Affiliate Marketing Has Evolved from Pay on Performance

I’ve been sitting on this post for over a year, it’s an opinion piece with action items mixed throughout.  I’m posting now because of the client leads have been coming in over the last 7 or 8 years where they heard “affiliate is a low risk channel”, “there’s marketers and influencers out there ready to promote you”, or “You only pay when a sale is made”.  None of this is accurate, but pieces of it exist.  Also, this post starts a bit like doom and gloom, but it is not a doom and gloom post, read through the end.

Years ago affiliate was a performance based channel with value-adding and zero-value partners making it friendly for small companies that knew attribution, new brands, and for startups to grow their business.  There was also very little in the way of government regulation with FTC advertising disclosures, tax laws, etc…

It was one of the few marketing channels a startup could compete and beat big brands in, mostly because big brands have anything goes programs with minimal oversight.  That has been the case in the past and still is today.  But that doesn’t mean small businesses can’t succeed, they just need to work harder.

Affiliate marketing is not:

• An army of people looking to promote you.
• Where you create some banners and links and expect sales.
• Low risk, the only partners that are going to join (for the most part) without substantial effort are ones that want to intercept your own traffic already on your website.
• A channel for entry-level employees to manage.
  • Affiliate managers need to have a combination of media buying, PR, GEO/AIO, SEO, email, and PPC skills to be effective.
• Pay when a sale occurs if you want growth.
  • There has to be budgets to pay affiliates, upfront to produce content, products that need to go out for review, etc…

If you want pay on performance and do not want affiliates that intercept your own traffic, it’s a good 1 to 2 years until you hit break even on fees only.  The affiliate channel is a long term investment, so you need to be prepared to lose money for a couple of years on commissions, software fees, and affiliate manager salaries or agency fees.

For a high-value channel that drives incremental revenue for your company, you need to bring on partners with traffic that your brand does not have access to without the partner.  i.e. no coupon sites that show up in Google for your company name + coupons or review partners and influencers that show up for “brand + review”.

A high-value, low-risk program is where you have affiliates that shows up in Google for “best running t-shirts” and not your brand in the query, or that have a video in YouTube demonstrating wrenches for a specific purpose where the partner links to your store to buy the correct one.  This is traffic you cannot reach without the YouTuber, unless you run ads on their video.  But video ads don’t build the trust that the creator recommending a specific wrench from your store has.

Another example is winning over reddit admins, Facebook group owners, and skool community leaders that are willing to include your affiliate links as resources for their communities.  Some of these partners have content creation costs, others have brands paying for access, and this likely means you need to front some money or pay a commission higher than 10% or 20%.

You get the customer and can make money on the second or third sale, they’re likely only getting paid on the first sale or first year of sales.  If you want access to their audiences, and their traffic is not dependent on you having traffic, stop thinking the first sale needs to be profitable, start thinking about the LTV of your customer base.

We no longer recommend focusing on affiliate in your first few years in business and when you don’t have at least $60K – $100K per year to burn testing the waters on salaries and fees.  Many companies learn the hard way and hire an agency that’ll take their money and flood their program with trademark bidders, coupon sites, review only partners, and browser extensions.  I’ve never seen this work out for the brand in the 20+ years I’ve been actively managing programs.

SEO is faster to optimize for and bring in revenue, PPC brings conversions to you more quickly while giving you audience data, and influencer can get your brand up and running without having to pay commissions on top.  These are the wiser investments, and I’m saying this as an affiliate management company that actively manages and grows programs for enterprise level brands and startups.  It is not in my best interest to write this post, but it is in yours.

Something else to consider before launching an affiliate program is that if you have media coverage right now, those links to your website are likely helping your SEO.  Once you launch an affiliate program, they’ll likely be turned into affiliate links and 307 redirects and you lose this SEO boost.

I’ve broken the rest of this post into two sections:

• What happened to where affiliate is a high-risk, high-cost, high-competition, and expensive channel
• How to work within its ecosystem and find affiliate partners that can add value and may work on a rev share or hybrid model

What Happened

I think the inflection point for affiliate leaving pay on performance was when large media companies started entering the affiliate space around 2017 and 2018 en masse.  It had always been there, but now it was beginning to dominate, especially with Google favoring the media when they released top stories feature (December 2016), AMP in 2015, and other opportunities that favored the media companies.

Media outlets started by taking “earned media” and making the brand and product links affiliate links.  I agree with this because they have a right to earn money from their content and their readers.  From there they hired what were “affiliate relationship managers” (different from affiliate managers that manage affiliates), and these affiliate relationship managers would join programs.

Media companies would promote programs and the affiliate relationship managers would ask affiliate managers for ideas on what converts, topics that work with their customers, and best selling products that match themes.  These recommendations would appear in the publications and sales would be made on a performance basis.  It was a beautiful progression of the affiliate channel, but came at a cost.

