Opinion

May 20, 2020

Partner Marketing is Not Affiliate Marketing

Why are brands missing opportunities for deeper partnership? Lack of competition is hiding the opportunity.

As marketers, we’ve all seen it. A company rolls out a sleek new brand but it turns out the underlying product is exactly the same. Anyone remember Radio Shack rebranding as “The Shack?” A new name and fancy packaging! But the same dingy stores. This will get you only so far; and, in fact, will probably backfire. Because you’ve skipped the most important — and the hardest — part: improving your product. 

This should serve as a cautionary tale for the affiliate industry, which is in the midst of a very well-intentioned (and much-needed) rebrand. And yet, the affiliate industry has failed to address any of the core problems that are driving the need for a rebrand.

 

How did we get here? 

Theoretically, the technology and the services that power the industry could manage any type of partnership. But, the industry has evolved, primarily, into a discount channel. Through affiliates, consumers get the product they want at a discount, brands make a sale, and the affiliate gets a cut. But that tidy arrangement is creating problems: it leaves out vast portions of the online universe because the buyers (publishers) and the marketplaces (networks and platforms) restrict competition. And that means vast amounts of money and innovation are being left on the table. 

The affiliate channel is controlled by a few industry heavy-hitters. There are the buyers (or publishers): Rakuten (ebates), Honey, Retailmenot, and a few others. Then there are the marketplaces (networks and platforms): Commission Junction, Rakuten, and Impact. Rakuten alone often accounts for nearly half of many programs’ revenue, and some estimate that 80% of affiliate commissions are paid on the last click. 

And the marketplaces do not allow their customers to work with brands on other platforms,  restricting the ability to form strategic partnerships. This scarcity of options for brands is creating a lot of problems:

  • It maintains artificially high prices for last-click publishers, and artificially low prices for strategic partners and traditional publishers. This concentrates power in the hands of a few buyers. 
     

  • It keeps the affiliate channel functioning as, primarily, a discount channel, and discourages innovation and growth into other types of partnerships.
     

  • Because channel managers are incented on last click, it discourages them from taking advantage of competition and building strategic campaigns.
     

  • It restricts brands from forming B2B or “strategic partnerships” by limiting their options to the marketplace they are on. 

The last-click attribution model represents the core problem. The acquisition of Honey for $4B by Paypal means that the present value of the last click is 40x the commission generated.  With that kind of incentive in place, the industry will continue to funnel commissions to the last click. And that means a small group of buyers (publishers) will continue to control the market — even though marketers know last click leaves out all the other side trips and visits a customer has made during their journey toward a purchase. The hours a consumer spent poring over articles on legacy publisher sites, or reading reviews on highly trusted partner sites? All lost. 

This current situation is a lose-lose for all parties, even affiliate publishers. Because the current situation makes it impossible to grow. To that end, affiliates have begun to rebrand themselves as “partner marketers.” But nothing in the industry has changed. It’s a shame, but it doesn’t have to be this way. 

At the end of the day, all parties need to be able to account for the intrinsic value they create. Credit must be given where credit is due. This will, in the end, create far more value than the last-click model ever did. The technology exists to make this happen. Now, the business models must change to meet this challenge. 

Solutions

There are two directions the industry should take. First, the industry should incent teams differently–


Publishers that are being underpaid for their contribution should band together and demand higher prices. 

 

Brands should promote managers that have cross-channel experience and are able to apply broader attribution models to account for value. Managers with cross channel responsibility are less beholden to the big affiliate publishers and more likely to just shift spend to another channel instead of giving in to the pressure to pay everything on last click. Brands should also form a brand council and demand standards be created for ad placements and transparency.


Networks and platforms should build a publisher-facing product that gives publishers insight into the value they created on the click path. Monetize this directly with publishers. Marry this with client service teams that help sell that value to merchants. 
They should work together on brand partnerships, allowing brands to connect with other brands that are on a different network or platform. This can be sold as a different product with different features and pricing. 

Second, the networks and platforms should build a new go-to-market for a new customer segment–

 

  • Refocus their go-to-market on different customers (CFOs, heads of BD, strategy teams). These customers are the ones creating strategic partnerships, but their needs are different than an affiliate team. 
     

  • Build a product that meets the different needs of business development and corporate strategy teams. Platforms and networks have to build a solution that allows their advertisers to connect with brands on other platforms, and have much more payment flexibility. 
     

  • Pair the tools with an outsourced business development service. These services cannot be repackaged affiliate services. They must be teams that understand how to account for the incremental costs and the incremental benefits of a brand partnership. Building strategic partnerships requires an understanding of the costs (finance teams, customer service teams, marketing, etc) AND the intrinsic value created by the partnership. Presently, the last-click model limits the ability of an affiliate manager to service that product.

The semantic argument is a superficial one. The real question is: what is the successful go-to-market strategy for partnership automation? 

The irony is that the affiliate industry is discovering that recruitment of strategic partners and placement in traditional publishers is not plug and play, much like many new entrants to the affiliate channel discover about recruiting partners. 

The semantic argument is a superficial one. The real question is: what is the successful go-to-market strategy for partnership automation? 

The irony is that the affiliate industry is discovering that recruitment of strategic partners and placement in traditional publishers is not plug and play, much like many new entrants to the affiliate channel discover about recruiting partners. 

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