The multibillion-dollar affiliate marketing industry has grown and matured since its inception almost three decades ago. Over that time, the industry has overcome challenges and continues to contribute to new customer acquisition and fuel repeat purchases. Today, affiliate marketing is used by over 80 percent of advertisers.
This two-part series will take you through the important milestones and affiliate marketing trends that transformed the landscape into the thriving industry it is today — highlighting its history and how it has evolved to continuously add significant value to advertisers’ digital strategies, both today and in the future.
Affiliate marketing: The dawn of a new industry
The affiliate industry came to fruition as the demand for marketers to prove ROI with their ad spend grew and marketing leaders were more stringently held accountable for their digital investments.
Affiliate marketing employs a pay-for-performance model, which is attractive to advertisers as there are very few upfront costs to get started. It was equally enticing for affiliates, since they can earn high commissions in exchange for directing traffic to an advertiser’s landing page.
As the rapidly evolving affiliate landscape grew, unfortunately, some affiliates temporarily turned the budding industry into the Wild Wild West of digital marketing.
Some key challenges and affiliate marketing trends from the past
- Deceptive advertising: Using inaccurate statements and making false claims on offers promoted by affiliates who misrepresented the products and services the consumers were purchasing.
- Abusive marketing tactics: Implementing hidden upsells, employing poor and confusing cancellation processes, and running unauthorized charges were common practices for affiliates seeking alternative ways to boost conversions for traffic driven to an advertiser’s website.
- Widespread spam: Leveraging email and search engine spam to promote offers, usually in violation of an advertiser’s brand guidelines, quickly tarnished the reputation of affiliate marketing by associating the growing channel with spam.
- Fraud: Managing affiliate programs proved challenging, as outdated technology and spreadsheets were the standard. As a result, advertisers and networks were limited because they didn’t have the transparency into their affiliate traffic or the ability to properly vet affiliates. The lack of clarity was the launchpad for fraud which included cookie stuffing, botnets, and fake conversions.
The Federal Trade Commission (FTC) crackdown
By 2009, the FTC began to operate with a tighter grasp on the industry when affiliates were promoting incentivized offers without advertiser approvals and sharing misleading claims. One high-profile offense came when affiliates falsely connected the federal government to loan modification services in an effort to collect and sell personal information to paid loan service companies.
To protect both the consumer and the integrity of the affiliate industry, the FTC regulations involved:
- Requiring advertisers and affiliates to disclose additional information so that consumers know who they are engaging with, transparency on price, and an end to deceptive advertising practices.
- Issuing a warning to advertisers that their affiliates must abide by brand guidelines, as the advertisers will be held responsible for their actions.
The affiliate marketing industry matures
The time had clearly come for advertisers and networks to adapt their affiliate marketing practices. This was driven by major shifts in technology, the landscape, and regulations.
Technology is modernized
- Powerful tracking and analytics technology become a necessity to manage affiliate programs: Leveraging data to streamline affiliate program management enables advertisers and networks to quickly generate higher revenues. They turned to robust tracking and analytics platforms — specifically those that could provide a real-time solution with the infrastructure to track and manage an affiliate campaign from the first click to the final conversion and every touchpoint in between.
- Mobile ad spend slowly catches up to mobile usage and measurement follows suit: Closing the gap between mobile ad spend and usage was a priority during this era. Consumers spent 20 percent of their time consuming media on mobile devices, while advertisers only allocated 4 percent of their budgets to mobile advertising. Eventually, advertisers began leveraging affiliates to drive traffic through mobile web browsers and apps. Using technology to manage mobile performance included new ways to track in-app events like logins, game plays, purchases, etc.
The partner landscape expands
- Social media influencers become part of the affiliate marketing world: Joining the traditional affiliates were a new breed of partners that had a large social media following marked by high engagement and strategic influence. These social media influencers ranged from prominent political figures, celebrities, mommy bloggers, and anyone with an impressive online presence. To make their influencer efforts more measurable, marketers added influencers into their performance marketing programs.
Regulations impact measurement
- Consumer privacy legislation redefines how performance marketers approach marketing measurement: Going into effect May 25, 2018, the General Data Protection Regulation (GDPR) is a piece of legislation that was created to enhance data protection laws for all European Union citizens. Performance marketers responded to the growing demand for increased consumer privacy by implementing protocols that impacted data collection processes, measurement without third-party cookies, and how to safely market to consumers.
- Web browsers block first- and third-party cookies to extend the commitment to greater online privacy and security: Beginning in 2017 web browsers join in on the privacy movement by blocking first- and third-party tracking cookies:
- Apple’s Intelligent Tracking Prevention (ITP) detects known trackers and blocks cookies connected to that domain.
- Firefox Enhanced Tracking Prevention (ETP) blocks third-party tracking software, which includes third-party and first-party tracking cookies.
- Google Chrome 80 improves the process for consumers to block and/or clear cookies used in a third-party context.
Ushering in a new era of affiliate marketing
In the wake of the COVID-19 global pandemic, digital adspend was forecasted to grow 2.4 percent worldwide in 2020, which marked the first year that adspend growth declined to single digits. This shift in adspend meant that advertisers were operating on slimmer budgets and added pressure to prove measurable ROI.
However, the affiliate channel persevered as one of the most adaptable channels available to marketers, with many advertisers relying on the performance-based affiliate channel more than ever. By July 2020, online searches for the keyword “affiliate marketing” reached its peak since 2009 as both companies and individuals quickly searched for new ways to grow their revenues during the marketing budget cuts and economic challenges that surfaced in the early days of the pandemic. At the start of 2021, affiliate marketing was projected to be one of the leading sources of revenue for 31 percent of U.S. publishers.
What’s next
While affiliate marketing has encountered setbacks, the future looks brighter than ever. What’s driving the growth? The answer is simple – revenues. By leveraging accurate data, real-time metrics, and robust technology, affiliate marketing enables digital marketers to generate consistent year-over-year growth.
Stay tuned for part-two of this series that will navigate the affiliate marketing trends shaping the future of the industry and how you can prepare.
