Let's not beat around the bush: if you want recession-proof marketing in 2009, look to affiliate for positive answers!
Affiliate marketing, like any kind of marketing this year, is in for a rocky ride -- there's just no getting around the impact that a dip in consumer spending will have on advertiser budgets. But, just as necessity is the mother of invention, so a recession should drive, not hinder, advances in the sector.
In general, if digital is the most recession-proof marketing channel thanks to its accountability, then affiliate marketing -- given its focus on the CPA model -- should be the most recession-proof digital channel. The move of marketing spend towards a lower risk model, such as the affiliate channel where advertisers only pay once a sale has been made, should continue to grow in a climate demanding both transparency and return on investment. The natural familiarity of affiliates to both risk management and arbitrage also helps the channel prove its credentials when budgets are tight and demonstrable performance is required. The flexibility and resourcefulness of affiliates will help them shift their strategy and tactics when circumstances change.
Still, the broad theme of affiliate marketing in the future is the same whatever the economic state of affairs -- accountable, performance-based marketing. Specifically, we've picked out five areas where affiliate marketing will continue to evolve and each is as much a response to the need to constantly improve in a fiercely competitive space as a response to the looming recession.
1.
Growth. A recession will of course force marketers to cut ad budgets and focus on those channels that deliver sales directly and charge only for results on a performance basis. CPA is the pinnacle of performance-based marketing and the low-risk nature of affiliate marketing will ensure advertisers continue to move budget in this direction. For this reason, we can expect growth (in share of spend at least) in affiliate marketing to continue.
2.
Specialisation. Affiliates tend, very broadly, to be of two types: PPC affiliates who focus on search advertising to drive traffic to their clients' sites and content affiliates who build sites and services (e.g., price comparison sites) to do the same thing. The crossover is enormous but the need to drive even greater value will demand greater focus. That means we can expect the PPC specialists to focus even more heavily on paid-search expertise (potentially evolving into search agencies in their own right) and content affiliates to concentrate on building even better media properties (with either multiple advertisers or, in effect, as one-brand contract publishers).
3.
Cash back and vouchers. A noticeable trend, accelerated by the deteriorating economy, is the emergence of cash-back offers and rewards, made available to consumers via specialist affiliate sites. Such sites often necessitate consumer membership, or at least a form of loyal participation. With an eye on value for money, discount voucher sites are now an accepted part of shrewd online shopping. As consumer spending gets tight, such offers become more crucial to secure a sale and merchants need to embrace such marketing methods to help meet challenging sales targets.
4.
New media and formats. The growth in social networking has moved the pool of audiences from traditional publisher-owned websites to user content-focused properties like MySpace and Facebook. So far, advertising has proven ineffective in these places, but affiliates are chasing those audiences just as hard as traditional advertisers. They have been quick to build applications that build in traffic-driving mechanisms and try the demographic-targeting ad systems available on social networks. One wouldn't bet against affiliates being the first group to crack the problem -- after all, their livelihood truly depends on it.
Affiliates are also usually the first to exploit new formats. This is clear in, for example, video. From wearing URLs on their T-shirts in YouTube videos to creating their own, traffic-driving clips, affiliates are aware that the broadband revolution has prompted a massive rise in the provision and consumption of TV (as in televisual) content on the web and are already using that as a new opportunity to drive traffic to merchants' sites.
5.
Reporting. Advertisers will be focusing intensely on driving efficiency from whatever money they do spend this year. Reporting of actual performance results in customisable formats for specific campaigns and channels will be paramount -- all in real time. There will be a renewed effort to better understand the path to conversion and the online consumer experience, as well as traditional demographic data. There is perhaps already too much emphasis on 'last-click wins' commission models and better reporting will allow advertisers to have a greater understanding of the online ad exposures that influence a consumer on their journey to a purchase, and target, and reward, accordingly. Affiliates will of course adapt to suit.
Second, advertisers will place renewed focus on de-duplication. This means that, where two channels (say display advertising and search, or two different affiliates) are part of the sales process, there is potential to reward both, albeit for lesser amounts. That will lead to new pressure on digital as a whole and affiliate networks in particular to provide better reporting and/or greater insight from the reporting tools that already exist.
Robert Glasgow is managing director at Webgains.