2017 was a tough year for affiliate marketing, but despite a rough ride, the industry has bounced back and is booking. So what are the big issues facing the industry and what will this mean for telemedia players?
Yes, there are issues with fraud and, yes, the industry is facing a raft of regulation (direct and indirect), but things are looking more positive for the sector than they have for some time.
From GDPR to ecommerce, from mobile commerce to artificial intelligence, from a move away from coupons and other diversifications, the industry is shifting. So what are the key trends facing the industry in 2018 and what impact are they going to have?
The EU’s recently introduced General Data Protection Regulations (GDPR) are going to going to impact affiliate marketing in numerous ways – some we probably haven’t even thought of yet.
“Affiliate marketing’s array of varied players means that there is no one industry-wide interpretation of the regulation that will fit everybody,” says Rob Davinson, Content Analyst, Awin. “But for those affiliates with a large and loyal base of users, such as the traditional publishing houses and bigger news media sites, the regulation could potentially put them in a position of power.”
He continues: “User consent sits at the heart of the new law and, given that publishers are the ones that have built up trust with those users, it could afford them significant influence over their advertiser or third party partners, driving up competition for access to these prospective customers. As a consequence we may well see such affiliates dictating terms to their commercial partners in a manner that hasn’t been seen before.”
One of the other consequences from the GDPR fallout will be understanding the changing status of what is considered private data. Affiliate marketers, like all others, will have to justify their use of personal data to continue gaining access to it.
“Education and communication will be key elements in this regard and, unfortunately, these have so far largely been found wanting,” says Davinson. “The tone of most GDPR information found online is characterised by individual speculation rather than unified instruction and that does not bode well for when the eventual live date is reached in May.”
This is not entirely the industry’s fault, he avers. The nature of the law is such that only through legal precedent will we fully understand its remit. Someone will have to be prosecuted before we know for sure what constitutes a transgression.
“But there’s no doubt that both the wider ad industry and its affiliate strata have so far lacked a clear and simple message to their constituents and consumers about what GDPR means for them and why it’s important that they consider how data is necessary for online advertising and, by extension, the web to function,” says Davinson.
Ecommerce and native ads
The rise of ecommerce means that more people are prepared to buy online and often when searching are very much in ‘buy’ mode. Affiliates are going to increasingly target this – however, to get results in 2018 they are going to have to be much more focussed on what they are serving up, says TUNE content marketer Anna Chatilo.
“In the past, many affiliate marketers focused on a catch-all approach, offering traffic up to hundreds or thousands of sites, even if they had little authority or traffic to give. But in 2018, advertisers will laser their focus into smaller groups of highly credible, targeted, and popular influencers,” she says. “To map your strategy, focus on a few key influencers in your industry. Start with them, then nail your niche before expanding outward.”
According to Chatilo, this is also going to mean more native ads – adverts that are consistent with the look, voice and style of the platform they appear on – and these will crowd out banner ads.
“Marketers are increasingly leveraging social media like Instagram Stories to show ads in ways that users hardly recognize (or mind) as ads,” says Chatilo. “Research via eye-tracking technology shows that consumers look at native ads 53% more frequently than display ads. And Business Insider forecasts that native ads will provide almost 75% of all ad revenue by 2020. To improve your results, create native ad experiences that your customers enjoy consuming right alongside the rest of their content.”
According to Evan Weber, affiliate marketing guru and founder of Experience Advertising, advertisers need to do a better job of diversifying their affiliate traffic sources away from coupon affiliates and browser extension affiliates, into relevant/niche web publishers and mobile affiliates, in order to broaden their affiliate revenue sources.
“This is a challenging task that can only be accomplished by utilizing the recruiting tools provided by the major affiliate networks (and then following up), as well as using proactive affiliate recruiting strategies to prospect potential targeted publishers by category or niche” he says.
“If merchants put resources into growing their affiliate channel, they will experience affiliate channel growth, otherwise they will have 5-10 affiliates accounting for the majority of their revenue (which capitalize on the merchants website’s overall traffic), which is definitely not ideal. Ideally, you want a very diverse publisher base producing traffic and revenue, which ensures the affiliate channel grows over time on an annual basis.”
PSD2 and open banking
Somewhat overshadowing GDPR is PSD2 – the second Payment Services Directive, another piece of EU legislation that will impact affiliate marketing in some unusual ways.
PSD2 paves the way for ‘open banking’, where consumers can take control of how their financial data is accessed and used by third parties, potentially opening up banking to new players and new services.
“One upshot of this is that affiliate businesses could take advantage and enter the financial market to offer just such a third party service, providing consumers with insights on buying behaviour or comparison facilities for the best current accounts for example,” says Awin’s Davinson.
“However, since its official launch in January, the initiative has stalled with just three of the UK’s nine biggest banks meeting the deadline by which they were asked to be ready to implement it. Given some analysts have suggested that Open Banking could spell disaster for the incumbent banking institutions, it may well take longer than expected for affiliates to take advantage of this new opportunity.”
Technology underpins affiliate marketing and currently the technology around data use and marketing is moving ahead in leaps and bounds. We have all read much about machine learning and artificial intelligence (AI) – and we are all already recipients of marketing messaging pushed out by these futuristic technologies. So what are they going to do for affiliate marketing?
One company that has delved into the high end of AI in affiliate marketing is Webgains. It has partnered with IBM to use the latter’s Watson AI platform to develop cognitive solutions that will help online advertise more intelligently with machine learned affiliate marketing.
Webgains is the first in the performance marketing industry to harness IBM Watson cognitive technologies in order to increase both the efficiency and efficacy of digital ad placement.
Utilising AI and machine learning solutions, Webgains will ensure clients are able to present the most timely and relevant content across a strategic range of digital publishing partners.
Richard Dennys, CEO, Webgains explains: “The introduction of AI into Webgains’ suite of technology enables clients, publishers and staff to have more flexibility. Our account managers will have the tools to enhance efficiency and to make more intelligent decisions which will have a real impact on clients’ sales figures and ROI. This investment will make our service more valuable than ever.”
Webgains is developing a suite of products and APIs (Application Programming Interfaces) with IBM. The first phase will see Webgains develop a Virtual Assistant to support staff and clients with front line customer service tasks. The product will use APIs from the IBM Watson Developer Cloud portfolio including Watson Conversation, AlchemyLanguage, Retrieve and Rank, and Tone Analyzer. The Virtual Assistant is designed to improve response time and efficiency, helping with basic tasks and questions as well as uploading promotional assets and assisting with invoices. It will be trained in English, German, French and Spanish.
Learning over time, the Virtual Assistant will allow Webgains to analyse customer intent and trends in order to feed learnings into future service. Webgains will build, test, configure and train the Virtual Assistant in conjunction with IBM Enterprise Services to maximize the full potential of AI within a high-growth organization.
The second phase will see Webgains focus on intelligent ad placement. By processing extensive data including prevailing external trends, web queries, user data and social media analysis, Webgains’ valuable insight will enable brands and retailers to make more informed decisions for their digital marketing strategies.