Nicky Senyard is CEO and Founder of Fintel Connect, an award-winning marketing analytics company built for the financial services space.
People have been predicting the demise of affiliate marketing for many years now, yet the industry continues to grow from strength to strength. According to Statista, U.S. affiliate marketing spend is expected to reach over $8 billion by the end of 2022, up from $1.6 billion recorded in 2010.
What is driving the rise of the affiliate marketing industry? In a word: value. Affiliates are able to drive revenues for their advertisers in unique ways relative to any other advertising medium. SaaS Scout’s 2020 Industry Report shows that affiliate programs drive 15%-30% of all sales for advertisers. Within my own company that specializes in affiliate marketing for financial services, I’ve also seen affiliate partnerships account for as much as 40% of new customer acquisitions.
Affiliate marketing is so effective, in fact, that nearly half of U.S. executive-level marketers, recently surveyed by eMarketer, verified they have greater spend control and better ROI in affiliate marketing, over other paid channels. There are also affiliate marketing networks that aggregate and filter the best publishers in specific markets to deliver measurable results for advertisers.
All this is proof that affiliate marketing is far from dead. In this article, we’ll look at some of the reasons why affiliate marketing isn’t going away anytime soon.
Blocking Of Third-Party Cookies
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Google Chrome is by far the most dominant web browser globally, with a 63% market share. So when Google announced its intention of completely phasing out third-party cookies in Chrome, many worried about the potential negative impact on affiliate tracking and attribution.
However, the truth is that this change will not be a major threat to affiliates, as Google is mainly targeting the most invasive practices enabled by third-party cookies. A number of privacy-respecting options will still exist and will replace much of the functionality of third-party tracking.
For example, first-party cookies that are stored by the visited website itself will continue working as normal. Similarly, server-to-server tracking generates a unique ID when a user clicks an affiliate link and tracks the user’s behavior across sessions, so when the same user later makes a purchase, their unique ID gives credit to the affiliate that referred them.
These are all solutions that work well in affiliate marketing because affiliates have a direct relationship with their audience and provide content that they actually want to consume. This makes them legitimate operators in Google’s eyes and minimizes the risk that they will be affected by less permission-based advertising.
Partnership-Based Affiliate Marketing
Historically, affiliate marketing developed a somewhat debatable reputation. In the early days, it was much easier to game the system, and there were many spammy websites that tricked visitors into clicking on links at any cost.
Things have come a long way since then. Tracking systems have improved significantly, and specialist affiliate networks like ours carefully curate and monitor affiliate performance to ensure that advertisers are getting legitimate ROI for their marketing dollars.
In addition, the best affiliate networks also offer CPA (cost per acquisition) programs, where advertisers only pay for actual customers gained, instead of a CPC (cost per click) model, where affiliates are incentivized to maximize clicks. This cleaner incentive model better aligns affiliates and advertisers and minimizes principal-agent problems.
Finally, the rising standards of digital content mean that it’s no longer possible to build a large affiliate marketing business purely on SEO and PPC gimmicks. Instead, the best affiliates act as publishers that produce high-quality content that their audiences want to opt in and read. This greatly increases trust between the affiliate and its audience—trust that advertisers can benefit from when they sign up a new customer through that affiliate. This is a unique benefit that advertisers can’t gain from any other medium, as the affiliate is directly vouching for the advertiser’s brand.
The Growth Of E-Commerce
The pandemic was a major tailwind for the e-commerce industry. Since then, customers have gotten increasingly used to the idea of doing more of their shopping online.
This has not just been the case for essentials and medical supplies but has been reflected across all markets, including apparel, travel, tech and financial services. And it’s a trend that’s here to stay. In fact, the Adobe Digital Economy Index reports that in March 2021, as society was recovering from the pandemic and social distancing restrictions were easing up, Americans spent an incremental $8 billion more on e-commerce than what previous projections had forecasted.
This is a trend that is very favorable for affiliate marketers. As more people get used to buying more products online, more affiliates will be required to promote those products. The market will likely become even more specialized than it is today, with publishers focusing on becoming recognized experts in a well-defined product segment.
Affiliate Marketing Is Here To Stay
As long as a marketing channel continues to deliver sustainable results, it will continue to remain relevant. Affiliate marketing, with its ability to diversify advertiser reach, rapidly earn customer trust and measure performance down to a granular level, is likely to continue being a major growth channel for savvy online brands in the years to come.