Does the “traditional” affiliate model still have a place? In this article, I'll be highlighting the case for a two-tier approach to running an affiliate campaign.
It is now 11 years since the emergence of affiliate marketing in the UK, and there is no doubt that the channel has evolved considerably in that time.
In fact, I would argue that it has moved from being a self-contained channel to the situation we now have where “affiliate marketing” is just a catch all term for CPA based performance activity that happens through an affiliate network.
The original version of affiliate marketing as laid out by Jeff Bezos when he launched the Amazon Associates scheme back in 1994 was a vast network of amateur hobbyist sites linking relevant content to complimentary products and receiving commission when sales occur.
The divergence of this which led to the affiliate “channel” becoming a home for price comparison sites, PPC arbitragers, email marketers, cashback/loyalty portals, voucher code aggregators and retargeting firms takes us further and further from this initial vision.
Therefore is it time to re-examine whether this utopian vision of a long tail of content sites is still relevant in today’s increasingly crowded online world.
It is commonly accepted within the huge majority (if not all) affiliate programmes that a form of Pareto’s Law occurs, with the leading 20% of affiliates driving 80% of sales. My view is that these numbers are inching further and further apart, with the larger partners becoming increasingly influential.
I put forward a few reasons for this:
- The online space is becoming more advanced and crowded, and so for a small affiliate with limited time and cash to compete and drive large traffic volumes is an increasingly tricky proposition.
- The larger affiliates have grown businesses and knowledge over the last 5-10 years and have become smarter in obtaining traffic and converting that traffic.
- Advertisers have increased understanding and scrutiny within this space, therefore cutting out some of the more unsavoury elements that have latched themselves on to affiliate marketing previously.
All of this means that the gap between the large partners and the long tail is becoming a chasm. An obvious result of this is that advertisers wish to focus their resource on the leading players; as a business of course you are going to concentrate on those delivering greatest value.
These large partners generally include feed based comparison sites, cashback, voucher code sites, retargeting firms and maybe the odd email company, so a diverse range of partners all driving significant volumes.
Therefore the focus of an advertiser or their agency is to develop bespoke strategies for these partners, to ensure they have maximum opportunity to drive traffic and rewarding them appropriately for doing so.
So where does this leave our long tail of affiliates, the large number of partners driving a varying yet still valuable number of sales for their advertisers?
In an ideal world, there would be unlimited time and resource to help each of these partners climb the ladder to move into the big gang. However this is not feasible in a realistic environment.
Therefore we begin to see that advertisers and agencies must begin to view their affiliate offering as a two tier approach. This argument becomes intensified when we take a view of the wider online market.
Most advertisers would love to be able to spend more of their marketing budget on the performance basis that forms the bedrock of affiliate marketing. Who wouldn’t want to pay for marketing only when you already have the money in the till?
This subsequently leads to a scenario where advertisers are seeking to convert more large partners to this performance payment metric, thereby increasing the gap even further and creating a greater emphasis to this divide.
How to effectively manage these two distinct segments will be the theme of future posts, but I wanted to set the scene. The original vision of affiliate marketing, a large number of relevant but small partners, is alive and well but is becoming increasingly marginalised.
We now have to re-examine how we view the “affiliate channel” in light of this and I would suggest that it is now time that we begin to view it as two distinct channels: performance partnerships encompassing those large CPA driven relationships; and affiliate marketing covering the long tail.