Transcript:

eMarketer Presents: The Evolution of Partnerships: Working with Content Publishers in the Affiliate Channel

Audrey Schomer:

Hello, thank you for joining and welcome to the next session of Global Partnership Day. My name is Audrey Schomer. I'm an e- marketer senior analyst at the market research firm, Insider Intelligence, and in the session I'll be talking about content publishers in the affiliate channel.

This is a category of publishers in the channel that's gotten a fair bit of attention in recent years. They're also sometimes referred to as mass media publishers, and these publishers are some of the most attractive partners for marketers to find and work with.

So today I'll be talking about why that is. What is it about these publishers that makes them so valuable? How are these publishers building their own affiliate commerce businesses and how are they helping to drive change in how marketers are building their affiliate programs?

All right, so I'll be guiding you through a few different sections here. First, I'll walk us through why these publishers are increasingly pursuing affiliate partnerships for their own monetization.

Then I'll be walking through how the pandemic affected the affiliate channel last year, and in particular, how content publishers benefited and what marketers expect for 2021.

And then I'll talk a bit about how marketers are perceiving content publishers compared with the other partner types that they're working with.

And then I'll go a bit deeper on how content publishers are building and running their own affiliate commerce strategies and why that makes these publishers such high quality partners for marketers.

And finally, I'll be wrapping up with a section on how the marketers are working with content publishers in different ways, particularly related to attribution and compensation models that they're using in those partnerships.

I just wanted to start us off with a quote that I think highlights the main idea at the bottom of this conversation, which is that the affiliate space has evolved.

And a big reason for that evolution is simply because the publisher mix in the channel has diversified, and in particular that diversification's been driven by content publishers that are gaining a bigger presence in the channel.

So traditionally, as many are probably aware, the affiliate channel has been used as a place for advertisers to work with a rewards type of partner, such as cashback or coupon sites.

But that is changing, and it's not just these rewards types of partners that marketers are partnering with. It's also these editorial brands with large engaged audiences creating high quality content driven by affiliate links.

These publishers are writing about or creating content around brands and products that they know will resonate with their audiences.

And so for many of these publishers, affiliate isn't actually a new monetization strategy for them. And in fact, a lot of these publishers have been active in the space for a few years or longer.

So if you think of BuzzFeed or Wirecutter or the Strategist or any number of these publishers under Conde Nast or Meredith for example, these publishers have all built pretty robust e- commerce content offerings.

And those offerings are driving engagement among their audiences and transactions for their affiliate partners.

But in fact, we expect that for these publishers, e- commerce is going to become an even more important revenue stream, and that's even compared with more standard revenue sources like digital advertising or subscriptions that they've traditionally relied more on.

So earlier this year, we had seen some data from Lotame of a survey that they ran among a small group of publishers.

And almost two thirds of these publishers said that they expected e- commerce to be among their top three revenue sources in the first quarter of this year, and over a third said that it would be their top revenue source.

And so as you can see from this chart, affiliate advertising is also given as one of the response options. But I do want to caveat that most publishers will actually include the revenues from their affiliate partnerships as part of their total e- commerce business.

And these things aren't sort of mutually exclusive in the way that this chart maybe makes it seem. And in fact, when publishers are talking about their e- commerce business, they often also mean their affiliate commerce partnerships.

So what's driving this increased emphasis on e- commerce is the fact that other revenue sources aren't as reliable or are getting harder to come by for many publishers.

For example, digital advertising with the deprecation of third- party identifiers is getting more complicated, more demanding of resources that not all publishers will have.

So for example, related to the collection and use of first- party data that not all publishers have.

And second, we also continue to see that publishers are shifting to digital subscription models. But we know that not every publisher can succeed at this at scale either because not every publisher has the resources to create content that people are going to pay for, or because of this so- called subscription fatigue phenomenon, where not every consumer will actually reasonably be able to pay for every publisher's content that they want to access.

So actually in many ways, we see that e- commerce revenues driven by affiliate advertising can be a much more resilient monetization strategy.

