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2017: the year affiliate marketing shakes out and grows up?

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As budgets tighten, measurement improves and ROI pressures increase, 2017 is set to be another significant year for the affiliate marketing industry. The introduction of additional technical disruptors, swathes of new niche publishers and fresh thinking in A.I. and Machine Learning technology will consolidate the affiliate channel’s position in the industry as one of the most, if not the most cost-effective customer acquisition option, according to new Webgains CEO, Richard Dennys.

New technology dominates but still won’t disrupt

A vast number of start-ups and scale-ups have been founded throughout the performance marketing and adTech ‘ecosystem’ over the last few years. This will certainly continue throughout 2017 and beyond, especially as devices and connections incessantly improve. In Western markets at least, new tech entrants are the hyper-niche players looking at either new innovative cashback or incentive models, or blogger/vlogger tools and ‘network delivery’ tech. In nearly all cases however, their models are dependent on vast economies of scale in order to turn a profit, or attract a buyer. Although this industry doesn’t have too many barriers to entry, there are innumerable barriers to scale. It will be interesting to see how this continues to develop over the coming year or two.

Further & faster movement to mobile via ‘in-store’

For many years the industry has been heralding the arrival of a true ‘mobile’ era. It’s clear now that cross-device activity has reached ubiquity and this will continue to accelerate in 2017. As well as the convergence of desktop to mobile – which has been in place for a couple of years now – we’re seeing a blend of in-store, mobile and daytime workplace purchasing economies. With new stringent controls arriving in 2017 across the EU region (regardless of Brexit), the grey areas of complexity sit around data protection. Consumers have much more power to decide what happens to data and fines are huge for non-compliance, which is a massive issue for cookie-based advertising models. This time next year this will be considered as one of the number one issues for everyone involved in eCommerce.

Release the robots!

Advances in A.I. technology will soon make human interaction a thing of the past unless there’s an issue or cause for celebration. The popularity of A.I. is fast outpacing the on-going development of current technology. As IBM reports, there’s a significantly advanced adoption curve for AI compared to that of app stores 10 years ago in the retail industry. For routine enquiries, a well-trained chatbot can satisfy an increasing range of customer transactions and requests, and unlike a human contact centre, it can adapt its responses based on the customer’s purchase history and local weather. Soon everyone will be clamouring to enter the A.I. space and in 2017 many more brands will start to build chatbots, especially for Facebook. This will present a new challenge for marketeers as they race to upskill and train their staff – the technology is only as good as the team behind it!

Consolidation of low-cost, tech-only networks

Low-cost, technology-only vendors could witness a steep reduction in attractiveness at all levels of customer and publisher size. At Webgains we are seeing an influx of new clients who are moving away from low service, high tech platforms once they realise the reduction in operation cost doesn’t cover the rise in staff costs and the expertise required to operate the programmes effectively. Low fees inevitably result in a low-touch, volume play, so we will likely see a shake-out of several smaller vendors in the industry; meaning companies either buying each other out or going bust, and only one or two from the top end alongside vertical niche specialists will come out as winners. Other potential casualties are the larger networks who bet their houses on new smart-tech and risk turning their backs on the profitable, high-service driven business practice that clients need.

Brexit-forced affiliate marketing growth

European integration and sustainability is still of critical importance in a post-Brexit world. From invoicing and tax planning, to data protection and the movement and freedoms of staff, the UK will be focused on staying lean and offering routes to new and exciting markets not available to us through EU membership. The affiliate channel is low risk and offers high ROI, making it the most attractive option for retailers in 2017. While Display and Search Marketing continue to disappoint expectations, improvements in attribution are now consistently proving that well-run affiliate networks offer the highest ROI in the industry. In 2017, affiliate marketing has a great opportunity to burst back into the mainstream.

Mini-booms & busts

UK ecommerce is arguably the most developed in the world and in 2017 we’re likely to see more UK retailers using the affiliate channel to expand into new markets. Following the recent weakening of sterling, we can see UK exporters are having a great year, while importers of good and services are starting to struggle. Although consumer costs have gone up, such as holidays, petrol and food, global businesses now see excellent value in assets and the cost of people following the UK’s recent ‘devaluation,’ fuelling the beginning of wage inflation in all areas.

Stumbling unicorns

At the top end of the market, I’m seeing and hearing that Brexit and the US election seems to have weakened the investment appetite of some venture capitalists and made them nervous. This year’s political events will have a direct impact on how businesses will perform in 2017. Over-valued businesses will be the norm instead of the exception and more will struggle to raise follow-on funding. If this happens expect even more staff turnover than normal and a switch from growth funding to revenue funding; more adverts and fewer free and discounted services, with a focus on unit economics. Having been largely dormant for a while now, mergers and acquisition activity could roar back into life over the next 12 months.

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Editor and content creator for Telemedia – for 18 years and counting

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