, it’s the brand’s prerogative, just as it’s the publishers to choose who to promote.
It’s worth putting this in perspective, the number of brands who have approached us thus far is less than 5% of our UK total and we have many others who are pushing ahead with their programmes and sticking to promotional plans already agreed with their publishers.
Matt Gilbert, CEO, Pepperjam: Pepperjam’s proprietary data provides a compelling counter to the underlying premise of this question. While there are isolated examples of brands/merchants pausing or closing affiliate programs, they are isolated to specific vertical categories (travel) and businesses whose overall balance sheet health challenges their ability to fund marketing in ANY channel as a result of the impact of COVID-19.
The Pepperjam Affiliate Marketing Sales Index indicates that for the period of March 2020, clients who had active affiliate programs on Pepperjam’s Ascend Affiliate Cloud Platform during the same period in March 2019, realized a 14% YoY gross merchandise sales growth across the 10 retail categories tracked in the PAMSI Index. During the measurement period, there were 8 days experiencing greater than 20% YoY growth rates. Additionally, we observed greater investment in the channel, with positive YoY commission growth every week in March.
For brands concerned about commission rates on certain high demand SKUs, or considering a global pause on affiliate commissions, Pepperjam is strongly discouraging short-term thinking. The relationships built between brands and merchants and their affiliates have been built on a foundation of trust and nurtured over extended periods. Absent an existential threat a business, brands and merchants should be prudent in their decision making, evaluating the mid to long term risk to their affiliate channel revenue and creating a dynamic where competitors are able to capitalise upon reactionary, panic-driven decision making.
Nick Fletcher, SVP, Northern Europe, Rakuten Advertising: While times like these are often just a cause for protective measures, there’s a strong argument in support of the affiliate channel. Consumers are still clicking on affiliate links and shopping via the affiliate channel across the UK and Europe. In Rakuten Advertising’s UK Affiliate Network, both orders and clicks were up week-over-week at the end of March – 16% and 8% respectively.
Shoppers are being more cautious, looking for ways to make their money go further, with cashback, loyalty and rewards publishers playing an important role for these. Our network has seen deal sites grow their share of traffic in the UK by 72% year-over-year throughout the last week of March, showcasing that there are still opportunities to engage and build relationships with consumers via affiliate publishers.
What does this mean for affiliate partnerships going forward?
Dunia Silan, VP Revenue EMEA & APAC, Skimlinks: In the short term, there’s the much-reported big impact for travel brands and publishers. We’re also seeing strain in the grocery sector and problems for fashion brands with their supply chains, and their time to deliver on orders.
But longer-term, there is an opportunity here for brands and publishers to help make readers’ lives better. Readers have essential needs, but they also need entertainment during lockdown. Commerce content can help brands and publishers to deliver on both. It can offer advice on where to buy what they need and offer them ideas to make the best of the situation until things improve.
This is an opportunity for merchants and publishers to work even closer together. Affiliate partnerships have the ability to comfort readers and take the stress out of shopping during this difficult time.
Kevin Edwards, Global Strategy Director, Awin: These are exceptional times, so we all need to pause and reflect. There will always be a tiny minority of bad actors out there looking to use the current environment to make cynical changes to their programmes, but we have to assume good intent from brands looking to adapt and survive. For those publishers who can connect with the right audiences at this time, they have a great opportunity to strengthen their relationships with the brands offering those in-demand goods and services.
At this time consumers will be looking to trusted brands and authentic sources of information; they’ll also be spending much longer online. We need that familiarity and the comfort they offer when everything else feels dislocated. Similarly, we need to bear in mind that such is the speed with which events are unfolding that the picture can change very quickly and publishers may need to be patient and understanding of snap advertiser decisions.
Conversely, it would be great to see resilient brands reach out to their trusted affiliate partners and offer them a foot up, a commission hike or deal based on their ongoing loyalty and effectiveness. Because the affiliate channel is such a tried and tested driver of sales, as brands focus on the numbers and logistics, it really comes into its own and demonstrates its power.
Matt Gilbert, CEO, Pepperjam: Like any relationship, it is easy when all participants are thriving. Its only in times of struggle that the strength of a partnership is tested. Those that pass, endure. Brands and publishers need one another now more than ever. For those brands, publishers, and the platforms and networks that facilitate them, the way they handle these moments will define their relationships for many years to come. Communication should improve, and transparency should define any exchange.