And as a result, I think we are seeing that this could become a more dominant revenue source.

In this next section, we are going to take a look at what happened in the affiliate channel last year and what marketers expect this year.

All right. I think many know that the disruptions of the pandemic year led advertisers to start shifting their budgets into performance channels, and affiliate was definitely a beneficiary of that.

And in general, historically, the affiliate channel has tended to be pretty resilient to these kinds of recessions or downturns that would have an effect on the broader digital ad market just because this is a channel where marketers have expected to find returns.

And this was definitely the case last year, particularly as consumers were shifting huge amounts of personal spending online. So over half of UK affiliate marketers that were surveyed by the IAB UK earlier this year said that they increased their spending in the channel last year and only 20% said that they decreased it.

And also maybe not surprisingly, affiliate revenues overall in the channel increased dramatically last year, also driven by big increases in consumer spending online.

And so this is actually data that Partnerize shared with e- Marketer showing activity on their network for all partner types in the network.

Overall in 2020, affiliate revenues jumped 31% year- over- year, and they saw the biggest monthly year- over- year increases happen in April and May, which of course were the early months of the pandemic.

And in fact, another affiliate network that we spoke with said that the April, May spike for them was so significant that it matched their peak traffic and revenue levels that they would normally only have seen around the holidays in normal years.

And so on that note, affiliate revenue growth also spiked in November ahead of the holidays. And that kind of a growth spike is similar to what would normally also be seen in other years, is likely that this year was particularly strong growth given that holiday e- commerce retail sales were growing stronger than they ever had in the past.

eMarketer estimated that holiday e- commerce retail sales grew by 32. 5% last year versus 2019.

And growth was even more impressive among content publishers as a category of publishers in the channel. This is revenue growth among content publishers in the Partnerize network.

And this is a category that Partnerize defines as media companies as well as influencers. So media companies being content publishers or mass media publishers.

And so you can see that content publishers grew revenues at dramatically faster rates. And last year, overall content publisher revenues jumped 75% year- over- year.

And when we spoke with individual publishers, they also said that 2020 was a record year for their affiliate businesses. They saw huge gains in traffic, in click-throughs, and in conversions.

And so for example, the Strategist said that for them, affiliate revenues jumped 94% year- over- year and isolated just to the pandemic months.

It more than doubled. It was up 108% in the months of March, December versus the prior year period.

And as far as what marketers said that they expected for their channel spending this year, many of them expected to increase it. So 65% of B2C marketing executives that were surveyed by Gartner said that they expected to increase their spending in the partner channel in 2021.

And so from our perspective, this suggests strong confidence among marketers that marketers are starting to look at the affiliate channel as a more important part of the broader marketing mix and consider the value that it's driving for their businesses.

In this next section, I'll be talking about how marketers consider the value of content publishers relative to other partner types they work with, and give a little bit of context as to why these content publishers are considered to be among the most valuable in the channel.

So affiliate marketers actually say that content publishers are among the top partners driving value for them in the channel. So according to the same IAB UK survey, UK affiliate marketers ranked content publishers as the second most valuable affiliate partner type after rewards partners.

And on a scale of one to 10, marketers ranked content at a 7. 41 on average.

So just a scorch behind rewards partners at 7. 52 out of 10 on average.

And so why are content publishers considered to be so valuable as partners? One of the reasons to that question is that simply marketers consider partner content to be very effective for moving prospects down the funnel.

So we had seen some chief marketer data surveying US marketers, most of these were B2C marketers, and about 30% said that content created with partners was one of their top three most effective types of marketing content for moving prospects down the funnel.

But I also want to know that this category is a catchall, and actually content publishers in affiliate are especially strong because they're creating multiple different types of marketing content as part of their affiliate content strategies.

And that would include many of the other content formats that are even listed here. So as a baseline, many content publishers are writing articles and blog posts, and some content publishers are creating social media posts, others maybe building newsletters.

Either integrating their commerce content links into existing newsletters that they run, or even creating brand new commerce- focused designated newsletters for their audiences.

