Change is coming to the affiliate market. Be prepared to adapt.
Affiliate is a relationship business, but some relationships create more value than others.
A relationship with a publisher who grants you preferential pricing information and media placement can be justified as adding value in a market with little transparency. But, over the past two decades markets from Wall Street to social to display have automated pricing and bidding, eliminating friction, unlocking trillions in value. You no longer need to call a broker to trade an equity, and an advertiser does not need special access to pricing data from Facebook.
Is the transactional relationship between advertisers and publishers about to be automated in affiliate? And what should you do to prepare?
The connection between supply and demand is controlled by personal relationships in the affiliate market. Placement and pricing are often only available to those with relationships. This friction destroys value by limiting the number of advertisers who can offer a commission to a publisher.
“We often call affiliate a relationship business to justify the little work and less diligence being done,"
pointed out Hanan Maayan, CEO of Trackonomics.
There is a reason programmatic is a $1T industry, Google, Facebook and Amazon are among the most valuable companies in the world and affiliate is a fraction of that. The aforementioned markets do a better job of efficiently connecting supply & demand.
Few affiliate relationships are being used to create value for the overall market.
But that may be about to change. Recent investment from top tier VCs and PE firms indicate investors see potential to create growth by eliminating friction.
Three investment trends will drive a change in valued skills sets:
Consolidation of publishers allows data to be shared across larger audiences, mediums, channels and geographies.
Tech acquisitions like Impact’s purchase of Trackonomics give publishers and brands access to similar data and insights.
The roll up of affiliate agencies (OPMs) by private equity sends a signal that the holding companies believe affiliate relationships will soon share comparable data with other channels (otherwise the business models would not align).
All three trends indicate there will be more access to data, leading to two changes to affiliate manager roles:
Relationships based on solely on access to transactional data like pricing and/or media placement will be eliminated.
The ability to create strategic and/or innovative relationships will increase in value.
So is today's affiliate manager the same as yesterday’s Wall Street trader, about to be phased out by high speed trading? And if so, what skills should you focus on to survive and thrive?
Learn to work with data. Do not mistake this for knowing how to pull data and create reports. Learn to interpret information and act on trends. Be able to look at a broad set of performance data and make informed buying decisions that increases value.
Understand of different media products. If the transactional elements of the relationship disappear, and the major platforms (Facebook, Google, Amazon) remain expensive, the value of the affiliate channel will remain its ability to deliver diversified returns across a breadth of publishers. Your value will rely on your understanding of different publisher/influencer/partner’s brands, editorial missions, media products and how their audiences interact with your products.
Develop collaboration skills. You will have to be comfortable recommending when to shift budgets from channel-to-channel. If your affiliate channel is still being measured separately you won’t be much use when data is normalized and consolidated. Your relationships with other members of your team and ability to effectively collaborate with them will be vital your career.
Know how to build strategic relationships. Building a strategic relationship requires different skills than an affiliate relationship. Learn to work with your finance teams to understand what the company's strategic objectives are (margin, volume, share, etc), the legal team to build custom contracts, the sales team to avoid channel conflict and the marketing team to develop unique selling propositions and a strong go-to-market plan.
Be willing to experiment. Influencers, Youtube channels, Tik Tok are all huge performance channels that did not exist a few years ago. We’re not at the end of the age of innovation and you should be willing to try new things. If you don't, PR, display, brand and other channels will gobble up your budget.