Decisions, like that of Amazon to remove third party affiliate vendors, will motivate publishers to develop, and in many cases, expand, their relationships with affiliate platforms and network providers. In the e-commerce world, many direct to consumer brands already have a healthy fear of ceding control of their first-party data and customer relationships to Amazon. Publishers, many of whom rely on a large contribution percentage from e-commerce referral revenue, and who have experienced the pain of relying on Facebook and Google as primary traffic sources, are likely to respond by increasing their focus on developing a diversified partner strategy.
Nick Fletcher, SVP, Northern Europe, Rakuten Advertising: While brands are adjusting their campaigns due to everything from budget to inventory to fulfilment challenges, there is the need to ensure they are future-proofing their affiliate programme. This is vital to ensure brands are able to increase activity without major partnership losses.
We are seeing a trend of increased activity across certain publisher models such as content and deal sites, and it is important to remember that a hallmark of successful affiliate programs is partnership diversity. Consumers are turning to a variety of sites right now for everything from information, entertainment, distraction and comfort. Now more than is ever, it’s important for brands to diversify their publisher mix.
Continuing to nurture your most valuable affiliate relationships will also be essential going forward. The affiliate channel has always been about relationships and this experience highlights just how important this is and how it puts relationship building back at the focus.
With this in mind, should advertisers and publishers be adapting their budgets and KPIs to campaign changes?
Dunia Silan, VP Revenue EMEA & APAC, Skimlinks: With respect to the fact advertisers only payout to publishers when sales happen with affiliate, we would hope more brands will lean into the channel. Publishers are a vital resource for people at this time and more than ever they want to make sure they’re making the right purchase decisions.
For publishers, a key change we’re seeing is the emphasis on timely content. Readers are rapidly adapting to the situation and we’re starting to see people move beyond “need” purchasing.
Both sides need to be flexible too. Publishers will write about brands that cater to a situation and pivot between different affiliate programs to ensure they continue to earn commissions. Likewise, merchants, in-demand categories have a great opportunity to broaden the number of partners they work with.
For advertisers, a key adaptation is going to be for those advertisers that typically haven’t seen great e-commerce performance. Take a holiday like Easter for example. Chocolate hasn’t been a strong online performer in the past, but this year online Easter Egg order options are in high demand.
Kevin Edwards, Global Strategy Director, Awin: We need to be very careful on topics such as personalisation. Consumers want to purchase useful products that help ease this difficult period; they don’t want to be aggressively targeted or oversold to. Many brand campaigns have been pulled as they felt tonally wrong at a time when a lot of people are struggling, many furloughed, others feeling stressed and scared. Publishers need to be using their power to support consumers through this time and that requires careful messaging.
There have been some publishers launching initiatives that are supporting local charities and the NHS. Some advertisers are also doing the same. It seems to me like the perfect opportunity for publishers to promote those brands who are giving something back. Longer-term, these are the retailers that consumers will remember responded well at this time and if publishers take extra care to support them at this time, that could strengthen a whole array of partnerships in the coming months and years.
Matt Gilbert, CEO, Pepperjam: Every brand will experience some virus-related impact, which will require agility in strategic priorities, allocated spend, and measurement. For apparel retailers who have already taken possession of spring merchandise, it may be necessary to increase promotional activity to clear surplus ahead of back to school/fall merchandise arrivals. For furniture retailers, who may have realised a significant increase in new to file acquisitions during the month of March as consumers sought to set up home offices quickly, strategies now need to consider driving repeat purchase and customer loyalty.
As the weather warms in the northern hemisphere, home and garden retailers should tailor messages for creating outdoor living spaces. Success requires a data-driven understanding of the target audience and marketing messages that emphasise relevancy and context. With pay for access channels like paid social and programmatic display experiencing heavy cutbacks, marketing budgets will continue to be subject to a rigid scrutiny, and many will gravitate their spend commitments towards proven performance channels, like affiliate.
Nick Fletcher, SVP, Northern Europe, Rakuten Advertising: Now is definitely the time to act smartly and adapt budgets and KPIs to respond to changes in consumer behaviour.
As brands refocus their advertising spend, lower-funnel performance strategies are a sound investment. Across our global network data, we’re seeing a notable opportunity to engage active shoppers, as consumers continue to interact with digital advertising. In fact, people are clicking on affiliate links more than this time last year in Australia (up 15%), Brazil (up 108%), Germany (up 4.9%) and the US (up 22%).
As a result, there’s a real opportunity to pursue strategies such as on-site and social retargeting, through which brands can make use of first-party data to serve targeted ads at a time when authenticity is even more valuable.
