Amazon Aggregators Part 2: Get the skinny on this eComm phenom

Amazon Aggregators and Affiliate Part 2 of 2(read part 1 here): The Big Consolidation Wave


Three (more) Takeaways

  • Amazon aggregators and the forces driving them are causing a wave of acquisitions for brands, publishers, and agencies.

  • Tremendous new growth and acquisition opportunities have arisen for niche publishers, OPMs, and digital marketing agencies.

  • Data-driven affiliate experts on the brand, publisher, and agency sides are in growing demand, creating new career growth opportunities.

In our last post, we outlined the “Amazon Aggregator” phenomenon, the key players driving this market transformation, and how these market forces are reshaping retail by promulgating “e-commerce-as-a-service.” This post will discuss the implications of this new business model and how key industry participants, including brands, networks, agencies, and people, can capitalize.


Brief Review


With the e-commerce-as-a-service model, providers drive extraordinary revenue, growth, and profitability by providing a scalable go-to-market e-commerce infrastructure. The principle is to provide a scalable, repeatable growth model, starting with the “low-hanging fruit”: merchandising on leading online marketplaces, especially Amazon.


Brand aggregators are approaching the market in three stages:


  1. Buy small- to medium-sized, high-growth brands that have proven their value proposition. Then accelerate growth on these platforms through technology and marketplace experts.

  2. Expand brand footprints beyond the marketplace(s) for continued growth.

  3. Partner, build or acquire new venues for promoting goods to expand awareness and sales and keep the growth train moving.

Concurrently, digital content companies are acquiring niche publishers to enhance their ability to drive e-commerce scale. Along with these acquisitions, these companies are adding new performance-based content and marketplace marketing products to improve their revenue models. Companies like Vertical Scope, Red Ventures, and Dotdash are building out the supply side of this evolved ecosystem as the aggregators consolidate and professionalize the demand side.


Finally, we see affiliate agency consolidation as investors recognize the value that scale and consistently applied technology can provide in this new brand-building landscape. Agencies that demonstrate effective systems and processes are consolidating to deliver e-commerce excellence.


Market Implications for Affiliate: potential growth for all, threats for some.


Affiliate is a scalable, highly efficient channel for driving traffic and sales for brands. Further, it’s pay-for-performance, something that appeals to any business focused on direct sales. The top Aggregators are building extensive content and affiliate teams to expand the reach of their brand messages. Creating content and affiliate centers of excellence provides a better means of driving demand.


Implications for Publishers: new potential customers.


Publishers should note that having more brands that understand affiliate means more potential advertisers and revenue. It also means that their value as acquisition targets is rising. This is particularly true for content- versus discount-centric publishers. While aggregators are not opposed to cost-effective discounting, the basis of e-commerce-as-a-service is to grow scale without sacrificing margin.


Whether or not you are a publisher interested in being acquired, it’s essential to recognize that these new dollars come with some “strings.” Aggregators are data-centric companies that bring – and demand – customer insights and want to leverage these insights for better results. They will seek the most scalable and cost-effective ways to do so. That’s a key reason why there’s so much M&A activity on the publisher side: top content companies are creating data-driven tools to drive scale and performance and then implementing those tools across a range of properties and verticals.


Implications for OPMs and Digital Agencies: a threat and an opportunity.


Brand aggregators are intent on developing their own scalable tools. Some will succeed, and automate manual tasks, eiminating the need for some services agencies provide. Some will fail, and need outside help from agencies. Either way, agencies should be paying attention.


Brand aggregators could be lucrative clients for those OPMs that invest in tools and processes to deliver extraordinary growth. Again, the key to success with these new potential clients is creating a scalable and repeatable model. Those successful will reap the benefits of the e-commerce-as-a-service revolution.


This is a crucial driver behind investment in OPMs and the accelerating consolidation of small- and medium-sized players into agency groups. The traditional adage about agencies is that the assets go down the elevators every night. Digital and data-driven marketing are changing that dynamic, and smart agencies build tech and processes for this new world. While the brand aggregators understand the value of individual expertise, they want to create a scalable and repeatable model to apply across a potentially massive set of businesses. No single individual or small team can do that.


Implications: Traditionally Managed Brands


Small and medium-sized brands are getting much more sophisticated in their marketing, posing new opportunities and threats for traditional brands and retailers. In the old model, massive brands have massive advantages by dint of their product development resources, marketing spend, distribution outlets, and overall market power. Brand aggregators are leveling the playing field for medium-sized brands with advanced business processes and infrastructure that get applied to any high-potential brand.


Just as the proliferation of digital media broke the stranglehold that TV networks, magazine publishers, and publishing groups held on brand development, so too is digital challenging the hegemony of the brands broadcast media built. Data-driven targeting, online distribution, and precise brand-market fit neutralize massive broadcast budgets and brick-and-mortar distribution footprints.


Implications: Affiliate People


If you’re good at what you do and understand the value of data and insights for program development and optimization, you’re in the proverbial catbird seat. Visit a few brand aggregator websites and see the many openings for people with digital experience. Check out the help wanted ads from publisher aggregators rushing to build content and performance teams. See the many new opportunities with brands that used to dismiss this channel as “non-incremental” or “necessary evil.”


Success in this new world will come from analytical skills in addition to your traditional partner-building skills. The magic here is that the best people at forming partnerships and optimizing performance through data-driven decision-making will make out incredibly well. And affiliate marketing skills may well become the key to long-term success across marketing.


Conclusion


The aggregation trend is larger than PE-backed Amazon Aggregators snapping up DTCs. Consolidation is everywhere, creating new opportunities for affiliate people and brands. The long-expected recognition and amalgamation of our industry have begun. Be ready.


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February 23rd, 3pm. Publisher Technology, how publishers are driving innovation in the affiliate space. Sponsored by Awin. Register here


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May 19th, 3pm. Cross-Channel Gab. Leaders from Search, Social, PR & Affiliate discuss the collision of channels. Sponsored by Matterkind. Register here



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