What you need to know:

• IAB’s latest research into the Affiliate and Partnership Marketing space shows nearly twothirds of advertisers and agencies who’ve been spending on affiliate and marketing channels plan to increase spend over the next year.
• During the IAB’s Marketing and Partner Affiliate Summit in Sydney this week, advertisers, agencies and publishers were all on hand to tout their investment and support of this channel – with some even suggesting it’s become a viable, muchwanted alternative to Google and Meta.
• Yet both IAB’s event speakers and research agreed there’s a clear lack of maturity around the space, with the majority only investing over the last five years. A lack of education and consensus is needed to overcome it, all agree.
• During a panel discussion at the event, panellists from BikesOnline, Are Media, Commission Factory, Cashrewards and other brands shared how top of funnel objectives through to consideration – not just the lowest of the funnel ambitions – are being serviced by affiliate channels.
• For Are Media, affiliate is part of a wider commerce play designed to deliver a slice of the purchase pie to its publishing house as more consumers turn to digital channels to buy products and services, says CEO, Jane Huxley.
• Yet all panellists agree: Improving transparency around how commissions and affiliate partners are gauged and rewarded is vital if this channel is to grow.
• It was also clear there’s a lack of sophistication around attribution modelling to recognise how affiliates are impacting acquisition and sales through the funnel.
• Another persistent problem the industry has is around understanding and balancing short and longer term benefits and ROI in the face of upfront tenancies and commissions in place in the affiliate space right now.

IAB’s Affiliate and Partnership Marketing Summit in Sydney event this week saw several client-side advertisers articulating the growing heft of affiliate marketing in their marketing mix. With IAB’s latest research into the space showing the majority of those investing in affiliate marketing planning to increase spend in the next year, figures indicate they're not the only ones re-weighting plans.

Brand leaders weren’t just talking about the very lowest part of the funnel either. Top-of-funnel objectives such as brand sentiment, building awareness through to consideration examples were shared by Rainer Schmid, global head of marketing at BikesOnline, plus Commission Factory client strategy manager, Kate Eringa. In the same vein, some of the $20m in ad spend being guided by outsourced CMO, ecommerce marketing specialist and former Showpo marketing chief, Mark Baartse, is making its way into affiliate sources.

A few – including BikesOnline plus one of Are Media’s unnamed clients – are even pulling dollars out of Google in favour of affiliate marketing options instead.

“Google and Facebook are too expensive. I'm going to find other places to spend that money. Affiliate is a great channel to use. That's why we keep taking money out of the traditional digital channels and put it into affiliates as it works really well,” Schmid said.

This growing love for affiliate is as apparent on the publisher side. Are Media CEO ANZ, Jane Huxley, was on hand to share the role affiliate is playing within the broader umbrella of the magazine giant’s ‘commerce’ strategy as a much-needed revenue source. In Are’s case, affiliate is largely coming through monetising content across its 39 brands.

“It's just taking us that one step closer to the consumer,” Huxley told attendees. “We have always played a role in informing and inspiring, why wouldn't we go one step further by inspiring an action and igniting an intention to buy something? In a way, it feels like a very natural evolution of the role of magazines and content has always played. But now we're taking a piece of it for ourselves.

“I'll tell you why: Quality content is incredibly expensive to create. It can't be created by generative AI. That does a brilliant job of looking over its shoulder, but my incredible editors and general managers will tell you what's coming next year, the year after that and beyond," she suggested.

“We are building on a very long heritage of creating quality content by monetising it in the ways audiences are moving in droves to, which is getting out their credit card, using Apple Pay, buying online, ship and collect deliver, however you want to do it.”

Yet as the IAB event made plain, there are real challenges to overcome if affiliate and partnership marketing is to avoid the pitfalls of so many digital and advertising channels before it. Criticisms and obvious maturity gaps were quick to surface during panel discussions and audience question time.

A whopper is improving transparency around how commissions and affiliate partners are gauged and rewarded. It was also clear  sophistication around attribution modelling to recognise how affiliates are impacting acquisition and sales through the funnel is sorely lacking. A persistent problem around understanding and balancing short and longer-term benefits from marketing investments likewise reared its head. Being willing to test and learn was another inevitable stumbling block.

“There's a fundamental, deep misunderstanding of this channel – we just don't understand the real basics,” said Baartse. In commenting on the results of IAB’s survey, he also saw disconnects between quality of content and commission costs among others.

“Content was rated very highly, which I 100 per cent support. But on the other hand, there was a big focus on keeping commissions low and ROI high. When we’re comparing content between New Idea to Honey and giving them both 10 per cent – which one is doing more work, adding value, contributing more to my brand? There’s a big disparity there. But you talk to people and they’ll say 'just look at ROAS numbers'. It’s such a simplistic, bad way of looking at the world,” Baartse argued.  