For brands who chose to optimise their budget to lower-funnel performance strategies with a focus on active consumers, they will need to align their strategy and KPIs. This may mean changing tactics to include deal sites in the affiliate mix to meet new customer acquisition KPIs, or pivoting programmatic display KPIs from customer acquisition, to customer retention.
Lastly, as a company, how are you supporting advertisers and publishers during these changes?
Dunia Silan, VP Revenue EMEA & APAC, Skimlinks: Our primary focus is to continue to provide a quality service to our publishers and their readers. In the middle of March, we introduced six weekly bespoke newsletters across our key markets, to alert publishers to changes and keep them updated on trending content topics.
The newsletters are in two categories: Merchant Updates which appraise them of changes to affiliate programs and new promotions from advertisers, and Insights Emails which share with them the latest trending topics they can cover from our network. These communications ensure publishers can help their readers and continue to earn commissions from the quality commerce content they create. They’re sent to the US, UK and APAC multiple times per week.
Our Merchant Team has also put great effort into bringing new merchants onboard in this time. We’ve signed almost 400 new merchants since the middle of March, which offers publishers fresh ways to reassure their audience and generate commerce revenue. We also now highlight “Give Back” merchants in our UI, so publishers know which merchants have given back to the community in this time, be it charitable donations or altering part of the production to make essential goods. On top of this, the team make proactive recommendations for alternative merchants publishers can feature where brands have paused affiliate activity.
Lastly, our Editorial Team generates new editorial ideas daily for commerce content teams around the world. It is a resource publishers around the world can draw on to supplement content they already create or use to scale commerce despite the uncertain situation. The Editorial Team works closely with our Insights Team to understand how publishers can respond to new daily developments.
Kevin Edwards, Global Strategy Director, Awin: For some publisher types, they have seen their revenues completely fall away. If there’s a way for them to diversify we want to provide the data insights in order to help them do that.
We’ve released a performance tracker we update weekly and are happy to help other publishers who need additional pointers. Our network policy of at least seven days’ notice for any commission changes remains, and we will shortly be publishing details of all the brands that have made amendments to their programmes as a result of the coronavirus within our interface.
For SMEs, we’ve waived fees on Awin Access, our entry-level of service, for three months. It’s also free to launch a programme with us. In addition, we’re running complimentary tutorials on how to get your campaigns off the ground to help support growth through Awin Access. For anyone reading this who works with Awin and is anxious about their current predicament, I urge you to contact us. We have a large team on hand to help support you at this time.
We’ve also launched a hub that includes thought pieces, webinars and hopefully helpful pointers so that we can all stay connected over the coming weeks. In the last few days, we’ve considered what a post-corona world looks like for retailers as well as published a list of resources for UK companies seeking help to shore up their businesses.
Matt Gilbert, CEO, Pepperjam: Pepperjam is engaging in a number of initiatives to continue to provide meaningful information and research to our clients, agencies and publisher partners. We were the first to market with the critical data insights provided by the Pepperjam Affiliate Marketing Sales Index. The index was created to provide marketers with data-driven insights on the recent performance trends within the channel and provide the ecosystem with actionable data to guide critical decision making.
We have a dedicated Resource page on our website that houses our COVID-19 specific research, thought leadership and recommendations for marketers. We are working with clients and publishers across our ecosystem to facilitate changes in locking periods, provide flexibility on payment terms, and working aggressively to pro-actively to identify opportunities to assist all partners to navigate this unique and challenging time in the world including hosting the industry-first Digital Partner Days to provide publishers with a hosted venue to present affiliate marketing opportunities to brands and agencies, in a safe and virtual environment, no handshake required.
We will continue to provide COVID-19 related updates and remain committed to maintaining the cadence of thought leadership and data-driven insights to assist the industry as we fight through the challenges resulting from the virus.
Nick Fletcher, SVP, Northern Europe, Rakuten Advertising: All businesses are affected by this global crisis and our focus will be on equipping our clients and publishers with the insights, strategy and support they need to continue to do business during this difficult period.
We are opening our doors to discuss options for customising elements of campaign agreements to ensure clients can remain successful.
In addition to this, we’re pulling data daily in order to keep clients informed of what’s changing and where opportunities exist so that they can react in real-time, with key insights and strategy being shared by our support teams, within an email newsletter series, as well as across our owned channels. This includes a designated resource centre we’ve set up to help guide our advertisers and publishers globally.
Our commitment to being a trusted partner and advisor to our clients and publishers remains strong and our goal is to provide them with the support and guidance they need during this period.