27 Mar, 2019
Written by Jules Bazley, Regional Vice President, Europe at CJ Affiliate
Over the last 20 years, affiliate marketing has evolved substantially in terms of the number of publishers and service providers available to brands.
Affiliate networks originally came about and drew together publishers and advertisers by providing an independent single source of truth that ensured all parties were fairly remunerated for driving sales to brands.
The value provided was simple;
Clearly things have moved on since then, and as one of the biggest networks in the space, I am frequently challenged about the value of our proposition against the other ways of tackling programme management. Some of the more common questions include:
I wanted to take a moment to address each of these.
The network effect is definitely aiding the short-term prospects of affiliate marketing. To ensure longevity for both our network and the affiliate channel as a whole, CJ is prioritising with:
You’ll notice that publishers are high on our list of priorities. Research by CJ Affiliate supports the theory that affiliate marketing is growing year-on-year from a healthy supply of new blood. In fact, we’ve seen publishers generate nearly half (45%) of a programme’s revenue after successfully completing one of our five-year growth plans.
New publishers bring new ideas, customers and strategies, leading to better results for the advertiser. By combining their offerings with our knowledge of the channel, the network effect is going to be relevant for many years to come.
In the face of demands for greater ROI, networks have been able to successfully maintain the contribution of top-tier affiliates while increasing revenue from other sources. Nowadays, we tend to see 50% of a programme’s earnings coming from the top bracket, with 40% delivered by a combination of new, short tail and long-tail publishers. A variable contribution is made by international and cross-border affiliates, who also make up the final 10% of revenue.
This growth has come from publishers being handed the technology, resources, data and guidance to succeed. Top partners will always exist on a programme. Yet, there is now a constant focus on building contributions from the ground up, and it’s a very exciting time for advertisers that want to drive scalable, sustainable revenue.
We have to talk about the value of programme diversification in the same sense. The dangers of relying on just one publisher are made obvious from the horror stories that have followed the demise of several big programmes. What some fail to realise is that spreading the contribution is to spread the risk. By having a more even distribution of performance, less of an impact is had by publishers going out of business, being outfought by a competitor or suffering under the weight of new legislation.
Of course, there is always the option of heading down the SaaS route, ignoring the advice of a network and applying focus to those top five or ten contributors; optimising their revenue until even the mid-tier is made redundant. A more selective approach could make things incredibly easy to manage, but at the expense of performance elsewhere. Indeed, advertisers would be ludicrous to remove 40% of highly cost effective and incremental revenue from their affiliate programme, especially when this is where we’re seeing the most amount of growth.
For those that want to build a sustainable programme, the affiliate network – preferably one with strengths in publisher recruitment - remains their best choice.
The reasons for a brand’s migration to the SaaS model usually revolve around cost, but this actually represents a false economy on a few different levels, namely:
Affiliate networks prove time and time again to offer significant ROI to advertisers on the lookout for cost-effective, sustainable revenue.
Every industry has its challengers that threaten the hierarchy, and sometimes the newcomers are offering a much better product at face value. However, that is simply not the case with affiliate marketing.
It’s a channel that relies on certain functions that brands can supposedly 'do without'. If there is a question which produces a legitimate reason as to why networks are unable to compete with SaaS platforms, I’m certainly yet to hear it.