Renaissance for Retail Affiliate Marketing? Part 1 of 2

How can marketers work to grow their affiliate programs today in a world that’s already decided “fewer affiliates are better?”

The following is a transcript of an interview conducted by Jeff Molander of Molander & Associates Inc., with affiliate marketing veteran, David Delisle (pictured left) which set out to answer this question. (Also a Get Elastic exclusive):

Advertisers seem increasingly weary of affiliates of all sizes, shapes and colors. Yet the black eye affiliate marketing has earned itself isn’t holding some advertisers back. There are a select few who are bucking the trend – aggressively investing in and expanding their affiliate marketing channel.

There’s a lot of hype-and-spin surrounding the risks involved with and the future of cost-per-action (CPA) affiliate marketing. Where it’s going next is unclear. In particular within the scope of so-called “social media” it remains highly unclear yet everyone seems hopeful. I’ve gotten on board with the likes of Jay Weintraub who suggests a recommendation-based model that looks a lot like MLM (multi-level-marketing) may take form citing Fanista and RadicalBuy as early signs. Yet what about today… how can marketers work to grow their affiliate programs today in a world that’s already decided “fewer affiliates are better?”

Recently, veteran affiliate manager and The Partner Maker LLC founder David Delisle suggested something rather radical. “We’ll see affiliate marketing move back to where it began with thousands of small mom-and-pop Web sites each driving a little bit of traffic to marketers,” Delisle said.

It was enough to intrigue Revenue Magazine to chat up David again earlier this year. “… he believes the ‘focus on the top affiliates’ approach has done more harm than good for affiliate marketing. That’s because top producers are continuing to break away from being compensated as cost-per-action affiliates (on pure revenue share). Such publishers are compensated for access to their audience, which consists mostly of repeat customers.

The result is that traditional, powerhouse affiliates like eBates, Upromise and MyPoints look and act more like media companies than affiliates, Delisle explains. If merchants are interested in new-customer acquisition, they should be weary of focusing only on these types of affiliates.”

I (arguably one of affiliate marketing’s biggest skeptic) began to look around and notice companies like Art.com, Allposters.com and Insurance.com. Each of these companies took a remarkably different approach to affiliates versus traditional retailers and were seeing remarkably different results – and remaining quite tight-lipped about their successes. It’s rare to find public displays of ROI like when affiliate marketing management company, AMWSO, used video to drive sales for conscious goods marketer Gaiam. In fact, AMWSO won an award for its use of Webvideozone and Linkshare’s combined technologies to drive affiliate sales with video. Outsourced affiliate program management companies have been mostly told to keep traps shut about such successes.

So I sat down with David to get the full story on what this “affiliate marketing renaissance” business is all about. The following is what transpired…

Molander: Marketers and their CPA affiliates have yet to tap into what’s being called ‘social media’ in a big way. It seems like a tremendous opportunity. Are there any signs of early success and in particular how do CPA affiliates fit in?

Delisle: Marketers and CPA affiliates are just now getting around to being provided with the right tools to leverage social oriented Web media – video, images, blogs and various, easy-to-use publishing platforms. Look around – tools like PopShops offer opportunity on the affiliate publisher and advertiser side. Affiliate networks are beginning to do more with RSS technologies to empower advertisers… things are moving forward. Innovators like social shopping site ThisNext and StyleHive are also examples of companies chasing the “affiliate / social media” opportunity. Buzzillions, Jellyfish.com… the list is growing. But, it’s surprising how many marketers still hold back on providing affiliates with the simplest of tools; like the ability to deep link to different pages on their site.

Molander: Ok, so it’s important to understand that things are just now beginning to heat up. Right? Marketers are not yet connecting in a meaningful way with social-oriented affiliates… and especially in the context of CPA. That stated, when talking about affiliate recruitment in today’s age one should not overlook the growth potential of so-called ‘social media.’ The up-side is tremendous and un-tapped. Agree?

Delisle: Yes. But, it’s not just ‘social media’ that’s being ignored and it would be disingenuous to say that marketers are not connecting in a meaningful way. Backing up for a moment… marketers want to grow affiliate-related revenue, right? Okay… yet they only feel able to manage the ‘top producing affiliates.’ Think of it in terms of Chris Anderson’s ‘long tail’ economics. Marketers have chosen the ‘big hits’ – the fewer affiliates that can deliver large numbers of transactions or leads. That’s their choice but this has created an unbalanced reliance on a very small number of affiliates as the distribution base continues to converge. Marketers are, in effect, throwing in the towel. They don’t feel able to do the ‘heavy lifting’ of growing their affiliate distribution base

Molander: Exactly. Everything is consolidating as companies like Rakuten – Linkshare‘s parent – and ValueClick – CJ‘s parent – are buying them. Rakuten acquired TrafficStrategies, a lead generation focused search affiliate and ValueClick acquired MeziMedia, a coupon, product comparison and incentive shopping affiliate.

Delisle: Right. The result is the very limiting world we live in today. Most marketers have productive affiliates that fit neatly into a small handful of categories like search marketing, coupon/deal sites and incentive-oriented shopping. Affiliates have not been encouraged to grow into more diverse subsets or offer different kinds of value to marketers. It’s a pretty ‘innovation challenged’ situation. There’s money being left on the table and some marketers are swooping in and capitalizing by diversifying their affiliate base in ways that are somewhat mind-blowing. Yes, this gets into social type media but also the bread-and-butter type of search marketers, landing page optimization affiliate partners… the tried and true stuff. The difference is in how much risk these marketers are taking in forming deeper partnerships with affiliates. Higher risk tends to lead to higher payoffs.

Getting back to your comment on recruitment… The sheer size of the Web and what appears to the generalist – marketing VP’s, Directors of eCommerce – as a consolidating base of potential affiliates has led to a situation where networks are relied upon exclusively for affiliate publishers. Quite literally, recruiting affiliates has been reduced to plugging into a network and walking away. The more we move towards this “less is more” mentality, the farther we move away from the original concept of affiliate marketing.

Next, I decided to ask David point blank: Marketers all across the globe have been continually told to focus on their top affiliates and pair back on the others. Is this not sound advice?

His answer may surprise you and he dismantles the belief that successful retail-focused affiliate programs are – and should be – limited to coupon/discount, loyalty/incentive/cash-back shopping and search arbitrage affiliates. Tune in next week to hear the details.

Jeff Molander is a leading Web marketing expert, author and speaker. He is CEO of Molander & Associates Inc., and can be reached at jeff_at_jeffmolander.com.

Disclosure: Jeff Molander is an investor in The Partner Maker LLC


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3 Responses to “Renaissance for Retail Affiliate Marketing? Part 1 of 2”

  1. Since I conducted this interview, Chris Sanderson and James Nardell of AMWSO have managed to earn a spot on eConsultancy’s short list of innovators in Web marketing. Congratulations to them!

    http://www.e-consultancy.com/awards/shortlist.asp

  2. [...] This is part 2 of an interview conducted by Jeff Molander of Molander & Associates Inc., with affiliate marketing veteran, David Delisle (pictured left). Of course if you missed part 1, you can read it first here. [...]

  3. [...] all driving incremental sales. They give some compelling reasons why this change is happening. Renaissance for Retail Affiliate Marketing? Part 1 of 2 “How can marketers work to grow their affiliate programs today in a world that’s already [...]

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