“People are treating affiliate as [a] holistic, largely ultra bottom funnel channel as opposed to a more nuanced, full funnel channel that it can be used as – but honestly, rarely is.”

Advertiser, publisher take

On the positive side, IAB’s research is showing increased levels of engagement and spending in affiliate and partner marketing. According to the latest annual IAB’s latest Australian advertiser and publisher industry review, 53 per cent of advertisers and agencies surveyed increased overall spend on this form of marketing in the last year, and 63 per cent intend to increase spend over the next year.

Of these, two-thirds agreed affiliate and partnership marketing is more important in helping them achieve their business goals, while a solid 89 per cent using affiliate marketing are satisfied with return on investment over the last year. This is higher satisfaction than those using SEM (80 per cent), or digital out-of-home (70 per cent) – though we note the respondent type here, i.e. potential bias.

One-third of advertisers / agencies are spending $50,000 or more each month on average on affiliate and partnership marketing. But here’s the caveat: 66 per cent have five or less years’ experience with affiliate and partnership marketing, a number that drops to 58 per cent across company experience, meaning sophistication around this form of marketing remains low.

Speaking on the findings, IAB director of research, Natalie Stanbury, told attendees some usage may still be experimental. The IAB’s report garnered 95 advertiser and agency responses as well as 52 publisher responses. Yet she saw the results as painting a clear picture of affiliate marketing establishing its value in driving sales and customer acquisitions.

“This is reporting very high levels of satisfaction in the channel in terms of delivering return on investment, driving spending increases in overall investment,” she said.

A diverse set of approaches are in play, ranging from what advertisers consider to be more to less valuable, Stanbury said. Most popular affiliate investments are around content (61 per cent), followed by rewards (58 per cent) and social including influencers (47 per cent).

IAB’s survey showed advertisers predominantly managing affiliate programs in-house and operating across a range of industries. Retail continues to be the most active ad category and has been over the last four to five years.

Affiliate also represents a growing revenue stream for publishers, who proffered a range of different business objectives for affiliate and partnership marketing in the survey. Primarily, it’s about increasing revenue (77 per cent) and growing the number of advertiser partnerships (57 per cent).

“Nearly two thirds of publishers have increased revenue from affiliate and partnership marketing in the last year. Six in 10 also indicated they've been able to increase the cost of placements and inventory over the last year. And most of them have also been over increased in a more of advertisers that they work with,” Stanbury said. “Again, reward and content are primary methods from the publishers of working with advertisers through their affiliate work. And previously, we saw these methods were also seen as the most valuable to advertisers.”

But those tougher operating and economic conditions are present – not to mention the pending privacy legislation changes and deprecation of cookies (eventually).

“When advertisers are looking at affiliate and partnership marketing, they're looking at measures of return on investment, the volume of sales and the new customer acquisition as the most important key performance indicators,” Stanbury said.

By far, the most used attribution settings to pay partners is to pay the commissioner entirely to the last referring affiliate partner (93 per cent using it sometimes, always or often), with usage around first click and custom methods much less common (36 per cent and 40 per cent, respectively). It’s not an ideal model, as panellists across the summit reiterated, with many criticising the lack of nuance when it comes to attribution.

“There is a need further education transparency and reviewing attribution and tracking systems used for affiliate marketing,” Stanbury said. “There's also a real call for some case studies, so that evidence of effectiveness that shows the uplift or incremental sales generated by affiliate marketing.”

Welcome Google alternative (getting rinsed for repeats)

Even with these maturity and measurement hurdles, appetite is strong for something besides Google or Meta. Huxley used the example of a Sydney-based client aggregator service for consumers in the homes space as a case in point.

“We’re about to do a fairly significant deal in the homes space… our client made a really interesting comment to me: ‘Jane, every year I spend $8 or $9 million with Google. I know I am paying for the same customer time and time again, and I don't want to keep giving Google money for a customer that's already done business with me. I would rather see my money going into the ecosystem of publishers in Australia, so we know that customer is having a quality content experience on the way through’.

“Now, we believe we will convert higher. But that is music to my ears. Finally, we're starting to see some of these companies spending significant amounts of money on Google for customer acquisition now looking at channels such as lead generation or affiliate to acquire that customer through a much more quality experience,” Huxley concluded. “They know that the quality experience on the way through means their customer is more likely to be a repeat customer for them, and I'm very happy to share that. It's really interesting to see that turning of opinion in a lot of people who spent a big on Google… to these newer formats.”

Over at BikesOnline, Schmid is moving dollars out of Google to put them in affiliate marketing. It’s managing its partnerships via the Impact platform.

