The Evolution of PR in Ecommerce
Affiliate Marketing is a massive market on a global level - and it's only beginning
Today’s post is authored by Curt Humrichouser
With a few exceptions, the US ecommerce growth rate has been a fairly steady 15% YoY for a decade now capturing over 14% of all US retail sales. Alongside this has grown an entire ecosystem around ecommerce-focused digital marketing and within that existing affiliate marketing. It is this that deserves your attention.
The increasing challenges to the traditional ad-supported business model from regulators, ad blockers, and cultural mistrust are pushing publishers to commerce content in order to smooth or grow revenue streams.
Affiliate Marketing is Diversifying
Publishers have, in one way or another, been doing affiliated editorial content since publications first drew audiences. The challenge for physical media was tracking the editorial’s impact. The combined rise of digital publishing and ecommerce has required tracking and attribution systems and.these systems are increasingly being used by the more sophisticated publishers to evolve the entire publishing business model.
Publishers can now accurately track how much revenue they drive for their partners and as a result, achieve better rates from this demonstrated performance, and also because of the affiliate data set that allows companies to improve their product, strategies, and processes.
Therefore publishers that have a good grasp of their data with sufficiently mature and robust processes in place have harnessed the power of their brand names to create commerce content at a massive scale. Some have even launched properties that are entirely devoted to commerce content producing thousands of pieces of content per month such as:
BestProducts in the Hearst Magazines portfolio launched in 2015.
Wirecutter, acquired by the NYTimes in 2016.
Properties like these are pure service journalism helping consumers make educated decisions on products and services free from the editorial friction of their parents and helping to pay for their broader journalistic efforts.
Not all Affiliate Marketers are Alike
As ecommerce has grown, so too have affiliate programs, from the massive Amazon Associates program to the tiniest of agreements between a D2C brand and an Instagram Influencer. This proliferation of programs, able to support the smallest of audiences (with intent), is being facilitated by another high innovation area on social media and video platforms namely profiling and targeting the result of which was beautifully foretold by Joe Kraus in one of my favorite quotes, “The 20th Century mass production world was about dozens of markets of millions of people. The 21st Century is all about millions of markets of dozens of people”.
When thinking about the affiliate marketing landscape, not all publishers are alike. An Instagram influencer is a publisher as is the New York Times. A single mention by each of them will have vastly different impacts, for several reasons. The New York Times can post a link on Wirecutter, include it in their newsletters, social media posts and notifications to users of their app-wide less specific reach. The Influencer may only have the social media post so a much narrower reach for a single high impact moment but they are free of overhead and institutional friction of the NYT.
Several publishers we have worked with now have a fully functional commerce-focused editorial team working alongside the traditional editorial team so they can create and capture some of the value of commerce content and are focussed strategically on implementing the best practices needed to deliver on a long-term commerce strategy.
Investments in publishing should be focused on scaling ecommerce efforts. If the publisher is not already committed to commerce content, now is the time to encourage that pivot. This means hiring a team that is dedicated to commerce, establishing the data, mindset and process cycles necessary to self improve, building out additional channels for audience acquisition and content distribution such as newsletters and social media. The goal is to capture the last click to a seller. Oh, and they need to understand they are minimum of 5 years behind others in the space which means board level mandates to those charged with this pivot.
The Platform Wars
Even before Amazon’s dominance with its native affiliate platform (see here for a previous CrossStack post on the Amazon TPS ecosystem), 3rd parties were providing platforms that could be used within ecommerce stores that, via provided links, facilitated the independent tracking and attribution of purchases, and thus acted as the source of truth for the publisher and seller to agree on which purchases should be credited to the publisher. Impact, Rakuten Linkshare, and Conversant are among the several major players in this arena, and new entrants seem to pop up every year. These systems have also evolved to provide a number of other attribution and tracking methods that many seller and publishers have yet to take advantage of.
The business model relies on scale – the more sellers that sign up for a tracking service, the more attractive that service is to publishers. These platforms have marketplaces to facilitate matches between publishers and sellers and service features for sellers to manage and further incentivize the publishers they have attracted, but they generally don’t actively advocate on the part of either party. Sellers just have to hope that publishers will find them.
Many publishers are willing to use these systems to direct prospective consumers to D2C sites - a site focussed solely on one brand or product - but even if conversion rates approach that of Amazon, Walmart et al and offered higher commission the site has to prove that it’s going to be a good purchasing experience for the reader and the that it can yield a similar overall commission given that the basket size may be smaller. Even if all the boxes are checked off, it’s much easier for the publisher to use the Amazon or Walmart link and be assured of a higher conversion rate and often larger basket. This continual interchange between commission, conversion and basket is just one of the ways publishers, sellers and brands (for D2C) interact both passively and actively.
Consumers also play an active role as they buy more online from sites that aren’t Amazon - Amazon’s share of the growing ecommerce pie actually fell from 43% in 2019 to 31% in 2020 fuelled by wider efforts by other bigger retailers and the stay at home shop local impact of COVID. Wherever the consumer goes, so too will publishers. But publishers are resistant to supporting many disparate or novel affiliate platforms in their growing toolsets and data methods (the cost to do so often outweighs any revenue gains in the same year), and brands do not want to use a platform with few publishers. The ideal state for the ecosystem is two to five platforms, not twenty. Therefore expect to see consolidation in affiliate platforms in the next 24 months. Low friction scale is key to making the platform profitable and desirable for both publishers and sellers.
As Amazon has broadened its scope of items from books to everything, consumers have become accustomed to online shopping within the Amazon ecosystem. Yet a small insight by Amazon led to a fundamental change in where these editorial mentions appear. The insight was that a growing number of consumers started their shopping journey on the Amazon platform. This behaviour meant that Amazon had captured a visitor higher in the purchasing funnel than their platform was designed to handle.
Thus the most recent innovation has been the presentation of 3rd party commerce content within the Amazon platform in response to a search by a visitor. This onsite content has evolved into the next big thing in publisher created commerce content since Amazon solicits content from several third parties and, like a search engine, returns the ‘best candidate’ for a given search. Publishers receive commission if an Amazon visitor uses this content to make a purchasing decision.
This is commerce content lives within the ecommerce platform – i.e., on Amazon.com, slotted in between the product listings. Amazon pioneered and has evolved this format in the past couple of years, and other large platforms are looking to emulate this approach as well.
We estimate this content drives as much as $5 billion in GMV based on interviews and consulting with the largest suppliers of content vs an overall ecommerce volume of nearly $860 billion in 2020. This is without factoring in the expansion of this format to other retailers, which we believe will arrive in the next 6-24 months based on conversations with major retailers.
Retailers should be actively recruiting publishers to participate in their onsite programs, selecting carefully for good brand match between the publisher and products and finding ways to adapt their own behavioural models for success.
From an investment perspective, an aspect to follow with diligence is the potential to roll-out similar programs across retailer platforms, and the optimization of this strategy beyond current use cases e.g. in gaming interfaces, in physical store use, retailer CRM, etc.
The Affiliate marketing ecosystem is the biggest driver of growth in digital advertising today, showing tremendous innovation in the retailer, publisher, and brand sides.
As consumers become more comfortable with buying online, and less comfortable with traditional advertising, editorial content, wherever it is to be found, is pivotal in helping when they are ready to buy.
There are opportunities for targeted investments in retailers, publishers, and ecommerce brands for those who can identify the entities able to make the biggest impact both here and abroad.
Thanks again to our guest author for today, Curt Humrichouser. Curt works at SellerRocket – an eCommerce-focused PR startup in the Affiliate Marketing space. Check them out here!
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