And some are even also creating video content that they might distribute on various platforms, including their own sites on social and potentially OTT video platforms like YouTube.

So all of this content that these publishers are creating is working as part of a holistic commerce content strategy, and all of it is helping to drive users down the funnel from various different channels where their audiences are engaging.

And so this quote from Nilla Ali, the SVP of commerce at BuzzFeed, I wanted to share because I think it expresses the underlying trend that I really want to emphasize, which is that commerce content is tapping into the fact that consumers are now using content to help them to make smarter purchasing decisions online.

Consumers are turning to publishers with different kinds of implicit requests. So a consumer might be saying," Help me discover products or brands that I would like because I'm this kind of a person, or I'm this kind of a shopper." They might be saying," I'm in the market for this type of product." For example, if they're searching for the best jeans for new moms, and then the publisher content would help them to consider among different options.

And so what this translates to is that cultures are meeting consumers at various stages in the customer journey online. And I think in some ways this might present a mindset shift for affiliate marketers because publisher content is engaging consumers at multiple points throughout the funnel, even at higher points in the funnel when consumers might not even be in a shopping mindset when they're only in the awareness stage.

And usually when they're mid- funnel, when they're considering among different products, but they have some level of intent. And then of course, publisher content is helping to drive those users down the funnel.

So in this section I'll be talking about how publishers are building and running their own affiliate commerce businesses, and what are the different aspects that that strategy often involves.

Hopefully this will just give everyone a better sense of what makes these publishers such strong partners and meaningful parts of their affiliate program.

Most publisher commerce content that's used to drive affiliate sales takes the form of written articles, which usually will appear on a publisher's site or sites.

And so how this works, I think many are probably familiar with, but just to recap, publishers are creating different forms of editorial and they're sprinkling in affiliate links that direct the reader to an online retailer or a brand page.

And then when that referral leads to a conversion, the publisher earns a commission based on whatever the rate they've negotiated with the partner. And so there are different types of affiliate editorial content in a publisher's arsenal, and that could include most commonly reviews or recommendations.

For example, this could be a piece where a publisher is writing that we tried this product or we tried this brand and here's what we thought of it, or here's what happened.

Another common type of editorial is product roundups, otherwise known as listicles. A very common type of this that publishers will create is these best- of- lists that would assemble what they consider to be the best of a certain product type that would then be considered a more evergreen type of content that would continually reach consumers that have intent to buy that particular product.

A third common type is articles where the writer might be adding in affiliate links to something more like a personal narrative or a personal essay.

For example, a writer might be describing her personal fitness journey and she would mention or add links to some of the products that helped her on that journey.

And so these different types of editorial will serve different purposes. So it's the same kind of thing you may have learned in biology, the form meets function type of relationship.

And publishers are usually thinking about... With different editorial types, they're thinking about how to reach different audiences or different audiences at different points in the customer journey.

And so for example, the best- of- lists that I spoke a bit about are generally considered to reach higher intent audiences that are likely to be in the consideration or evaluation stages of the funnel.

And they are already in the market for something in particular. And that's understood to most likely be the case because if someone is doing a Google search for, let's say, the best blender, then it's probably safe to assume that they are a blender and tender.

And so publisher commerce content's really helping the consumer at that point to decide which one they would like to buy. It's also important for marketers to recognize that a key part of content publisher commerce strategy is driven by data.

And this is because publishers have to consider who their audience is and what they're interested in when they choose to write about product category or even a particular brand.

And that's just because of course, how well a publisher's commerce content responds to their audience needs will relate to how well it performs.

So to help them figure out what those needs are, publishers are reflecting on different quantitative and qualitative data metrics that they get either from user behaviors on their sites or other channels where they're distributing content, as well as reporting that they get from affiliate networks to really help them to figure out what's performing well versus not well, and gauge what their audience is interested in and then better respond to those interests.

So on the quantitative side, they're tracking things like page views, meaning simply traffic to their commerce content. And generally if it comes into their sites, they would be tracking where that audience is coming in from, whether it's coming from search or from social, an email newsletter, any of these other channels.

