Retail Media Platforms Can Learn and Leverage a Thing or Two From Affiliate | AdExchanger

Michael Jaconi, CEO & co-founder, Button

The Sell Sider” is a column written by the sell side of the digital media community.

Today’s column is written by Michael Jaconi, CEO & co-founder of Button

Customer acquisition rates are up and ROAS is down across the walled gardens of Facebook and Google.

That’s hardly news at this point. It’s also well-known that, without the conversion-based measurement they’ve grown accustomed to on the walled gardens, marketers flock to media where they can reliably tap into purchase data.

Companies like Honey, Ibotta and Impact reached billion-dollar valuations on the back of this conversion-focused trend. I predict that the next wave of unicorns in the marketing stack will emerge on top of retail media.

Amazon Ads, the first scaled version of retail media, proved marketers would spend on a seemingly uncapped basis when they’re confident in the connection between ads and sales. Privacy issues add another feather to the retail media cap, since retailer platforms are largely unaffected by Apple’s changes.

But retail media strategies have taken their cues from the big walled gardens by targeting customers almost exclusively on their own retail properties where first-party customer data is applied.

Retail media can learn instead from affiliate businesses that have implemented similar strategies with intent-laden traffic across the web, but without the power retailers have – a well-known commerce brand people buy from.

Wait, what does retail media have to do with affiliate? 

Today, nothing.

But in the affiliate world, publishers pursue the same goal as retailers: to convert online intent into a shopper journey.

Affiliate publishers habituate consumers to link from their sites to transact elsewhere through a mix of strong content, amplification via social media influencers, promotional offers and expert reviews. For retailers, this is accomplished through great UX, personalization and increasingly app downloads and loyalty programs.

There is minimal overlap between affiliate commerce and retail media (nobody mistakes an affiliate network for an online store). But there is a major untapped opportunity at that convergence.

Affiliate marketing may seem dull – it’s not CTV or the metaverse – but retail media can learn (and profit) from affiliate.

What’s the fit?

Traditional affiliate marketing programs perform well and predictably – after all, they make money on straightforward connections to a sale. But they don’t dynamically scale to meet demand and there are very few ways for marketers to grow their affiliate channel spend or for publishers to grow their revenue. Only so many readers click a hyperlink, and that number can’t just be ramped up, at least not without publishers spending an unsustainable amount on their own acquisition marketing.

Retail media is a way for affiliate companies to escape the enterprise value smurfdom they’ve faced by incorporating their media and shopping intent into a retail media offering.

How would retail media help affiliate?

Affiliate networks that are tied to static commissions can use retail media as a step in the direction of auction dynamics.  There’s a huge missing piece of value in the market for programmatic to sync with media that can attribute sales.

Rather than pre-set commissions on sales, as affiliate marketing is almost always done, retailers can identify when commissions should rise if they need to clear out particular inventory or drop if a product is selling organically. And that’s just the low-hanging fruit. Retail media platforms could also auction affiliate links to brands as a page loads, just as retailers do with sponsored search units, greatly improving the value of the media.

So how does retail media benefit?

Sounds like a great deal for affiliate networks and publishers, but there’s also meaningful value for retailers and the tech companies pursuing retail media dollars.

For one, there’s pure enterprise value.

Affiliate networks (or “commerce marketing platforms,” if you prefer the nomenclature) are valued in the 2-10X revenue range. Shopify and many commerce advertising companies trade at 15-20X or more of revenue. Retailers stand to make up those gains if they add affiliate networking at relatively low prices.

Affiliate networks could also help retail media break out of retail trade marketing siloes. The affiliate industry works with savvy performance marketers – just the type retail media needs to branch out to digital-native advertisers that place a premium on intent and first-party conversion data.

Affiliate would create whole new inventory opportunities for retailers, which are mostly confined now to banner ads or sponsored search results on their own sites.

If retail media doesn’t seize the chance, big tech will

It isn’t just retailers and tech startups pursuing a retail media business. Often, it’s the outsiders who see the opportunity most clearly.

When Microsoft Advertising acquired Xandr this year, the headlines were all about the AppNexus story.

But Microsoft’s headline was “Microsoft to acquire Xandr to accelerate delivery of digital advertising and retail media solutions.”

Satya Nadella knows a deal when he sees it. And retail media is an absolute steal right now, compared to social media ROAS.

Best of all… users need it!

The denizens of the internet also stand to benefit.

Recipe sites are a go-to example of how ads have failed the web. Pages are littered with ads and the category has struggled to grow despite high intent.

Affiliate relationships exist there but they’re monetized at fractions of the potential value, and often don’t link to the places where online grocery shopping occurs. The recipe publishing category is crying out to send hungry traffic to Instacart or Kroger, but currently the sites are drowning under banner units instead. And there’s no way for recipe sites to capitalize on that would-be, should-be revenue stream.

The same goes for the retailers, which are competing heavily with each other for the same online shopper audiences, but still leaving all that intent-laden traffic from other channels, like affiliate, on the table.

Follow Michael Jaconi (@michaeljaconi) and AdExchanger (@adexchanger) on Twitter.

You May Also Like