Affiliate marketing, with its rich history dating back to the earliest days of the internet, has often served as a key channel for low-risk market testing. Often served as a key channel to test into a new market at low risk. However, as privacy policies and cookie regulations make channels like Meta and Google more expensive, affiliate marketing has seen increased budget allocations and has evolved from a bottom-funnel tactic to a longer-term option for building brand equity.
Embracing affiliates’ diversity
What has driven this change? More dynamic product feeds lead to a more engaging and relevant shopping experience. Even smaller brands can build immediate trust with social proof and customer reviews within product ads. We also see small brands can play big with AI tools. Perhaps the term affiliate is what’s dead, whereas the pay for performance model with more sophisticated tech is alive and prospering.
Based on what we’ve seen from working with many different brands and verticals in the affiliate space, we will now take a look trends. Our goal is to help your decision making on if and how affiliate marketing will be part of your marketing mix moving forward:
Ad spend on affiliate channels will increase in 2024
Given these circumstances, combined with the pressures from inflation-driven recessions affecting cash flow and liquidity, it becomes crucial to control your marketing investments. The cost-per-acquisition (CPA) or affiliate model stands out for its low risk and effective cash control.
In addition, the main pillars of the online marketing mix SEM, SEO and Social Ads is increasingly difficult (and expensive) to scale. Display and retargeting advertising has struggled for some years and in 2024 we will see the 3:rd party cookies more or less being phased out which further adds to this trend.
Also, new types of affiliates with new types of technology (such as AI) can be easily tried, just by adding an affiliate. With the right network provider, you can outsource the management as a service to them and if you are a brand looking to expand to a new market, affiliates can provide local market reach and expertise.
Media houses turn to commission based business models
Media companies, such as Schibsted and Bonnier (featuring titles like Aftonbladet and Dagens Nyheter), consistently rely on engaging content. Sellers can provide this by sharing information on what is selling, laying the foundation for e.g. shopping guides and review articles. Good product linking (properly placed) has high conversion, benefiting the seller. Linking is easily done with affiliate links, benefiting the media house, saving time and effort in moving their ad inventory! If you are working with these types of affiliates, with such large audiences visiting them every day, you should be cautious of cookie dropping and view through attribution.
New type of affiliates challenging traditional publishers and partners
We see new types of players leveraging their position in the e-commerce value chain. One example is Klarna, formerly a payment provider and now a bank, which uses the purchase histories of thousands of customers to target offers and now acts as an affiliate. They can integrate offers with their checkout and in-app experience. Klarna also acquired Pricerunner (price comparison site) and influencer network platform APPRL to expand their business as an affiliate publisher. Another example, Molly, a coupon scraping browser plugin, has used technology to short-cut discount code affiliates, with in-browser, on-site experience, positioning themselves between the advertiser and the traditional discount sites.
Influencers working on commission based platforms
We see that the explosion of brands working with micro and nano influencers will continue. But also that bigger influencers will use these types of setups for quick and easy campaigns. Advertisers are less willing to commit fixed amounts on campaigns and influencers can work through affiliate networks or through sub networks such as Metapic and Stylelink. This will give creative freedom for the influencer and strategies will mostly involve general guidelines, eg. avoid certain topics or angles when promoting a certain product.
Cross promotions and brand-to-brand partnerships used for loyalty marketing
We see an increasing number of customer clubs and communities turning to affiliates to create and curate added value for their members. Brands can provide added value as well as becoming an affiliate themselves in return (i.e. works both ways). The affiliate network will act as the integrator finding the right brands to match, together with a working commission model. Certain verticals are better to cross, e.g health and beauty with food and clothing, or electronics with kids and family. Hello Fresh, meal prep service, giving away samples, has used this way of marketing to expand.
Brands owning their own affiliate sites
More and more brands will look to acquire affiliate sites relevant to their niches to increase their reach. In addition to increased reach, this will give them the opportunity to promote products through editorial content, it will give them SEO benefits (established affiliate websites usually have high-ranking keywords and a strong backlink profile). This will also provide consumer insights. These websites provide valuable data on consumer behavior, preferences, and trends and control over marketing channel messaging. German wine distributor Viva, owns and operates a wine and food site, and a newsletter email list under a different name, using marketing contributions from suppliers, publishing articles, linking to resellers.
Advertisers will have to rely on 1st party data and marketing mix modeling to control profitability
Since the transition from UA to GA4 (data driven attribution and increased share of modeled data) has led to discrepancies between network data and analytics data. This will in turn, call for more marketing mix modeling and channel-specific campaigns to enable follow up and justify channels in general. Advertisers will combine analytics data and transactional data to keep an eye on profit. A kitchen supply retailer we know has cross-examined reporting from affiliate networks with analytics data, setting strategies and following up by affiliate type (high, low, mid-funnel), thereby keeping track of margins for each segment. We foresee more doing this since some setups, quickly become unprofitable if you don’t.
Affiliate networks becoming white label tech providers
As advertisers streamline their affiliate networks, the need for managed services, such as recruiting and approving new publishers, will diminish. This trend has sparked interest in white-label, self-service platforms where direct deals can be managed with enhanced tracking and reporting capabilities. For instance, Impact.com offers a white-label solution developed by founders originally from CJ. This platform allows for efficient publisher management and tracking without the added layer of service. Retail giants like Ellos and Vagabond are leveraging such platforms to forge direct agreements with their major affiliates, thereby reducing network fees.
Author: David Vallin, partner at Omniarch AB, david@omniarch.se
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