By: Chad Buckendahl
Affiliate marketing has a been a critical strategy for many ecommerce businesses throughout the years. In fact, affiliate marketing spend is projected to reach $8.2 billion by 2022, according to Statista. It is an impressive projection, but not surprising.
In my 25+ years of driving sales for major brands like Whole Foods Market and OrangeGlo International, and now serving as the VP of Performance Marketing at sticky.io, I have seen first-hand how mastering affiliate marketing can bolster brands, merchants and affiliate marketers themselves into new tiers of success. I have also come to learn how quickly the affiliate marketing landscape can change. Strategies that guaranteed big revenue wins in the past might not be as certain in 2021.
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.
Affiliate marketing has grown in scale and sophistication. And while there is still room for improving data transparency and payment structures, affiliate marketing has become a revenue driver for both B2B and B2C brands. As we begin 2021 and continue to adjust to pandemic-inspired changes, merchants should prepare for the following developments within the world of affiliate marketing.
The pandemic certainly disrupted affiliate marketing for certain niches such as travel. Overall, though, affiliate marketing sales grew in 2020 as more people headed online to shop. And with 70% of surveyed consumers planning to maintain some or all the new shopping habits they adopted during the pandemic, you can count on there to still be a demand for affiliate marketing in 2021.
The Implications: An increased demand for affiliate marketing this year means increased media costs as a result of increased competition. I predict increased Cost per Acquisition and Cost per Click rates. This can eat into profit margins for both the affiliate and merchant. I also foresee more affiliates will crop up as more people look for ways to supplement or replace income loss due to the pandemic.
The Federal Trade Commission, Food and Drug Administration and other government organizations cracked down on claims made in affiliate marketing campaigns in 2020 and you should expect this trend to continue in 2021.
“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.
It is no secret consumers spend a lot of time on social media, especially as social distancing rules keep people inside and on the apps. The platforms that heavily incorporate short videos are expected to grow the most. A report from eMarketer projects more than one-third of U.S. social network users will use TikTok in 2021.
Retail giants are taking note and getting in on the action. Walmart teamed up with TikTok to let app users buy fashion products featured in a live video stream, all without leaving the app.
While I anticipate social platforms focusing on commerce offerings in 2021, I do not expect to see a huge influx of consumers actually completing transactions directly on these social media apps this year. But it is coming, and in the meantime, consumers will look to social media to learn more about products before making a purchase.
The Implications: There is a lot to unpack here. First of all, this continued video trend means a higher demand for video production and affiliate agencies. Influencers who are experts at cranking out video content will also be in high demand, with merchants electing to leverage those influencers rather than building out as much native content to generate organic traffic. Secondly, if merchants want to tap influencers as part of affiliate marketing campaigns, they need to get more comfortable paying for first-click conversions, especially as consumers warm up to the idea of buying products directly in the social media apps. Historically, affiliate marketing deals with bottom funnel, last-click attribution but that needs to change.
Examining granular data to track affiliate marketing efforts is how brands and merchants will get ahead this year. That is not particularly new advice, but it is more important than ever as demand for affiliate marketing increases and affiliates explore new social media platforms to spread the word.
Plus, setting up the right dashboards and reports for your affiliate marketing campaigns mean you can pinpoint which affiliates are bringing in the best leads and spot potentially bogus traffic sources. Overall, having these valuable insights will give you more bang for your affiliate marketing buck in 2021.
See how sticky.io can help you scale your affiliate program. Sign up for a platform demo today.
Leveraging 25+ years of ecommerce experience, Chad Buckendahl serves as the Vice President and General Manager of Performance Marketing at sticky.io. He has taken on various roles at the organization, making him an expert at understanding how the sticky.io platform empowers performance marketers and solves their specific challenges. Chad previously ran several successful multi-million-dollar ecommerce businesses, including high-level positions at OrangeGlo International (OxiClean), Whole Foods Market and Video Professor. He was the co-founder of 2Chads Fulfillment (now QuickBox) and sold it in 2016.