They're also tracking click- through rates on their articles, conversion rates and order values. And based on that data, publishers are often calculating a metric called EPC or earnings per click.

And this is what helps them to determine the efficiency of a piece of commerce content. So for example, if a post has gotten a lot of audience exposure, it's likely to be getting more traffic and therefore more likely to drive higher number of conversions.

But a post that may have gotten less audience exposure might still have performed more efficiently in terms of the number of conversions that it drove from a smaller amount of traffic.

And so the EPC metric just normalizes the data for publishers to be able to evaluate the performance of their commerce content more evenly.

And on the qualitative side, publishers are evaluating different things like headlines, user comments on their sites or on social.

They might be running surveys of their audience to help them track audience interests, audience demographics or psychographics.

For example, one publisher that we spoke with said that they at one point noticed more engagement coming in from men on their site, which had historically skewed more female.

And so it led them to consider expanding into different product categories to meet that new audience need just by writing about products that would cater to that male audience.

And so all this data really rolls up to how publishers are deciding what to write about. And those decisions can get pretty granular as far as what retailers, what product categories, even what price points are resonating most with their audience, helping them to figure out what forms of content are resonating most with their audience.

And finally helping them to determine how strongly they should be promoting different pieces of content.

Many content publishers have omnichannel distribution strategies, meaning that they're distributing their commerce content on multiple different channels where they have presence.

So that usually starts with their sites, but it also extends far beyond their own site properties and would include their social accounts on different platforms.

It would include any email newsletters that they run or build. And some traffic can also be internal, meaning it would be coming in from a publisher's flagship site.

For example, if someone is clicking into a commerce content article from another site that they own. For example, visitors to newyorkmag.

com might end up on the Strategist. And so what this translates to is that partnering with these publishers can give affiliate marketers exposure across multiple different channels.

And for publishers really making sure that their affiliate links are distributed across all these different channels helps to boost transactions and performance.

So having that omnichannel distribution strategy helps publishers to meet consumers where they are. In particular, that's helpful when consumers are browsing or researching products.

So we have so some survey data from Global Web Index of US millennials and that found that search and social are still the most used channels for them to do product research.

Just over half said that they were using social, and 48% said that they used social to research products. And it's also true that consumers are increasingly starting their product searches on Amazon and not on traditional search engines, but it's likely that they only will start or will more likely start that purchase journey on Amazon if they already know what they're in the market for.

We had seen some separate Episerver data suggesting that if shoppers didn't know what they were looking for, they were comparatively less likely to start on Amazon and just as likely to start on Google.

And those shoppers were also more likely to start on social when they didn't have a specific product in mind. And so this is where publisher commerce content can really shine in terms of meeting consumers in those other maybe lower- intent shopping mindsets when they might just be browsing or researching different products that they're considering.

And this leads us to the role of social. And so it's no secret that social platforms are trying to encourage shopping directly on their platforms.

And so we're seeing that social users are engaging in more shopping behaviors on social platforms, but probably some of these behaviors are still not quite mature yet.

There was a Bizrate survey that indicated that 35% of people who said that they had made a purchase on a social platform.

For them, it was an impulse buy that they hadn't previously been aware of or considering. And so this suggests that on social, it's probably more about product discovery and these social shoppers are probably still lower intent compared with other channels where people might be doing product discovery or research.

But it's still likely that social is helping consumers to discover products. And in that case, this is where publishers commerce posts are helping those users as part of that process.

What's exciting about social actually is that several of the content publishers that we connected with are actively experimenting with how they can drive sales directly from social commerce posts.

As an example, some publishers said that they were actually using affiliate links in swipe ups in stories on Instagram that would direct a user to the retailer page and not to the publisher's own site.

And publishers have also said that social was allowing them to experiment with different formats including video. And so we expect that as social purchasing behavior matures, publishers are in a good position to reach those consumers as well.

This is our final section. Here, I'll be examining how working with content publishers will sometimes require different ways of working with this particular partner type, with respect to attribution and compensation.

