Affiliate marketing has been a critical strategy for many ecommerce businesses for nearly a decade. In fact, affiliate marketing spend is projected to reach $8.2 billion by 2022, according to Statista. That’s up from $5.4 billion in 2017. It’s an impressive projection, but not surprising.
Mastering affiliate marketing can bolster brands, merchants and affiliate marketers themselves into new tiers of success, but the landscape can quickly change. Strategies that guaranteed big revenue wins in the past might not be as certain in the future.
At its core, affiliate marketing is when someone (an affiliate) promotes a company’s product or service. The affiliate then receives a commission if the promotional efforts result in a consumer taking a particular action. Usually, this action is buying the promoted product or service, but some affiliates earn money if a consumer clicks on a link to a product page or signs up for a free trial.
The concept is simple, but the discipline has evolved over the years. In the early days, affiliate marketing lacked transparency and merchants struggled to determine if the affiliate traffic was legitimate. On the flip slide, brands and merchants did not incentivize affiliates for high-quality leads. Limited access to granular data can be to blame for these issues.
While there is still room for improving data transparency and payment structures, big brands continue to start and develop affiliate marketing programs. Vice launched a dedicated affiliate business in 2021 and a Digiday study showed 66% of surveyed publishers reported earning revenue from affiliate commerce.
Affiliate marketing popularity means certain product categories are also experiencing rapid revenue growth. A study conducted by Rakuten Advertising in March 2021 (see chart) reported a 109% increase in affiliate revenue growth for toys between 2020 and 2021 and a 103% increase for software.
The Implications: An increased demand for affiliate marketing in 2022 could result in increased media costs as a result of more competition. I predict increased Cost per Acquisition and Cost per Click rates. This can eat into profit margins for both the affiliate and merchant.
The Federal Trade Commission, Food and Drug Administration and other government organizations have been cracking down on claims made in affiliate marketing campaigns and you should expect this trend to continue in 2022.
“Affiliates should take note that the FTC will hold you personally and financially accountable for false or unsubstantiated marketing claims,” said the FTC’s Bureau of Consumer Protection after ordering a group of affiliate marketers to pay more than $4 million to settle charges that they promoted a fraudulent business. And it is not just the government organizations that are cracking down, big companies such as Google and Amazon, plus third-party payment processors, are keeping a closer eye on offers made from affiliates.
The Implications: Stricter regulations around affiliate marketing could result in lower Earnings per Click for affiliates and reduced conversion ratios. There will be pressure to increase Cost per Acquisition payouts to ultimately increase Earnings per Click. As stated above, I anticipate these changes shrinking profit margins for both merchants and affiliates. Moreover, brands and merchants (especially in high-risk categories)will need to continue to be diligent about following the latest advertising and payment regulations in their niche to avoid hefty fines.
In 2022 and beyond, expect more affiliates to try their hand at advertising, instead of simply driving traffic to advertisers’ landing pages or sales funnels. Affiliates looking to make this transition will need the tools to:
· Quickly launch landing pages that seamlessly sync with a CRM
· Edit HTML and CSS, then easily preview changes
· Track the success of sales funnels with robust reports and analytics
· Comply with local tax regulations
· Test and refine campaigns to improve ROI
· Boost average order value through post-purchase upsells and order bumps
sticky.io’s platform helps generate revenue for affiliate marketers, digital advertisers and brands. Whether you’re an advertiser or looking to become one, leverage sticky.io’s recurring billing platform that makes it easy to quickly launch offers, maximize revenue and scale an ecommerce business.