Investors in affiliate publishers have seen huge returns, exemplified by Honey’s $40B, 40x revenue acquisition. Meanwhile, affiliate platforms are valued at significantly less. It will be difficult for the industry to innovate when commission paid on the last click is valued at 40x revenue.
Investor dollars continue to support the affiliate industry. In January 2020, Partnerize received $50M in funding from Accel-KKR and Silicon Valley Bank. A year ago, Impact, the industry’s leading “platform,” took on $75M from Providence Capital. This is real money, from top-tier investors, and evidence that investors are buying the story that affiliate is not just a discount channel. But why does the industry want to sell that story? The market clearly values the discount channel. And it is a good story of digital transformation. The sale of Honey represents the final transformation of the coupon channel from analog to digital — a success that any marketing channel should brag about. In late 2019, Honey was purchased for $4B. At the same time, a number of financial services publications (Nerdwallet, The Points Guy, etc.) have been quietly gobbled up by PE firms at high multiples. Honey makes it easy for consumers to redeem coupons. It is useful to both consumers and brands, but it is a digitized coupon. It is reported that Honey had 2018 revenues of $100M — which means its sale for $4B represented a 40x revenue multiple (some argue 20x). Meanwhile, Partnerize received $50M, valuing the company at $240M on $31M in revenue — which means a 7.7 revenue multiple. Honey’s revenue multiple was 40x, or 5.2x Partnerize’s multiple. Yes, B2C is more difficult to acquire and retain than B2B, but the effect this has on the industry is clear: more investment in the last-click model.
In other words, the market values a dollar of commission received from supplying a coupon at checkout as 5 times more valuable than the underlying technology that is tracking that coupon. This limits innovation and growth.
If the last click is 5x more valuable than any other part of the journey, investment will continue to be limited to publishers, brands, platforms and networks that enable the last-click model.