The ad tech industry has been under the spotlight this past year, but while most companies are fixated on issues that are plaguing the industry, affiliate marketing is carving out a piece of the digital advertising pie. To get a better understanding of just how much of that pie affiliate services take up, VigLink conducted a survey of 500 publishers and 100 merchants that currently use an affiliate marketing program. The survey also explored the current industry sentiment, and expectations for the future. The results showcase how well affiliate services have been performing, and how publishers and merchants plan to increase their usage and spending over the next few years.
Publishers Rank Affiliate Marketing Ahead of Display Advertising in Revenue Generation
In a digital content landscape where ad blockers have become prolific, publishers ranked affiliate marketing ahead of former online revenue heavyweight champ, display advertising, in revenue generation abilities. This goes to show that marketers should be paying attention to the affiliate marketing tools that have played second fiddle to display options over the last decade.
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Taking a closer look at the results, the top two revenue generators for publishers were Google AdSense and affiliate marketing—both native solutions. Much like affiliate links, Google AdSense enables publishers to pair text with links to curated merchant destinations. Large publishers with over 100,000+ unique monthly views still make the majority of their money with display advertising with Google AdSense coming in second, and affiliating marketing coming in third. However, the majority (34%) of publishers with fewer than 5,000 unique monthly views rank affiliate marketing as their number one way of generating revenue.
Merchants More Satisfied with Affiliate Marketing Revenue Results than Publishers
Despite 64% of publishers reporting that their affiliate marketing revenue expectations were not met, 77% of publishers acknowledged that revenue generated from affiliate marketing programs from 2015 to 2016 increased or stayed consistent. Furthermore, a third of publishers reported that revenue generated from affiliate marketing did meet their expectations. In contrast, 73% of merchants (more than double the publishers) reported that revenue generated from using affiliate marketing programs met their expectations.
Managing expectations is important when new publishers are being introduced to affiliate marketing, especially for those who are use to earning sizeable revenue from their display efforts. One reason publishers’ expectations of affiliate revenue is not being met could be due, in part, to declining pageviews. Time spent online has shifted from publishers’ sites to social media. Google AMP, Facebook Instant Articles, and Snapchat Discover are all channels that were once sources of traffic back to publishers sites and are now one-stop reading portals for consumers. The declining pageviews is a key reason revenue expectations aren’t being met affiliate marketing, but publishers still plan to use it in the future.
That being said, of the publishers surveyed, 9% had generated more than $50,000 in 2016. Along with publishers’ increasing their revenue, and thus doubling down on their investment in affiliate marketing, merchants are reacting by increasing their budgets. 85% of merchants stated that their affiliate marketing budgets increased or stayed the same from 2015 to 2016. As of right now, most merchants (65%) state that affiliate marketing accounts for 5%-20% of their revenue, most of which is highly incremental.
Bigger Budgets and More Revenue Are In The Cards
Both merchants and publishers are recognizing the value of affiliate marketing, particularly in light of the hurdles ad blockers pose to their revenue generation strategies as well as reader preferences for quality, uninterrupted online content. 86% of publishers expect their affiliate marketing revenue to increase or stay consistent in the future, and a staggering 91% of merchants plan to increase or keep their affiliate marketing budgets the same in the future.
With the majority of publishers and merchants planning to increase their use of affiliate marketing in the future, it’s important to recognize that many are still relatively new to the affiliate industry. Only half (51%) of publishers with more than 100,000+ UMV have been using affiliate marketing programs for over five years now, and the majority of smaller publishers (65%) with fewer than 5,000 UMV have been utilizing affiliate marketing for two years. Merchants tell a similar story with 45% having utilized affiliate marketing for more than 5 years; 60% of larger merchants with over $5MM in revenue have utilized affiliate marketing for 5+ years. As these publishers and merchants continue to use affiliate marketing programs in their future, they’ll likely refine and optimize their usage for higher performance.
Positive Experiences Outweigh Mixed Feelings
Overall, the survey disclosed mixed results from both publishers and merchants, but there are clear benefits to using affiliate marketing that drive continued publisher engagement and merchant budget allocation.
As to how affiliate marketing could serve publishers better, 30% of publishers don’t think there are enough products that interest their readers and 20% think it’s too complicated to manage. However, it’s likely that merchants will continue to expand or open affiliate programs (due to the incremental revenue driven), resulting in more product coverage. Additionally, as more people become familiar with different affiliate solutions that take care of the technical aspect (hardcoding links) campaign management will be far more scalable.
On the other side, merchants have historically struggled with network quality concerns. A large part of the unease for merchants has originated from a lack of insight into where their brands are being promoted. The affiliate marketing industry has rapidly evolved to address these issues with the advent of 3rd party compliance services to help with detection as well as improved reporting options supplied by networks, sub-affiliate partners, and publishers. Merchants can now request comprehensive reporting showing where traffic originates. They also have the ability tailor their affiliate base by blacklisting publishers by region, promotional method, or site, giving them greater control over who is able to earn with their brands.
While all the results point to a bright future for the affiliate marketing industry, sentiment towards current programs are still slightly mixed. This presents an opportunity for the industry to hone in on areas that could use improvement, such as ease of use,network quality and even simple things like managing expectations. With the shifting online media and content landscape, including the proliferation of ad blockers and alternative media consumption platforms, we expect to see a much heavier focus on user experience and transparency in the coming year.