News, Technology, Entertainment, Recipe, Travel Articles


Monday, June 15, 2020

What Pay-for-Outcome Models Mean for Affiliate and Influencer Marketing | Sponsored Content

Throughout the past three months, with COVID-19 as a likely catalyst, influencers have been in trade publications frequently for perceived drama pertaining to seemingly abrupt changes to long-standing affiliate marketing programs. Journalists covering the space sought to understand the fallout between affiliate programs and influencers, campaign suspensions, and shifting compensation models. But as with everything in our space, understanding the truth is more dynamic than what may originally meets the eye. An evolution can be seen in retail marketers’ collective shift toward diversified programs and away from last-click overreliance. At the same time, influencers are responding to slashed upfront campaign fees by migrating to pay-for-outcome compensation models. These factors come together to seed a new relationship.

Affiliate Marketing

Over the last twenty years, affiliate marketing was heavily dominated by last-click coupon and loyalty publishers. But the affiliate marketing model made it too hard to assess the value of content creators and allocate compensation for their role in achieving a brand’s desired engagement—whether it be a registration or conversion. Affiliate technology was originally built to attribute compensation on last click. So for a long time, this system afforded no earning opportunity for influencers, simply because they were often the introducer touchpoint in the consumer journey.
As a result, the popular fixed fee monetization and commercial strategy around the creator marketplace was primarily developed as a defense mechanism.

For the dynamics between retail marketers and influencers to take hold, the affiliate industry needed to accelerate its evolution, to develop a way to prescribe value based on any given influencer’s explicit role in the consumer journey on the path to purchase, whether it be introduction or something more mid-funnel. The industry also needed to develop technology for precision influencer discovery, so that brands could find the right influencers based on specific attributes.

The welcome and collective move of brands and influencers toward pay-for-outcome models bodes well.

Now that affiliate technology is evolving beyond last-click publishers, there are opportunities for more sophisticated monetization. According to Pepperjam's weekly indexing, over the last two months, content publishers, like influencers, have realized year-over-year gains not only in revenue performance but also in their percentage share of revenue across the affiliate pie. And brands are responding—by investing more on a variable compensation basis, upwards of 127% year-over-year. With measured and proven performance, affiliate tools are finally a real option for influencers—they present an opportunity for high-level compensation for playing a measurable role in the ultimate conversion.

Combined with other recent events like brands dumping their fixed-fee campaigns, this technology evolution within affiliate marketing has created an environment for influencers to readily embrace the pay-for-outcome model. Influencers certainly felt the impact of recent budget cuts, but there’s been a palpable realization that they can offset these losses with alternative revenue streams, like affiliate. This trend toward pay-for-performance models has persisted week over week, and we feel that this position as a primary sales and marketing channel will stick after the pandemic, having been put to the test during the most challenging of times.

As April saw a sharp decline in ad spend with bookings through media agencies reportedly down 42 per cent, the affiliate marketing space appears to be holding its ground.

Rakuten Advertising reached out to affiliate publishers across content, loyalty & rewards and shopping & comparison sites throughout APAC to understand the effects of COVID-19 on their business. 57 per cent of those surveyed said it’s “business as usual”, with some seeing stronger performance despite the challenging circumstances.

42 per cent said site traffic had increased over the past month and a further 34 per cent said traffic had held steady. 61 per cent of respondents stated that growth was organic, and 42 per cent indicated traffic referral from social media had increased, corresponding with the large numbers of people at home increasing their digital interactions.

Promotions paying off

While investment levels from retailers has been affected during the pandemic across all channels, 58 per cent of affiliate publishers say they are seeing stronger performance from brands that are actively providing offers in market and promoting these via their affiliate partnerships.
Affiliate adaptability

Affiliate publishers haven’t been relying solely on their retail partners to innovate and appeal to sustain share and drive growth. 42 per cent of those surveyed said they have made changes to their marketing and promotional messaging to adapt to new consumer demands and behaviours.
ShopBack, one of Australia’s preeminent cashback publishers had a significant marketing campaign planned during the start of the COVID-19 outbreak.

Country manager Angus Muffet explained how they pivoted the campaign. “From a marketing standpoint, we had to move further up the funnel than we’ve done before to reach new and existing customers,” he said.

“Throughout the birthday campaign we weren’t just running conversion mechanics and talking about brands and offers, but trying to bring people into our ecosystem, and keeping them entertained while they were at home. Working with influencers to promote our virtual games and challenges also proved incredibly successful.

“For brands that were dealing with supply, fulfilment and budget constraints, we needed to be super flexible, allowing them more time to confirm offers,” he added.
Inventory value holding up

While overall the ad industry has experienced reduced demand and decreased inventory costs, affiliate publishers who traditionally work on performance models have largely kept costs the same, with brands continuing to see demand, conversion and effective ROI via the channel. 66 per cent of respondents said that they have not made changes to the cost of inventory available to affiliate advertisers.

Muffet, of ShopBack, said that, “working on a performance, cost-per-sale basis makes the affiliate channel a low risk environment for brands investing more to capitalise on this massive online marketing shift, as well as brands that are scrutinising their marketing dollars more than ever.”
Survival at a price

Of course, not all affiliates have been immune to COVID-19’s impact. 30 per cent of respondents say they have been cutting business operation costs where possible, while 24 per cent have reduced their own marketing spends and 19 per cent have been forced to make staff and salary reductions.
Creativity out of crisis

Tracking significant and rapid shifts in consumer behaviour, many affiliate publishers have identified an opportunity to reimagine the way they meet customer’s needs, with 27 per cent of publishers saying they have responded to the crisis with new inventory or campaigns. 37 per cent of respondents said that they are now providing new services and content to site visitors, while 24 per cent of publishers have invested in different channels to meet new consumer activity.

