Over the next 3-5 years I anticipate that affiliate marketing will take on a much higher profile within organizations. The reason for this is because a majority of online innovation is coming from this channel. If you take a close look at some of the established sites in the channel as well as some of the emerging you'll see a very common thread: All were created by hungry entrepreneurs who understand online marketing and consumer behavior to a greater extent than the dinosaurs roaming the halls at your typical agency.
Just this week it was announced that Rakuten, Inc. purchased Ebates.com for $1 Billion. That is not a typo. What that suggests is the channel is still growing at an exceptional rate and is worth the kind of investment you typically read about for some smartphone app that no one is going to adopt anytime soon on a global scale.
This growth and this potential are certainly exciting for anyone involved with the affiliate channel but it is important to understand the threats faced in the next several years along with the areas that allow for pushing the boundaries further. I'd like to outline the threats first to get the negatives out of the way.
Threats in the Affiliate Channel -- Direct Competitors and New Competition
The networks will be under a tremendous amount of stress in the coming years. As I mentioned in my first post, companies like Rakuten Marketing and CJ Affiliate will continue to do battle over pricing. And in addition to undercutting one another they have both undergone significant rebranding in recent months to show their existing clients and potential clients that they are more than just a single channel partner. Rather, they now include search, display and attribution tracking. By becoming a 1 Stop Shop you give yourself a competitive edge and open yourself up to new opportunities since you can legitimately compete against "agencies" rather than just networks. At the same time, you have to be mindful of what companies are looking for in a performance marketing vendor: Offer them something no one else can. Being a 1 Stop Solution is fine. Maybe even desired by a majority of advertisers that want simplification in their lives. Just don't become indecipherable from your competition.
And as the networks do battle they should keep their mind on several large publisher currently in their networks that have years of history with large advertisers that have complicated goals. Some sites might insist they prefer working through a network and that creating their robust tracking system is years away (if ever coming at all). But I think it is highly possible sites like Retail Me Not or ShopStyle could find a way to remove themselves from the networks and go direct with the advertisers. The fact is the networks cannot track online to offline and these publisher can deliver those sales via their incredible mobile and tablet offerings, traditional sites and email campaigns. Is it so crazy that they won't be able to someday invest in their own tracking, be bought out by a larger company that can implement those solutions or even find a way to work within an advertiser's existing analytics provider to find a reasonable metric that all can agree upon and cut out the networks? If you think that is crazy I think you underestimate the sheer amount of talent within this channel.
Threats in the Affiliate Channel -- Providing Value With Great Data
"Omni Channel" is the buzzword. Everyone wants to be a legit omni channel player. The problem is that making sense of data in an omni channel world is difficult and an inexact science. So, how do the networks make sense of all the collecting they are doing and provide real insights that are accurate and actionable? Beyond that, how do we get users to self identify across multiple devices and if we cannot is there a way to tie that data and behavior to a single user? Not yet. Maybe not for a while with a high level of accuracy either.
So, the solution the networks see now is implementing some form of attribution modeling so advertisers can see how users are completing the sale via referrals and how to weight the value those referrals provide.
Attribution modeling will never be universal across the channel.
Some advertisers will see value in coupon sites, others in loyalty partners and still others in content sites and will adjust their commissions based on this. If one model shows coupon sites being of low value and they cut commissions that could mean significantly less revenue for networks, coupon publishers and cause mass panic as everyone tries to justify their existence.
Threats in the Affiliate Channel -- Making the Most of Mobile
How secure is shopping via a mobile device? I think most consumers and advertisers would agree that the wider sense is not very secure at all. With large credit card security breaches that have affected Target and Home Depot combined with concerns about how secure The Cloud truly is we could see consumers retreating back to shopping through desktops or in-store...with cash!
Ok, I don't know for certain that is the path we're headed down. What I do know is that the affiliate channel is now starting to gather legit mobile and tablet data to share with advertisers. Along with this, mobile specific partners are emerging and traditional publishers are fleshing out their mobile sites. Just more examples of affiliate marketing being on the cutting edge. Yet, all this could be for not if shoppers are not willing to finalize sales on their mobile device. These channels are still critical to be relevant in and it is possible users will browse during their commutes or lunch breaks and complete the sale on their desktop.
That is still a sale that drives a commission and a transaction cut for the networks. But if we don't know that path from a lack of accurate data or if advertisers don't see the value in a mobile click the same way they do an actual sale, a potentially huge opportunity for affiliate marketers will fall by the wayside.
Moving Right Along...Towards Innovation!
Enough with the fear mongering. Next post will be all about the reasons to be optimistic in the channel and reasons to believe more investment is coming!
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