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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.  

Matt Bailey

Published 10 June, 2011 by Matt Bailey

Matt Bailey is MD at Performance Horizon Group Ltd and a contributor to Econsultancy. You can follow him on Twitter or connect on LinkedIn.

2 more posts from this author

Comments (13)

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Justin Rees

Justin Rees, Cofounder at Talking Customers

Matt,

Hope you are well.

Great article. I wondered whether you saw the same trends for affiliate lead generation? Is
the market becoming more dominant by larger affiliates or should smaller affiliates still be interested?

Thanks,

Justin

about 5 years ago

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Steve

Anyone with a modicum of sense will have been tiering their affiliate activities for years, I know I have.

However many networks won't/can't allow it. This is why I always advise clients to go with a network who select affiliates based on the fit with the client, their experience and knowledge in the sector and historical performance. Too many affiliate networks still don't do this and just open your affiliate campaign to thousands of affiliates, most of whom add little to no value (and can actually devalue your brand).

Being selective of who you work with is essential for brands running affiliate campaigns (imo).

about 5 years ago

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Helen Southgate, Online Marketing Controller - Strategy & Planning at BSkyB

Hi Matt

I think many Clients have been doing this for a long time already; a two tier affiliate programme is by no means a new concept and to a degree has always been in place although perhaps not to the same extent as it is now. I agree that the gap between large affiliates and the rest of the affiliate base is widening - however with the larger affiliates getting larger, rather than perhaps the longtail getting smaller.

I am as you will know an advocate of the longtail, viewed together as a whole it is the "largest" affiliate, but it does need a different strategy to manage and I think this is often a strategy that bewilders most people as it's not easy, requires resource and great communication. However, this is where networks can really add their value, longevity and sustainability is about having a diverse and dynamic affiliate programme - that means you need a mix of longtail and top value driving partners.

about 5 years ago

Peter Bell

Peter Bell, Managing Director at Fuse Lead Marketing

Yes great article which highlights what a fascinating future it is for affiliate marketing from bedroom to boardroom. As the space sucks in more lead gen dollars there will be much greater demand for full transparency in order to understand which half of your leads are working and which are not. There seems to be a natural drift towards using fewer bigger media players to do the job as the long tail represents many brand risks and difficulties in managing lead gen quality and volume over the long-term. So whilst the days of using thousands of affiliates may be numbered, there are certainly a good few hundred media players out there today.

Fast-forward a couple of years with performance marketing becoming the dominant force then the long tail could quickly become short and stumpy!

about 5 years ago

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Rob Langley

There are a few factual inaccuracies which show the writers relative lack of experience in affiliate marketing.

For example, affiliate marketing has been going for a lot longer than "11 years" in the UK and, as everyone knows, Amazon was not the "original version of affiliate marketing" but borrowed the idea of their programme from others.

The facts can be verified online.

about 5 years ago

Matt Bailey

Matt Bailey, Commercial Director at Performance Horizon Group Ltd

@Justin I'm well thanks Sir, hope you are too. I think lead generation needs to be looked at slightly differently as there are huge opportunities in certain areas and less so in others. I think that the development of new technology improving insight into leads will open up the channel and encourage advertisers to spend more. However at the same time, the traffic acquiring spaces are becoming increasingly competitive making it hard for new entrants.

@Steve Yes of course a lot of people have been separating their affiliates, but I think now it goes a lot further. I think that merchants and agencies will start to work directly with the larger partners, cutting out the network, and use the network for the long tail.

@Helen Not sure I agree with you here. As you know, a lot of merchants are taking the decision to reduce the number of affiliates with whom they work for various reasons. One of the main reasons is the lack of transparency offered by affiliate networks into how affiliates are driving traffic.

@Rob Langley Great comments. The first UK affiliate network launched in 1999/2000 and so whilst there may have been a few isolated examples of activity before then, 12 years ago was when it started to be taken seriously. Similarly, Amazon launching their Associates programme gave credibility to what was a fledgling area.

I'm not sure that either of these points make too much impact on the overall understanding of the article, but if that's what you want to concentrate on then so be it.

about 5 years ago

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Kevin Edwards

Matt,

Have to agree with Helen here - this has been happening for years and so I don't really see there being any new distinction other than a semantic one.

