Leadership Perspectives

Why Recessions Give Rise to CPA

Peter Hamilton

TUNE Blog - Why Recessions Give Rise to CPA dial image

You may not know this, but TUNE built our first product on the back of the 2008 financial crisis, now known as the Great Recession. In the two years following, we saw the largest percentage growth we have ever seen as a company. Over the years, entrepreneurs and executives alike asked me why I thought this was the case. Now, the impact of COVID-19 on our culture, unemployment rate, and economy have me reminiscing on that time.

True performance marketing means paying your partners after they bring in sales. That is what makes this the ultimate ROI channel. 

The greatest reason for our growth in a recession is the nature of performance marketing (or as many call it today, partner marketing). Because this channel of marketing and advertising works by compensating publishers and affiliates for the actual sales and conversions they drive, budgets are much more fluid. Some even describe them as evergreen. If you know that you only have to pay that $2 to a partner after you make $10 on a sale, then your risk is extremely low. The more sales that come in, the more budget you can spend, all without the exposure of paying for advertising that didn’t work. 

The challenge in performance partnerships is always scale. In times of economic uncertainty, marketers are willing to put in the sweat.  

For companies that have a clearly defined conversion funnel and the right message and creatives to provide their affiliate partners, this channel should be a no-brainer. However, it does require some management; it cannot compete with the simplicity of today’s Google and Facebook ads. With these ad platforms, you only have to deal with one huge partner — and that partner has a complete interface designed to help you buy ads. This is why marketers flock to these platforms to get rapid scale, especially when said marketers are just starting out. 

At TUNE, we’re in the business of building software to help solve the problem of scale for marketing partnerships. And we’re not the only ones. In order to find scale, marketers need to automate onboarding tasks, protect terms and conditions, access real-time reporting, set automated decisioning, and generate invoices for paying commissions. And that’s just the beginning. There are plenty of tasks required to manage each partner relationship, but there are only so many people to do them. 

In the past, marketing relationships were managed by humans and spreadsheets, the latter of which made it difficult to scale. We now have technology to help marketers easily scale the number and quality of their performance-based partners —  marketers just need to put in the effort to build a program. 

Recessions require everyone to be more flexible. This is especially true for publishers, influencers, and affiliates who make their living from monetizing their audiences. 

When advertisers are spending big, and the demand for traffic is higher than the traffic available, the power of price sits with the supplier. 

In this case, publishers are able to demand higher prices for their audiences, and require payment in flat fee structures. We’ve all seen influencers that demand an upfront fee to publish a single post, regardless of the sales that post may (or may not) drive. Yet in times of economic uncertainty, everyone must consider more flexible ways of doing business. 

Performance-based campaigns are an excellent place to grow. 

Publishers with valuable audiences should be able to easily monetize their traffic for advertisers, based on the return they are able to drive; they should be able to do so regardless of the economic climate. As we see CPM and CPC campaigns dry up, we will see more marketers turn to CPA, and more publishers willing to give it a try. 

I have never seen a scrappier set of marketers than those in the performance space. 

It is times like these that our sweat equity counts the most. 

Looking back, it was the insatiable grit of our founders and our alignment with so many like-minded performance marketers that helped grow TUNE into a major player in the space. Many of the individuals I met during those days are now managing millions of dollars a month in their own marketing budgets, or have gone on to build and sell their own companies. 

These are the times when capital is in low supply, and these are the times that return us to the fundamentals of business and risk. Spend $2; make $10; rinse, and repeat. Do you agree? 

Here’s to the scrappy ones, and I wish you all the best of luck during this historic time. 

Peter Hamilton, CEO of TUNE, working from home
Working from home like so many others in the era of COVID-19.

Author
Peter Hamilton

A digital marketer by background, Peter is CEO of TUNE, the enterprise platform for partner marketing. In 2018, he sold TUNE’s mobile measurement product to Branch, unifying measurement and user experience. Today, he leads TUNE’s efforts to bring better management technology and automation to marketing partnerships, across affiliates, influencers, networks, and business development relationships. Follow @peterhamilton