ADZINE 12TH JANUARY 2015
BY: TOBIAS WEIDEMANN
Bad news have dominated the affiliate marketing scene in the past few years: significant layoffs at Tradedoubler and Zanox, organizational restructuring at almost all big affiliate marketing firms – and knowing that the market has gotten substantially tougher, due to the decline in prices and strong competition in the programmatic field. On the other hand, customers and publishers have something to celebrate about. They are receiving customized solutions at reasonable prices and may even gain full ownership of their own marketing data.
“If one considers the facts level-headedly, one would see that there is a clear consolidation process set in place in the affiliate business in the past few months, which would also continue in 2015.” Christian Kleinsorge, CEO of technology provider, Ingenious Technologies, explained. For the former CSO of Zanox, it is no wonder that there is little innovation and new functions in the affiliate industry in the last ten years. There would be more, when one considers the combination of various advertising and cross-channel approach.
On the contrary, Anna Reiländer, CEO of affiliate network Belboon, rejected the notion of a crisis. “We have an average of 1,500 partner programs in our portfolio and they generate more than 250,000 transactions.” This is the result of continuous development, which was particularly positive in 2014. However, she also recognized a change. “For over a year now, we have been observing that the composition of the publishers has altered. It is tending towards larger publishers and they are intensifying their engagement in the arbitrage business with data-driven and automated techniques, as well as new business models, such as programmatic buying.”
Kleinsorge agreed. “20% of the partners generate 80% of the turnover. Because of this, there are good reasons to lower prices or to work directly with the partners.” He referred to private networks, which Ingenious Technologies as a technology provider offers. In fact, private networks are one of the most important answers to the loss of the significance of the traditional, which affiliate businesses often are. This was also confirmed by Julius Kirscheneder, director of ProSieben Travel. “For those of us in the travel industry, it is important to have over a dozen big partners.” With this, one should be able to negotiate well and develop a fruitful co-operation – without having a middleman take away your commissions.
Of course, such private networks can be more efficient, since the customers are able to define the rules of the environment, in which their messages should be displayed. This applies both to the field of branding and to companies with niche target groups. Because of this, companies can receive direct access to their key figures and negotiate directly with their publishers, often even without a classical media agency as a middleman. In view of the growing number of companies, which are able to manage themselves directly and independently, Kleinsorge, among many in the industry, questioned the media agencies’ future role.
“As an advertiser – together with the agencies – one should strive to work closely with the big publishers in the network.” advised Daniel Skoda, director of display and affiliate marketing at the performance agency, Eprofessional. At the same time, the Long Tail publisher encourages combining it with programmatic advertising measures where appropriate. With voucher and cross-selling campaigns where appropriate, the customer journey analysis, which has become popular with many e-commerce providers and in the German market, would offer much more insights than before. Nevertheless, it is impossible to completely avoid affiliate programmes in many cases. He said, “A part of the puzzle, which still makes sense in many fields, remains.” Kirscheneder, who naturally has an advertising and corporate view on this topic, believes in affiliate as a sales-oriented segment. He elaborated, “It makes perfect sense from an advertiser’s point of view, because you are taking on lower risks and you pay only for the actual successful transactions.” However, precisely because only the final transactions are measured – and the measurements do not portray the entire customer journey – affiliate marketers have a growing problem. This problem exists for a few years now – since the larger partners and marketplaces, from eBay, Otto to various travel and insurance portals, took the responsibilities of both technique and service in their hands and managed them in-house.
Specialized Network as an Alternative for SMEs
However, a private network is not necessarily worthwhile for every market player. Therefore, there are both private networks, which are profitable only with a sizable company, database and order volume, as well as semi-closed systems in the form of public networks, which have stricter barriers to access.
Kleinsorge did not want to undermine the significance of this semi-closed system. He said, “We noticed that there are increasingly specialized networks, which have focused on a specific market segment or industry.” Both the administrators and the advertisers of such networks should ensure a transparent solution, which would then bring meaningful figures to all market players. In addition, Ingenious Technologies favour white-label solutions that are “really worthy of their name” and “not just slightly more than a look-and-feel”, as criticized by Kleinsorge in the example of Tradedoubler’s solution. It all depends on real first-party tracking, which is deployed on the individual’s own domain and offers the advertisers full ownership of their data.
Confidence must be restored
Because of the lack of transparency, as well as tricks from a few black sheep in the past– also acknowledged by the representatives of the affiliate websites – the reputation of the entire business suffered. There was so much discredit that hardly any premium segment existed in the American market. The lack of transparency, with regard to who ultimately delivers the advertisements and where they will be placed, made many branding managers in Germany uneasy. “What remained was for the networks to work with the agencies, in order to come up with more confidence-building measures,” asserted Skoda. He, too, observed that several big networks are already trying to sniff out abnormalities with algorithms.
In doing so, the freeloaders can be stopped – these are the ones, who are responsible for distributing the relevant cookies– so that the end users receive the advertisements, even if they have not been purposefully delivered. This is in hope that the user will purchase from the respective e-commerce providers anyway, and the transaction can be made and invoiced together with the affiliate cookie. Therefore, for several years now, the affiliate unit in BVDW has been trying to avoid this by implementing a code of conduct and a quality certification for reputable affiliate networks.
And yet, the affiliate business has become more difficult for many players and less attractive for publishers due to another reason: In the past, it was enough to have a more or less standard SEO-optimized website available, and hope and wait for visitors. Thanks to Google’s Panda and Penguin updates, the jump to the top of the SERPs is now more difficult. It is not just a pain in the neck for the affiliate marketers, it has also brought various price comparison portals and review sites considerable losses in the last few Christmas sales.
Affiliate Market brought about dramatic changes
The affiliate market is not dead – but it is musty. Many market observers agree that in order to get the business moving, it is not enough just to adapt to the conditions. “The affiliate networks must evolve, both in terms of their usability and their technical platforms, as well as provide the customer with service of top quality,” said Julius Kirscheneder. “Especially for new brands, smaller firms or those with less experienced digital resources, these experienced networks and agencies are very useful partners.” With that, at least the mid-sized players would be able to sustain at an appropriate cost-benefit ratio.
However, for companies with large volumes, there is a higher tendency towards individually tailored solutions, which satisfies the cross-channel idea. Anna Reiländer from Belboon does not believe that other disciplines would hang the affiliate business out to dry. She explained, “Since affiliate marketing belongs to the performance sector and is in the position to include other online disciplines, especially those with data-based technologies, this issue is out of the question.” The question is rather how affiliate marketing presents itself as the new technique that is beneficial to your partners.
Skoda sees this differently. “Programmatic and affiliate belong together. Affiliate programmes can be supplemented with programmatic and disqualified for the Long Tail, for example.” Reporting and the access to individuals’ own data is the important part here – and this increase in transparency is the key, with which technology providers will grow exuberantly in the coming years.