I also think you need to draw divisions between sectors. If you look at a large retail programme you'll see multiple amounts of active affiliates compared to some of the programmes I'm sure you're thinking about (smaller tail telecoms/service vertical).

I've just checked one example, an advertiser who has nearly 1,000 affiliates making sales for them (year to date) and more than 2,500 recording clicks. Yes there are a handful of obvious large affiliates but these will be different for other programmes and sectors.

Also, your response to Helen about 'a lot' of advertisers reducing the number of affiliates they're working with. Working for a network that has over 1,000 advertisers, the amount that have done this that I know about can be counted on one hand.

I would also counter it's less about transparency from networks and more about lack of resource or indeed engagement from advertisers. Any self managed solution requires both so I don't see massive clamour for this at present.

about 5 years ago

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Nichola Finan

Resource, resource - client side that is. Your article highlights once again that this channel requires investment in analysis, testing & planning that does require client time and energy. We need to make affiliates sexy again - will you be looking at attribution modelling and the mobile/social space in your next posts??

about 5 years ago

Matt Bailey

Matt Bailey, Commercial Director at Performance Horizon Group Ltd

@ Kevin Completely agree with your point on sector differentiation. However even in a retail environment there will be large price comparison sites (eg Kelkoo, Ciao) who should be seen as part of a performance marketing strategy but currently are not generally speaking. Would also suggest that whilst the number of merchants conducting affiliate culls is small, it is becoming more common and is being lead by some of the larger players in the market.

@ Nichola Thank you for your comment. I think that any space where clients are spending their marketing budget should be analysed and tested, something that the affiliate market has been pretty poor on generally. With regards to attribution and new channels, I will post something shortly.

about 5 years ago

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Kevin Edwards

@ Matt, guess we'll have to agree to disagree. Very few advertisers I've spoken to are interested in culling affiliates. Having worked network side for nearly eight years I can assure you there's certainly no big momentum to do so, in fact it's probably more the opposite. Just because a couple of high profile advertisers haven chosen to do so in the last year it doesn't make it a trend.

As I said it's my experience that advertisers want to work with affiliates and publishers better and understand their traffic more but that takes time, money and effort. If they don't have it they may reduce their affiliate activity but it's uncommon and not something any of us working within the market probably want to see.

about 5 years ago

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Peter Heffernan

What would be nice is if one of you big shots would step up to the plate and put an end to these make $5,000/day "Gurus."

They've created an internet full of newbies (Like ME!), who have been giving every bit of effort to promote legitimate products for legitimate advertisers. Only to now find out that we're about to be chopped off at the waist by the big affiliate programs.

Ironically, I've been accepted to most of the large ones and continue to learn new ways to promote and provide good content. I guess I'll wait by my inbox for the pink slips.

about 5 years ago

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Helen Southgate, Online Marketing Controller - Strategy & Planning at BSkyB

I think an unnecessary panic has been created here. I have seen no evidence that Clients are changing their affiliate programmes to only concentrate on small affiliates. In fact, for a lot of large affiliate programmes I think we are seeing the opposite as Clients are starting to understand better the value that their base of affiliates delivers in terms of sales beyond last click, brand exposure and value of sales. Yes, there is a two-tier affiliate management system, where top afffiliates perhaps have more of a direct partnership with Clients, but this is not new, this has always been in place, think back to the days when Clients didn't do their own PPC, that was the era of the true "super affiliate".

The affiliate industry is built on the longtail. without it it would cease to exist. I do think Networks / Agencies need to embrace this better and understand it's value but overall I think it is widely accepted that value really does come from a longtail of affiliates as well as the top 10-20 partners so no-one should be being "chopped off at the waist" if they are delivering value to a Client.

I think we need to go back to understanding what affiliate marketing is, it is a microcosym of all of online - you can't do this with a few partners as you need the reach of mobile, display, social, search etc. and affiliates in my experience tend to be the first to succeed in these areas. There will also always be new opportunities for affiliates - at the moment mobile being one of them which opens doors to all sorts of new affiliates, online and offline.

about 5 years ago

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Greg V

I'm new to the Affiliate entity and I'm trying to decipher the varying comments. What is the "Collective Answer" or strategy to get atop and stay atop of the "Big Guys" as a small affiliate?

about 5 years ago

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