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A move by Tesco may provide some hints about the state of affiliate marketing and its future.

Earlier this month, Tesco sent the 150 developers who have been working with Tesco.com's Grocery API an email detailing that the company was opening up its database to them and giving them the ability to build applications that could potentially generate lifelong affiliate commissions.

How wide is Tesco's database being opened? Pretty wide. Developers will have access to databases for products, detailed product data (eg. nutrition information), favorites, previously ordered products and ratings. And once Tesco figures out how to maintain PCI compliance via some sort of stored card approach, there will also be limited checkout facilities that enable applications to process orders without the customer ever leaving the application.

Tesco is not placing any restrictions on the number of API calls that can be made and overall, the limitations are pretty minimal:

All we won't let you do is portray Tesco in a bad way politically, nor store private info without customers permission, nor sell insight on to competitors from customers using your applications, nor use Tesco branded images other than those that will be provided to you, nor attempt any form of denial of service.

What's in it for developers? Tesco is opening up its affiliate program to developers. So in essence, it's giving developers the opportunity to situate themselves between Tesco and the consumer. For developers who create appealing experiences, the reward is the potential of earning a commission for the lifetime of a consumer's use of the app.

The obvious question is: why? Why would Tesco allow third parties to insert themselves into Tesco's relationship with consumers? Does Tesco believe that third-party developers are better capable of creating rich experiences than it is itself?

The answer may be that affiliate marketing is less successful for affiliate program operators than we'd like to believe. Perhaps for some companies it's even stagnating. One person I spoke to about the move voiced the opinion that "many firms can count on one hand the number of affiliates that matter to them". Tesco's affiliate program is standard fare: send traffic to the retailer and earn a commission if it converts. But such standard affiliate programs don't always breed the type of affiliate and customer relationships that deliver results over the long haul.

By offering up a robust API to developer affiliates, Tesco is almost certainly hoping to encourage far more investment in its affiliate program. Developer affiliates are given a greater incentive to build attractive user experiences that can attract loyal users (and in turn 'lifetime' commissions) and customers get the choice to conduct business with Tesco through a variety of user experiences that may be more desirable than those currently offered by Tesco itself. In theory, it's a win-win-win.

Of course, affiliate programs that offer the potential for lifetime commissions aren't new. Such programs are standard with betting sites, and Amazon and eBay have offered APIs that affiliates can use for some time. Earlier this year, US electronics retailer Best Buy opened up its Remix API, which developer affiliates can take advantage of.

I think it was a sign of things to come and increasingly, expect more moves like Tesco's. Affiliate program operators may not be able to change the fact that the number of affiliates that matter is relatively small, but by giving the most dedicated affiliates the ability to build their own customer experiences and to invest more of themselves in the affiliate programs they participate in seems like the natural thing to do.

Photo credit: Terinea IT Support via Flickr.

Patricio Robles

Published 22 July, 2009 by Patricio Robles

Patricio Robles is a tech reporter at Econsultancy. Follow him on Twitter.

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Dave

"The answer may be that affiliate marketing is less successful for affiliate program operators than we'd like to believe. Perhaps for some companies it's even stagnating."

This is right and wrong, and this is why Tesco is doing what its doing. Wasting time designing CPA banners is over. The future of affiliate marketing will be through API's and apps.

over 7 years ago

Ashley Friedlein

Ashley Friedlein, Founder, Econsultancy & President, Centaur Marketing at Econsultancy, Centaur MarketingStaff

I think this is a really interesting move and one of the few genuinely innovative moves for a *large, traditional, retailer* that I've seen recently online. 

I've been banging on about 'atomisation', APIs etc. for years as an exciting way to evolve your business - opening up new markets, new segments, new revenue streams, and to 'leverage' your core strengths and assets. So I'm glad to see Tesco doing this. 

Obviously the likes of Amazon and Google have been doing this for years, but good to see a large UK retailer doing it. 