Most affiliate marketers are still using a last- click attribution model in the channel. So 86% of UK affiliate marketers that were surveyed by the IAB UK said that they were paying partners on the last click.

But 14% said that they were also customizing attribution, meaning that they were paying multiple publishers or crediting multiple touchpoints that led up to a conversion.

And 7% said that they were paying partners on the first click. So even though last click is still the most common attribution model, and that's likely to continue at least for a while, this can present some issues for content publishers as a category because as we've described a little, these publishers will often reach consumers at higher points in the funnel.

And so even though these publishers are contributing to a conversion, that conversion might not happen until several clicks after engagement with the publisher's commerce content.

And so last- click attribution can overlook the contribution that the publisher has made. There's a quote that I thought was relevant also from the SVP at BuzzFeed.

And so she said that if someone sees a piece of content when they weren't even in a shopping mindset, they may end up ultimately converting, but they likely made many clicks between that first point of discovery and final purchase.

The likelihood of that content piece actually getting credit for that transaction is fairly low given the way that affiliate attribution is currently set up.

And so what that means or what that can mean is that attribution maybe should increasingly look different when working with content publishers.

There are now multitouch attribution tools that are available in some affiliate networks, which are allowing marketers to credit multiple publishers throughout the funnel.

And so what these tools usually involve for marketers is setting up various commissioning rules that will help determine how to allocate or apportion a piece of the commission to different publishers that contributed.

And these rules can get complicated, and they require marketers to really get comfortable analyzing the data so that they set up the commissioning rules appropriately.

But ultimately, this is a great thing. This is a way for marketers to really be able to build long- term strategies with partners and reward the partners that are driving the most value in their programs.

And so in some cases, we might expect that marketers would find that examining the customer journey, they would see that content publishers maybe driving more value than they might have thought.

And getting full visibility into that is what really helps marketers to refine their strategies throughout.

And so likewise, basically all affiliate marketers are doing deals on a commission basis, meaning that they're paying partners per conversion, meaning usually a product sale, but that action could also be a lead or an install, for example, of a download of an app.

And so 99% of UK affiliate marketers said that they were doing deals on a CPA basis, but actually there's a fair amount of variety here.

More than half said that they were paying partners flat fees or a tenancy fees, and 24% said that they were doing CPC- based deals, meaning that they were paying partners for each click that they refer to the retailer or the brand site.

And so as with attribution, content publishers are leading to changes in compensation models in their partnerships with affiliate marketers.

Many content publishers are doing deals on a CPA basis, or at least with some kind of a commission component. But many publishers that we talked with said that they're actually negotiating alternative payment structures in their affiliate deals that included flat fee deals and hybrid deals.

So with flat fee deals, publishers are simply paid a single fee for producing content. And if it's a hybrid deal, the commissions would come on top of that flat fee.

And so with these alternative payment structures, marketers are basically recognizing that they may not always be paying for conversions, but that they have found other kinds of value that content publishers contribute to their affiliate programs overall.

And they're interested in compensating those publishers for that. And so this quote from William Hamer- Jones at Matterkind, which is an IPG agency focused on performance marketing, indicated in this quote here that many of these publishers are likely helping brands to acquire new customers, particularly as they are engaging people in the middle of a funnel.

These consumers might be undecided and that content might be helping to bring them in.

And so to wrap things up, I'll just leave you with a few final things to keep in mind. As I hope has become clear, content publishers have become more powerful touchpoints in the customer journey online because their content is helping to reach consumers throughout the funnel and then drive them down that funnel.

Content publishers also aren't just flying blind. They're doing a lot to optimize the performance of their affiliate content, including using data to inform their strategies, and they're distributing that content across a wide variety of channels to really maximize exposure and performance even beyond their own sites.

And finally, marketers are beginning to credit these partners in different ways using different attribution models and compensation models as they look to really drive long- term performance with this partner type.

Thank you so much for watching. I hope you enjoyed and please reach out to me if you have any questions at all. My email address is aschomer@ emarketer.

com, and please stay tuned for more great sessions that are coming up.