“Affiliate fits in every single stage of that funnel, whether it is introducing us to new customers, to bottom of funnel where it’s a little bit extra to incentivise that purchase,” he said, while adding lower end is more heavily weighted given people only buy its $15,000 bikes every five years or so. “But I just don't see other brands doing that – there’s not enough awareness around that. It's like other channels – you're going to do different targeting for re-marketing campaigns versus awareness campaigns. It is happening, but slower than it should.”

Commission Factory’s Eringa was more optimistic, citing brands wanting to strategise after seeing how diverse the affiliate marketing opportunity is.

“They see the potential and want a complex strategy which is not a bad thing, based on picking it up quickly. It’s not just about revenue, it’s about new and returning customers, higher AOV [average order value], brand sentiment, which is where we see brands working with influencers more – people want to think about their brands from a third-party perspective,” she said. “Education is needed, but once they are in the channel, they can see how much potential is there and are keen to diversify the mix.”

An example she gave was of a brand over-indexing on influencer spend, which wasn’t expected to generate the level of return anticipated.

“The value they took from it – and the thing I was quite surprised about – was that the most important thing for them was brand sentiment,” she said. “It was about what people are saying about my brand; it's not talking about themselves. It was about other influencers speaking organically, putting in their twist on it or speaking about something that is personal to them. I was quite changed by that.

“That brand kept going back and kept investing a lot of money and has started to see some return based on the publisher type they’re working with. But importantly, what they took away from it as a successful campaign was the brand awareness … but also that brand sentiment.”

It was a similar story from Cashrewards manager of client success, Dominic Ferguson. “Brands are coming to us having tested the waters and now they’re appreciating us a lot more. They’re coming to us with full financial year budgets, big campaigns – the appreciation of the whole channel has risen up massively,” he said.

“It's not just performance anymore either, they’re looking to us for more consideration, brand awareness, product launches. We’re getting more mature. We’re not just simple account managers anymore, we’re proper marketing managers now.”

Challenges to overcome

Yet according to Baartse, a fundamental, basic lack of understanding of affiliate channels persists. It’s one he agrees could correlate to years of experience and practical application.   

“One takeaway for me from the IAB survey was 48 per cent of advertisers had less than three years’ experience [in affiliate and partnership marketing]. That’s certainly reflective of what I see when I'm dealing with my clients day-to-day. There's a fundamental, deep misunderstanding of this channel – we just don't understand the real basics,” he told attendees.

“There were other disconnects in there. Content was rated very highly, which I 100 per cent support. But on the other hand, there was a big focus on keeping commissions low and ROI high. When we’re comparing content between New Idea to Honey and giving them both 10 per cent – which one is doing more work, adding value, contributing more to my brand? There’s a big disparity there. But you talk to people and they’ll say 'well, just look at ROAS numbers'. It’s such a simplistic, bad way of looking at the world.

“People are treating affiliate channels as [a] holistic, largely ultra bottom funnel channel as opposed to a more nuanced, full funnel channel that it can be used as – but honestly, rarely is.”

Perception of value is clearly key. One audience member raised the specific question of upfront tenancy payments and the lack of nuance in commission schemes and terms offered by some players such as Quantum.

“Like any other campaign, you have to test and learn, you don't know how it's going to work before,” Schmid responded. “We work with different payment models – upfront cost, CPA, CPM models.

“For someone introducing customers, we want to do first referral commissions. Somebody who's closing a sale needs last referral attribution – plus [a cut] for somebody who's influencing that sale in the middle. That helps improve strategy and builds something that’s suitable.”

Ferguson also wants to see advertisers made more accountable for how they’re awarding commission and results. “We've started with different kind of payment methods as we're trying to work with brands who advertise to make sure we're getting rewarded and for the clicks and impressions we're actually sending to advertisers. My recommendation is to create some accountability both ways,” he said.

For Baartse, transparency is king. “There's a better discussion on both sides of the fence of communicating what that value is and demanding that value in advance, as well as having very clear metrics. Everyone loves to say brand awareness, and people pull their magic – but it won’t exempt you from more accountability. There needs to be much better conversations on both sides. It doesn’t need to be hard leads, but it needs to be something.”

In addition, affiliate “is not a channel, it's a collection of channels”, per Baartse. “That's one of the big challenges. The way Cashrewards behaves versus Honey is chalk and cheese. It’s not the same channel,” he said.

For Eringa, investing in tenancies and working with content creators or influencers comes back to a long-term partnership: “I think brands get a bit worried about those fees with tenancies, but it's a long-term partnership – and what you see in the next few weeks may not be the total value you get from those publishers long term.”