Affiliate marketing has until now been a performance marketing channel in its purest pay-for-performance form. However, the touchpoints that are considered affiliates are growing and marketers working in this space need to know an increasingly widening skillset.
Microsoft, Rakuten Advertising and Trip.com spoke to PMW at the Rakuten DealMaker Europe event last week about their affiliate strategies, the pros and cons of in-housing and how they are overcoming challenges facing the affiliate marketing sector, often dictated by tech updates from the ‘Big Tech’ companies.
Affiliate marketing has a branding issue
Nick Fletcher, SVP EMEA at Rakuten Advertising, asserted his aim to “dispel this myth that affiliate is a lower funnel channel and doesn't have the same impact on consumer purchase decisions as some more traditional above the line advertising channels”.
Fletcher said: “Anyone that can effectively drive traffic to an advertiser website can be an affiliate. Affiliates come in all shapes and sizes and create unique, original content. It can be incredibly powerful and [affiliate marketers] can carry [consumers] right the way through that user journey, from the beginning right the way down to the end.
“I want to challenge people to be more ambitious when they think about affiliate marketing. It's got a perception issue. It needs to, ironically, improve its own brand.
“[Affiliate marketing] is seen as being a small percentage of spend (about five to 10%), which I think holds it back. We see from our advertisers that affiliates are driving firstly the investment market spend, and secondly the majority of their online marketing channel sales.
“When people think of digital marketing, they often think of paid search first. Then display and paid social. That's often where the people that are new to the advertising space invest their money first. But I think there’s a case to actually look at affiliate always before those other channels. Figure out what you can do with affiliate to then go back and look at the other channels.”
The arguments for in-house versus an agency
To get the brand view, PMW spoke to Senior Affiliate Marketing Managers at Microsoft, Trip.com, HSBC and Cleo to understand what they in-house and what they outsource to an agency.
“For a large company like Microsoft, we tend to have managed accounts,” said Cecile Boultareau, Digital Media Manager, Global Media Team at Microsoft. “We implement the strategy and then Rakuten manages the day-to-day relationships. I've worked in other companies where everything was done in-house and that's great too because I think you have a closer relationship with your publishers.
“Generally at Microsoft, we tap into the networks and connections that the marketing agency – whether it's paid media or affiliate – specifically have. If it's something at scale, outletting is quite powerful, but you can quickly lose control of how efficient it is as well.”
Control was a common theme that popped up in discussions at DealMaker, specifically outsourcing. For marketers in the financial services sector, there was a clear benefit for using an agency that specialised in compliance. HSBC and Cleo outlined in an interview with PMW how finance is different from other affiliate sectors because “mistakes mean incidents”.
Fletcher commented on the increased presence of affiliate marketers from the financial services: “One of the risks with finance is there's a lot of regulatory pressure on financial advertisers. So there's often a nervousness about losing a little bit of control, which I think is sometimes a good thing for affiliate marketing, because you want to be able to encourage unique content and deliberately let go or relinquish control. But when it comes to finance, you need to make sure it's backed by a compliance team.”
But he continued to explain the “false economy” when it comes to the cost factor of in-housing: “People think it is cheaper and more cost effective to have this resource in-house and I get that argument. Ultimately, if you are paying for resource at a third party, there's got to be some sort of overheads taxed on top of that.
“I do think it's somewhat of a false economy. It can actually be a lot more cost effective to run [affiliate marketing] through an agency. There's a huge amount of behind the scenes work going on [at an agency or affiliate network], and when you're in-housing things, it’s going to end up incredibly expensive.
“If you have specialists in each of these areas, a dedicated analyst, compliance lead and publisher person, it very quickly adds up.”
Trip.com’s Affiliate Marketing Manager Scarlet Liao countered Fletcher’s suggestion: “I would definitely suggest an in-house network. We are an international company and I would say keep a close connection with the headquarters, decision makers, products and revenue. It's all about the speed. The quicker you make decisions, the quicker you are on board with publishers to drive your performance to do better.”
How can brands maintain e-commerce growth post-pandemic?
During the pandemic people were forced to go online, but brands are now facing the return of people to physical stores combined with the cost of living crisis. “This is where advertisers are going to struggle over the next six months,” warned Fletcher.
“Firstly, you need to be really agile and adaptive to changing consumer behaviour, and secondly, not be afraid to invest in the right areas. One of the things we see across our network data is that the consumer journey is shortening. People are spending less time shopping, so you've got fewer opportunities to really grab their attention.
"The consumer journey is shortening. People are spending less time shopping, so you've got fewer opportunities to really grab their attention."
“That's why I talk about the importance of affiliates and valuing it not just from a purely ROI perspective, but looking at the awareness and influence they're having on consumers.”
Microsoft’s Boultareau highlighted the efficiency benefit of performance marketing: “You can control your cost a lot more efficiently [to maintain growth]. It's all paid to reduce flat fees and rely more heavily on cost per acquisition, where you don't take as much risk, so you are more in control of your budget with no big surprises.”
Let Apple focus on ‘the creepy stuff’
Marketers’ common anguish is the dominance of five tech giants: Alphabet (Google), Amazon, Apple, Meta, and Microsoft. Fletcher explained the current challenge they pose.
“They have control over the browsers which means they have control over what we track and how we track it. The big [challenge] on everyone's lips at the moment is iOS17 and the upcoming changes to Safari, Apple's browser. They're making some changes to their tracking and privacy mode.
“We're pretty confident about there being minimal impact on the affiliate space, but it's an evolving journey. It started with Apple releasing ITP several years ago and Google deprecating third party cookies.
“There's definitely a focus on consumer privacy. There are forms of marketing out there that are invasive when it comes to the consumer. As long as advertising is beneficial to the consumer, informs them and is adding value, then I think companies like Apple will generally let that be and focus their attention on ‘the creepy stuff’, for a better word!”
For Microsoft, a member of 'the big five', the challenges are shared but more simple. Boultareau points to one pain point being “the product feed not working, and that's holding us back from investing more because the basics aren't there just yet. We know there's potential, but there's technical problems.
“Again, having that direct conversation [with publishers] allows you to maybe ask for stuff that wouldn't necessarily come in premade packages. Often publishers just send packages, and half the time I'm not interested in what they are offering; I want something custom made.
“But this has been a positive outcome. It's not so much something that's not working, it's about testing something or personalising.”
If one thing could be taken from Rakuten’s DealMaker Europe event, it’s that performance and affiliate marketing is collaborative and creative, and advertisers want to learn from each other. Even financial services marketers are peeking over the fence to see how beauty marketers do what is getting increasingly more undefined.