Rakuten Advertising senior vice president APAC Stuart McLennan commented on the findings: “This survey shows that there remains clear resilience and opportunity with channels able to pivot nimbly to the changes in consumer behaviour induced by the Coronavirus crisis. The fact that so many of the publishers surveyed have been able to maintain the cost of inventory on their sites is testament to both the strength of the channel and the ability of affiliate publishers to adapt to the increased role of social as consumers look for engagement, information and best deals on the web.”

Unlike traditional media, affiliate marketing has been somewhat immune from the decline, largely because it’s a truly performance-based channel. In a climate where every marketing dollar is being scrutinised and branding budgets are being slashed, advertisers can continue to invest in a channel that delivers results and return on investment.

Of course, it would be remiss to say affiliate publishers haven’t been affected at all – publishers rely on the investment and partnership of advertisers, some of whom have had to pause relationships or reduce commission rates for a range of reasons no one could have previously predicted. However overall the Rakuten Advertising network has experienced 49 percent MoM growth since February, showing the strength of the channel in tapping into the influx of online consumers during the COVID-19 pandemic.

In what ways is affiliate marketing distinct from traditional advertising?

Affiliate marketing is unique in that it’s a true performance channel – publishers are rewarded on a commission basis when they refer a sale for an advertiser. It’s a low risk and cost effective channel to both to tap into new audiences and foster loyalty with your existing customer base.
Historically, there has been a lot of misinformation around affiliate marketing, and the channel has sat somewhat outside of the traditional marketing mix. But affiliate marketing has evolved significantly in the last five years and improvements in affiliate technology, personalisation and automation is helping scale the channel and prove its effectiveness.

Advertisers have complete control over their costs and can offer different commission rates on different customer types, products or categories (alongside many other data points). The reality is affiliate marketing is the only channel where ad spend can be directly tied to a retailer’s business goals in this way.

On the flip side, publishers also have complete transparency into how they might build their commissions and what kind of customers and products they’re referring, so they can work in partnership with advertisers to better meet their goals and grow their own businesses and revenue.
Have publishers noted changes in customer behaviour over the past few months?
Absolutely. Results from the survey showed that publishers are benefiting from increased traffic levels as consumers stay at home and look for engagement and interaction online. 61 percent of respondents said that site traffic had grown organically, and 42 percent said traffic from social channels had increased.

With there being financial uncertainty as we head into a recession, publishers also noted that consumers are responding well to deals and offers – 58 percent of publishers said they are seeing stronger performance from brands that are actively providing offers in the market.
We also asked publishers some open-ended questions around what overall trends they were seeing. There was a common thread as to what their customers were buying (which aligns with what we have seen as a network), such as increased sales across homewares, home improvement, food, fitness, consumer electronics and beauty. There was significantly decreased sales for travel.
How can publishers adapt their marketing and promotions to cater to new customer demands?
The COVID-19 pandemic accelerated the shift in consumers moving online. Publishers have a unique opportunity to not only help brands attract these new customers and assist in brand discovery (via content, information and recommendations, for example) but also to sustain them and encourage repeat purchases (via loyalty and cashback incentives, for example).

Publishers that use the data available to them to understand what and how consumers are buying will be best placed to be nimble and adaptive to changing customer demands.

What are the benefits of affiliate publishing during this time?

Affiliate publishers align with consumer browsing and shopping habits, which gives advertisers and brands the opportunity to tap into different consumer profiles and preferences. There are a lot of price-conscious Australians at the moment, who will naturally be drawn to deal, offer and loyalty publishers for added savings. By partnering with these publishers, brands have a direct avenue to these consumers at this time.

In a similar vein, content consumption is at an all-time high, and there is an opportunity for advertisers that partner with content sites to tap into audiences that are looking for inspiration and education on what to buy, and from where.

How can brands better utilise affiliate marketing – what opportunities do you think are being missed?
Overall affiliate marketing often flies under the radar. The premise of the channel is simple, but the technology that underpins it has evolved and now offers sophisticated targeting and personalisation opportunities for brands. The breadth of affiliate publisher models is also expanding – from content players to image recognition technology to publishers that drive online-to-offline sales. The publisher mix is a far cry from the days when affiliates were limited to deal and offer sites.
Brands that truly nurture a broad range of affiliate partnerships and publisher models and invest in the channel as it evolves will see the rewards of new customer acquisition, improved margins and better customer experience.

What advice do you have to marketers who are managing tightening budgets?

Working within tight budgets is nothing new to the majority of advertisers, particularly as digital disruption and changing consumer behaviours have resulted in businesses questioning the effectiveness of their marketing. As such my advice in these times is the same as it has always been. Advertisers who focus on creativity and a ‘test and learn’ approach will find more effective ways of reaching and converting customers. Given the nature of affiliate marketing, now is the perfect time to trial new publishers, experiment with incentives and adopt some of the new features such as dynamic commission which help drive marketing effectiveness. You’re paying for performance, it’s win-win.