Rethink Commerce Blog

Affiliate Marketing – The Xⁿ Billion Dollar Business

Posted on October 2nd, 2014 by

Affiliate marketing, even after being around for many years, is starting to take its deserved place in the news and in companies’ marketing budgets.

Why are we seeing so much explosion in the affiliate marketing space? Is it because affiliate marketing has finally become mainstream, or is it because affiliate marketing is a natural fit for the breadth of online services and apps that have been launched? Looks like affiliate marketing has finally found its niche in the New Services Economy.

In the past, when evangelizing the affiliate network or simply doing corporate presentations, we would present the affiliate channel overall as a 2-3 billion dollar industry in terms of marketing budget spending, with market forecasts expecting it to hit 4 billion USD by 2016.

why aff marketing

However, in the past several weeks, there’s been buzz about “affiliate marketing” being ”billion dollars’ worth” thanks to (just) a couple of the industry’s major players. One of those players is a large cashback website generating revenue as an affiliate, and the other is the largest affiliate network in the industry today – that together sold for a $3.3 billion dollar cumulative payout.

Will these events affect only those directly involved in the two acquisitions or will it impact everyone in the affiliate marketing ecosystem?

Implications for Affiliates – More Money and New Programs

The savvy performance-based publishers could take some of the marketing budget share that traditionally went to CPM or fixed tenancy media and services. This could translate into more consistent payouts for the best affiliates and improved marketing resources such as:

  • Exclusive discount coupons, campaigns and technology for the affiliate channel
  • Dedicated account management and support
  • Rise of new affiliate programs

Implications for Merchants – Better Audience Targeting and New Service Providers

  • The polarization of top affiliates will lead to increased competitiveness and battles over internet traffic and engagement. Merchants will benefit from the affiliate’s improved audience targeting and engagement through their own efforts. Fast access to targeted shoppers bases can save merchants time and budgets.
  • The industry is likely to continue to see even more innovative tech services, such as shopping cart abandonment tools or retargeting platforms, selling their services on a performance-based model.

tech services

Implications for Networks – Technology Improvements and Increased Fraud Prevention

  • Interestingly, the networks will probably be the most challenged player in this transition. While more merchants will consider launching affiliate programs and existing programs will focus on better management, the importance the affiliate channel is gaining will most likely bring about demands for technological & services improvements such as attribution and affiliate fraud detection.

2013 & 2014 Milestones that are Driving the Future of Affiliate Marketing

  1. Ebates sold for $1 billion to Rakuten
  2. Conversant (CJ.com) sold for $2.3 billion to Alliance Data
  3. Coupons.com IPO in March 2014 raised $168 million and hitting a $2.3 billion stock market value
  4. Viglink, content monetization platform through affiliate links, raises $18 million in Series C Funding in June 2014
  5. Retailmenot, the world’s largest digital coupon marketplace, went public in July 2013 on the NASDAQ Stock Market, giving the company a market value of about $1.4 billion.

 

Disruption is not only driving innovation in the New Services Economy; examples of this innovation can be seen throughout the digital commerce space and, especially so, in the affiliate marketing industry. We can expect to see more milestones, like the ones above, in 2014 and 2015 that reflect the continued growth and market validation of the affiliate marketing industry.

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Comments (3)

  • Hanna Fritzinger says: October 3rd, 2014 at 12:34 am

    Great, informative article! Thanks for mentioning VigLink’s latest round of funding as one of the milestones that is driving the future of affiliate marketing !

  • Monojit says: May 5th, 2016 at 8:26 pm

    Thanks, for the gr8 statistics and will continue to look forward to study more about the future of Affiliate Marketing from you.
    Can you please let me know, which affiliate companies are going to be good for Indian Market or are any affiliate marketing company is going to be launched in India

  • Monica Sturza says: May 6th, 2016 at 12:02 pm

    Thank you for your comment. We are very happy that you decided to follow our blog. Avangate Affiliate Network is a niche network, focused on software and digital goods only, and our main focus is on US and Eu countries. You can follow us on social media to keep up to date with our latest news.