Risk vs. Reward: How Top Brands Evaluate Affiliate Marketing Opportunities

Becky Doles

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Affiliate marketing provides ample opportunity for brands at potentially much cheaper prices than traditional display advertising channels, yet many brands struggle to take full advantage. In this blog post, we will take a look at the potential risks and rewards of the affiliate marketing industry, along with how top brands can capitalize on it.

A Growing Industry

If there were any rumors of affiliate marketing dying, it’s safe to say those rumors can be put to rest. A Forrester study examined U.S. affiliate marketing spend and predicted that total affiliate marketing spend will grow 10% each year until 2020. In 2017, affiliate spend was around a massive $5B, and by 2020, it’s predicted to rise to $6.4B. According to Google Trends, between December 2017 and July 2018 alone, search interest for the term “affiliate marketing” rose by 44 percent. And 81% of brands use affiliate marketing.

So it’s safe to say that if you’re not already leveraging affiliate marketing, you should be at least considering it. Like any new marketing venture, there are risks and rewards to consider first. Here are a few you should be aware of.

Affiliate Marketing Risks

1. Varying laws by country.

GDPR is a potent reminder that no country exists in a bubble, and with the global economy, brands must pay more careful attention to the rules and regulations in each country when it comes to disclosures, taxation and, yes, affiliate marketing. As such, it’s important to make sure you have the right partner to help navigate the markets you will be using affiliate marketing in.

2. Different cultural norms.

Similar to various cultural laws, cultural norms can vary by country, and even within countries. Make sure someone on your team is paying attention to cultural nuances, or partner with an agency that does. Failing to pay attention can result in backlash for your brand, and the opposite of the desired effect coming in with an affiliate strategy.

3. No partner is #1 for all markets.

Just because an agency or network says it covers a certain region doesn’t mean they’re your best option. No network or partner is number one in every single region, so don’t be afraid to branch out to find the right partner for different audiences and locations.

4. Advertising fraud.

Fraud is an issue particularly in the affiliate space. Beware of tactics like click stuffing, monitor your traffic for suspicious patterns, and choose your partners carefully.

Affiliate Marketing Rewards

The good news: with risk also comes reward. Here are a few reasons why affiliate marketing may be worth the risk:

1. Accelerated brand growth with less legwork.

Since affiliates have already built up websites, audiences, and followers, they can accelerate the rate at which brands connect with consumers in a new marketplace.

2. More trust than traditional advertising.

Because most affiliates have a level of trust built with their followers, they are more likely to help brands earn trust from the get go, especially compared to traditional forms of advertising.

3. More cost-effective than traditional advertising.

Because affiliate marketing is more closely tied to conversions — clicks, engagement, etc. — than display advertising, where you may be paying merely for impressions, affiliate marketing  can yield more bang for your buck and a better return on investment.

4. More niche audiences and less competition.

Certain affiliates have very niche audiences that would be harder to get from larger marketing channels like Facebook and Google. As such, affiliate marketing can be a great opportunity for brands to reach targeted consumers with less competition than the default channels everyone uses.

5. Promising for expansion.

Even for well known brands, expanding to new locations can be challenging because of subtle cultural norms and competition. Going the affiliate marketing route can be a great way to establish a brand in a new environment in a trustworthy and credible way.  

Maximizing ROI

We’ve been in the affiliate and performance marketing space for nearly a decade. Here is what we see top brands doing consistently that gets them better results than the competition, which you can implement, too:

1. Experiment with different formats.

Don’t limit yourself to only proven formats when there have never been more technologies to experiment with. Business Insider predicts that video will represent 82% of all internet traffic by 2021, and live video is expected to grow 15-fold, from 3% of internet video traffic to 13% by 2021. Similarly, research via eye-tracking technology shows that consumers look at native ads 53% more frequently than display ads. The market is ripe with new opportunities, formats, and channels. Test to find which formats your customers respond to most, then optimize from there.

2. Get as much data transparency as possible.

Publishers and brands are demanding access to more of their affiliate marketing data. The more data you have about what’s working across the entire customer journey, the more informed decisions you will be able to make, and the better your ROI will be, so don’t be shy in asking.

3. Choose reputable partners.

With so many partners in the industry, it can be challenging to keep a mental shortlist of which ones are reputable and which ones put you at risk for fraud and wasted ad dollars. 

4. Make sure you’re on mobile.

This goes without saying, but mobile is where your customers are. Don’t focus so heavily on your desktop campaigns that you forget to take advantage of all the affiliate opportunities on mobile like Instagram and Snapchat.

5. Don’t build it all from scratch.

Sure, you can definitely build it from the ground up. But many of the top brands allocate the bulk of their resources into developing a kick-ass affiliate marketing strategy, and simply build on top of a customizable platform versus using trial and error to find what works.

The Takeaway

With the right strategy, affiliate marketing can offer more reward than risk. As the form of marketing grows, it’s one you’ll want to take advantage of to enter new markets, reach new supply, and beat the competition.

Becky Doles

Becky is the Senior Content Marketing Manager at TUNE. Before TUNE, she led a variety of marketing and communications projects at San Francisco startups. Becky received her bachelor's degree in English from Wake Forest University. After living nearly a decade in San Francisco and Seattle, she has returned to her home of Charleston, SC, where you can find her enjoying the sun and salt water with her family.

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