All sorts of opportunities for smart affiliates and entrepeneurs here to add value to the core Tesco product / transactional / fulfilment /services capabilities.

over 7 years ago

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Matt Bailey

Whilst this is undoubtedly an incredibly interesting development which takes advantage of the CPA model, I don't think it competes directly with a "traditional" affiliate campaign.

Opening up their API allows developers to create apps which will be featured on platforms which already have an audience, eg iPhone, Android, iGoogle etc.The fact that these developers will be paid on a CPA basis and potentially tracked by an affiliate network does not necessarily bring them into conflict with other affiliates.

Existing affiliates create value by offering the customer a choice (price comparison sites, generic PPC affiliates, content publishers) or offering an incentive to convert (cashback, voucher).

Developments such as this simply create a new niche with the affiliate "channel" rather than replacing the existing.

over 7 years ago

Ashley Friedlein

Ashley Friedlein, Founder, Econsultancy & President, Centaur Marketing at Econsultancy, Centaur MarketingStaff

@Matt Yes - I agree with you. I doubt this is about replacing the existing affiliate channel per se. I think it just about growth, about 'leveraging' (sorry) Tesco's infrastructure and assets further, about Tesco hoovering up even more share of wallet.

I think the opportunity isn't so much just to be a 'standard' affiliate here but to create whole new business offerings and service offerings. Layering added value over what Tesco provides to create hundreds of niche businesses that Tesco couldn't do on its own (too messy, too small, too complicated).

Good old Long Tail. 

over 7 years ago

Patricio Robles

Patricio Robles, Tech Reporter at Econsultancy

Matt,

Absolutely. I don't see this as a replacement for the traditional affiliate model.

That said, I do think it is true that many affiliate program operators can count on one or two hands the number of traditional affiliates that really matter to them. So by offering a platform to affiliate developers who want to invest in creating much more robust consumer experiences, they may be able to obtain the type of results they're not seeing a whole lot of with their traditional affiliates.

From the affiliate standpoint, the greater access and flexibility is probably going to make it easier to succeed if you have development skills. Forget landing pages and microsites: if you can build an iPhone app using an API like this, for instance, your opportunity to profit probably increases dramatically. The affiliate who creates the best consumer experience wins.

over 7 years ago

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Matt Bailey

Additionally, I think the reported offer of "lifetime commissions" is a bit misleading. Lifetime commission in the affiliate industry suggests that the referring affiliate will earn continual commission for every purchase that the customer makes through Tesco, something that I severely doubt Tesco would want to get involved in.

I suspect that this will mean that the developer/affiiate will earn commission on every sale for the lifetime of the app.

Would love to be proven wrong though...orozco

over 7 years ago

James Gurd

James Gurd, Owner at Digital JugglerSmall Business Multi-user

What will be interesting to see is how many other major brands embrace this type of 'open' model, handing greater control to 3rd parties. 

The key to success in affiliate marketing is the relationship. The reasons so many affiliate programs stagnate is that the merchant fails to build a meaningful relationship with their affiliate partner and the affiliate fails to build engagement with the end customer.

I think that is why, as you wrote Patricio, most retailers can count on one hand the number of affiliates that add value. To create true value, you have to understand the motivations of all parties involved in the sales chain (from merchant through to end customer) and create a value proposition that appeals to all audiences. I think many program managers fail to appreciate this and see affiliate marketing as a quick win to drive traffic and sales, open an account with a large network and sit back to count the money only to be left hugely disappointed. I know, years ago I was naive enough to take this approach!

I agree that apps are a way to deliver end customer engagement for a segment of your customer base - if an app has no value, people will not use it. If they like it, then there will be value for both the developer and the retailer as well. 

Interesting article.

thanks

james

over 7 years ago

Patricio Robles

Patricio Robles, Tech Reporter at Econsultancy

Matt,

You're correct. Perhaps I didn't state this clearly enough ("Developer affiliates are given a greater incentive to build attractive user experiences that can attract loyal users (and in turn 'lifetime' commissions)").

It's a psuedo-lifetime commission...if you can build an experience that the end customer enjoys and uses time and time again.

over 7 years ago

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punch press

Great! It's really a progress

about 7 years ago

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