In the last few years the affiliate industry has hit its renaissance and what affiliate marketing means has changed significantly. Hopefully this post will give you a 2020 vision (sigh) into the affiliate marketing industry.
Before diving into the weeds of affiliate marketing, it’s important to note that there are different perspectives on this area of performance marketing because of the number of stakeholders involved. You may be a brand marketing manager investigating affiliate marketing, an aspiring affiliate looking to monetize your website, or maybe someone just trying to learn more about the industry. This post should give you insight regardless of the perspective you are in.
With a reported 81% of brands using affiliate marketing, it is one of the most in demand areas of marketing. In fact in 2019 LinkedIn listed it at number 7 in their most needed skills for 2020. As the demand for affiliate marketing has grown the number of blogs, bloggers, influencers and affiliates has grown to meet it. Affiliate marketing remains one of the best ways to monetize content, as it gives the publisher choice in the brands which they promote, helping to develop trust and authenticity between the writer and the reader.
What is affiliate marketing?
Affiliate Marketing has slightly differing meanings to everyone. If you got a group of marketers together they would likely all give a slightly different definition of what affiliate marketing means to them. Affiliate Marketing has been defined, by the Oxford Dictionary, as:
A marketing arrangement by which an online retailer pays commission to an external website for traffic or sales generated from its referrals.
Reading this in 2020, the definition seems dated and hasn’t kept up with the rapidly changing environment in which Affiliate Marketing works.
For me, a better definition would include all elements of the affiliate marketing landscape; the advertisers, the networks, the publishers and the customer. Furthermore, it would include the overarching new industry which has flourished from the roots of affiliate marketing, Performance Marketing.
Affiliate marketing is often referred to as a marketing channel. However, many partner marketing programs or influencer programs, which pay commissions, can be considered as using the affiliate model. So when creating a 2020 definition this should also be taken into account.
So here goes, the year is 2020 and this is what I would define Affiliate Marketing as:
Affiliate Marketing is a performance marketing framework, where an advertiser rewards one or more partners for completing an agreed tracked action that supports the advertisers own goals.
For me, this is a broad definition. However, I believe, the complexity and growth in the variety of ways to undertake affiliate marketing require the definition to be broad. The key take away is that you are paying for the outcome of an action which you have chosen.
Who does affiliate marketing?
In 2020, Affiliate marketing can be done by anyone, you just have to put the time and effort into getting started. That sentiment is true for all of the key players who work within the Affiliate marketing ecosystem. Affiliate marketing is for any of them to get involved in, it’s just what they do which differs. The key players I’d identify as “doing” affiliate marketing are:
Advertisers are usually the person paying the commissions, they sell a product or service. They are often also referred to as Brands or Merchants. I like to refer to them advertisers as I believe that best describes them; as they may not have a defined brand or physical product.
Partners are the entities promoting the Advertisers product or brand. Previously often referred to as affiliates, or less commonly publishers. I have noticed the term affiliate get less use recently; potentially because there is a defined legal meaning for “affiliate” and partially because some CMOs have preconceptions about the word. If you are looking to monetize your website for a brand then you would be trying to become their affiliate marketing partner.
Networks (or Software as a Service platforms) are the companies that handle the tracking and payment of commissions to affiliates. I have grouped SaaS platforms with networks – if you had asked me a few years ago I would have separated them – because the platforms have started to operate many of the same features as networks. For example, many now include Partner listings, Program directories and fully managed services (by referring preferred agencies).
Agencies (or OPM / APM companies) usually oversee and manage the day-to-day operations of a program on behalf of the advertiser. Outsourcing management is not totally necessary in all affiliate programs. Programs with a very defined goal, or small reach, may be better managed with one-to-one communication with partners.
It can be unwieldy for one affiliate manager to manage a few thousand partners. That is where outsourced program management (OPM) or Affiliate program management (APM) agencies can help to relieve some of the day-to-day tasks. Agencies can be a very useful tool when an affiliate program outgrows the size of the resources of the Advertiser.
Customers (or audience) are the people that the advertiser wants, the partner is trying to influence and the networks track. They are the single most important part of the affiliate flow, because without them nothing else happens.
How does it work?
There are nuances to every affiliate relationship, but ultimately all will follow the same general principles:
- A partner finds an advertiser they would like to work with.
- The partner joins the program of that advertiser.
- The partner then promotes the brand in some way or influences customers to complete an action for the advertiser.
- The commissionable actions are tracked.
- The advertiser sends money for that action to a network and commissions are then paid.
This is actually easier to explain with a somewhat oversimplified diagram. Whilst this diagram is easy to understand, it glosses over a lot of the details of affiliate marketing.
What are some of the things tracked by affiliate marketing?
Affiliate marketing can track almost anything. Tracking can be in the form of a cookie, browser fingerprint or unique coupon code. Most commonly tracking cookies are used and a pixel on the advertisers’ website is used to track the completion of the action. Most commonly the action is a purchase, but affiliate marketing has tracked:
- Registrations for an event
- New email subscriptions
- App downloads
- Customer retention
- and much, much more…
Because the tracked metrics are created by the advertiser, and ultimately their goals, the results generated from affiliate marketing are usually more tangible than other forms of digital marketing and can provide traceable and reliable ROI calculations.