The State of Affiliate Marketing: Should it be One of Your Business’ Goals?

Studies suggest that affiliate marketing will grow to be an estimated $6.8 billion industry in 2020. What do you need to consider before spending on it?

Lauren Dowdle
November 24 2018

What’s not to love about affiliate marketing? Marketers can earn passive income, while companies enjoy new clients, leads or sales. This practice and its potential benefits are nothing new — with it being responsible for 15 percent of the digital media industry’s revenue — but does affiliate marketing still bring the same value to companies as it once did?

Before we answer that question, let’s highlight a few of the key points. This performance-based marketing approach rewards affiliates for successfully promoting a company’s product. While there are some variations of how the core players are defined in affiliate marketing, Wikipedia breaks them down as the merchant (brand), network, publisher (affiliate) and customer. So, we’ll stick with those terms as we dive into this practice.

When it comes to the outlook for this technique, the future looks bright. According to a Rakuten Marketing survey, U.S. affiliate marketing spending will increase by a compound annual growth rate (CAGR) of 10.1 percent between 2015 and 2020, creating an estimated $6.8 billion industry.

We’ll take a look at what’s behind those projections, how marketers are using affiliate marketing and if your brand needs to invest in it going forward.

How affiliate marketing boosts revenue

Anytime you’re weighing out the value of a tactic — whether from a brand or marketer’s perspective — you’re going to consider its revenue capabilities. VigLink surveyed publishers and merchants that use an affiliate marketing program and found Google AdSense and affiliate marketing were the top two revenue-generation tools for them. Coming in behind these options were (in order) display advertising, brand/partnership sponsorship, paid product review and other native advertising.

Here are a few other takeaways from their survey:

  • 77 percent of publishers say the revenue from affiliate marketing programs increased or stayed consistent from 2015 to 2016
  • 73 percent of merchants say the amount of revenue generated from using affiliate marketing programs met their expectations
  • 85 percent of merchants say their affiliate marketing budgets increased or stayed the same from 2015 to 2016
  • 65 percent of merchants say affiliate marketing accounts for 5 to 20 percent of their revenue
  • 91 percent of merchants plan to increase or keep their affiliate marketing budgets the same going forward
  • 76 percent of publishers say the top reason they like affiliate marketing programs is that they make it easy to monetize their site
  • 84 percent of merchants say the top benefit is that it increases sales

As for the top drawback, survey respondents say it’s being unable to control the quality of the content where products are mentioned. Although, it’s worth pointing out 29 percent of merchants say they haven’t experienced any drawbacks.

If the numbers are an indicator, affiliate marketing is far from dead. Another study found 81 percent of merchants and 84 percent of publishers leverage affiliate marketing. From all signs, it’s headed onward and upward, although you can expect to see some changes with how merchants and publishers handle their marketing efforts.

How to be successful going forward

What it takes to get the results you’re after with affiliate marketing is constantly changing. Whereas content has been the outlet of choice for most in the past, now some are turning to videos and even AI to stand out in the growing field of affiliate marketers. This evolving industry requires you to stay on top of the changes to best reach modern consumers, so try these tactics to improve your chances of reaching potential customers.

Take an organic approach

Consumers continue to get smarter about marketing tactics and expect an approach that seems more helpful than sales-focused. That means publishers need to be transparent and only promote products or services that they know their audience will value. Also, be upfront about how the site makes money and who creates the content.

Track your campaigns

Just like with any other marketing effort, you’ll want to keep an eye on how your affiliate marketing campaigns are performing and adjust them as needed. Analytics tools have continued to improve, and there are several different tracking software options available — including, AffTrack, HasOffers, and LinkTrust.

These tools will show you what is and isn’t working, allowing you to expand on or eliminate certain outlets. Just remember: It might not always be the publisher or site that’s failing. It could just be that the product or service isn’t a good fit for that type of marketing. Don’t expect a poorly performing product to miraculously earn great engagement. Affiliate marketing doesn’t work wonders if the foundation isn’t there.

Ask permission

With the EU General Data Protection Regulation in full swing, you’ll need to make sure you have consent for all of your direct-marketing campaigns. Unless you’ve turned off access to consumers in European markets — which some brands have done if those aren’t their intended audience — you’ll need to ensure you get permission ahead of time to send marketing materials to them and also give them an opt-out option.

You’ll also need to tell them what information you’re collecting and who will be using it. If you’re already focusing on transparency, that should come as second nature to you, but it’s going to be even more important going forward.

Find your niche

Instead of trying to promote a wide variety of products, it’s better for publishers to stick to a few good ones. And for the merchants, it’s important to choose merchants that make sense for their brand. It needs to be a partnership that works for both ends if it’s going to be successful in the long run.

For example, if your brand relies on product reviews to earn new sales, focus on a publisher with that type of content — like with The Wirecutter’s affiliate-based model. They test a variety of products and write in-depth reviews. The site mostly makes money from Amazon’s Associate Program and has 8.6 million monthly visits, 11,400 referring domains, and 1,290 indexed pages.

As author Bo Bennett said, “Affiliate marketing has made businesses millions and ordinary people millionaires.” You just need to find the right partners and formula to make it happen.

Lauren Dowdle

Lauren Dowdle is an award-winning writer and magazine editor based in Nashville, Tenn. Her nearly decade-long writing career has covered everything from landscaping to marketing — plus being interviewed by Jay Leno and winning a backhoe-operating contest. When she’s not behind the keyboard, you’ll find her spoiling her four furry babies and exploring the city with her husband.

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