Once the media companies saw they could make money from the content they were producing, they started looking for more and more ways to make money.  This lead to multiple household names falling and losing their traffic because they were thinking about money and abusing their domain authority.  They forgot about content quality or topic relevance for their reader base.  I shared examples of this here before the big drops came to the big name publishers as a warning.  But it was too late at this point.

The media companies then decided to start putting up paywalls for programs in the form of “affiliate relationship managers” where instead of being actual affiliate relationship managers, they are ad sales representatives.  Because media companies know ad sales, they went for their comfort zones vs. long term success strategies.  If you’ve been to an affiliate conference since 2018 or 2019, you’ve seen that “affiliates” come with price lists, not opportunities to work together.

Before this PR companies and affiliate managers could get natural mentions and inclusions, now it is common to pay a media fee exactly like an advertorial, and then pay for inclusions in listcicles with commissions on top.  When PR does happen, the SEO team no longer gets the benefit because the media company turns the backlink into an affiliate.  There is a ton of value here still, especially for AIO/GEO, but much less for traditional SEO.  Here’s my post on affiliate links being backlinks for SEO.

All of the sudden a channel that worked for small brands is no longer accessible because the media companies require advertising budgets starting at $5,000.   This lets the big brands dominate and knocks the smaller players out of the running.  Around this same time niche sites and creators began to lose because the media companies took their space in the search engines for queries that a niche site should show up for.  Not all of them got wiped, but there were far less to work with.  Then the next change happened.

Google decided to surface reddit on almost every shopping query (at least it seems like they do) along with a bunch of UGC (user generated content) platforms.  These platforms took over from the niche sites which created a new opportunity for affiliate programs, but also a substantial risk for brands.   It is not hard to find the affiliates leaving comment spam as users, building content as unbiased blog posts, etc…  If you recruit them in, they can start driving sales fast.

The issue is many do not use advertising disclosures, will not follow brand guidelines, and make misleading claims about discounts or deals when none are available if you use their links.  They may also start responding to customers and potential customers as they ask questions and give non-factual information or spam an affiliate link with no disclosure.  If you allow the wild west like this, you lose control over your brand and your affiliate program terms are no longer enforceable.  It is a substantial risk if you get caught, so we don’t recommend it.  Then another shift happened.

Smaller affiliates saw big brands paying out money for placements, so they jumped on the bandwagon (as they should).  Niche sites showed up to conferences with media kits instead of promotional opportunities because they needed to make up for the revenue lost from Google traffic, but no way to deliver on the traffic and sales like the mass media companies.

When they couldn’t deliver and only promised exposure that didn’t actually exist, their revenue began to dry up and so did the opportunities.  I personally think there is a lot of value if approached the right way.  We’ve been able to take niche creators and dominate queries in Google as well as YouTube and other platforms.  But it takes work and breaking their g0-to strategies.  The big thing these creators did was a brand review that showed up in Google or YouTube for “brand + review”.

This is a mid-funnel touchpoint so there is some value.  But there is no way for the “influencer” to scale or grow it.  This touchpoint relies on the brand having their own traffic, and the creators cannot scale sales unless the brand increases it’s own efforts.

The influencer or review affiliate is parasitic meaning it can only make a sale once a brand brings a customer into their own funnel and that customer looks for a review.  More customers looking for review, more sales for the review affiliate.  Less customers searching for a review, less sales for that affiliate.  If the brand has no program, they can work on getting actual customer reviews to show up for these phrases and be more profitable as there are no more commissions and network fees on their own traffic looking for reviews.

Then the nail in the coffin happened for a large chunk of these niche sites and creators, Google wiped many of the sites that had non-branded traffic out devastating their remaining income so they left the space.  Again, not all niche sites got hit, we work with a lot that are thriving and some that are scaling.  These people rarely ever post publicly, they just focus on their businesses.  But there are less and less of them.

Here’s an example of an established niche affiliate with multiple domains.  The screenshot below is one that just started taking off after a few years of regular posting and has zero traffic for brands and vendors.  It’s all high-intent shopping queries brands cannot reach without them, and informative guides that are easily monetized.

The industry continued to evolve and other types of affiliates began becoming the norm.  YouTubers, streamers, apps that let you design rooms or find outfits at reasonable prices, social media influencers, and communities.  But some of these come with upfront costs.

YouTubers, influencers, and streamers have fixed media costs where they have to film, edit, get product, etc… If you want them to work with you, you need to provide product and possibly pay a production fee.  If you won’t send product, one of your competitors will and the competitor will get the promotion.

Some will do it on a rev share basis, but only if there are no brands with budgets trying to work with them.  The minute a competitor will pay for the content, they take the priority and you lose.  I’ve been on the end where the brand asks why content doesn’t go live, but also won’t pay a media fee or send product.  It’s not an easy situation.

When a brand owner who won’t listen and send products, but their competitors will, the brand owner assumes the channel doesn’t work.  Affiliate marketing does work, just not how the company owner wants it to because that founder won’t work within the channel’s needs.

This is something in-house affiliate managers approach me about when their bosses don’t listen.  The best I can tell them is to keep trying to educate their bosses, share examples from the partners their bosses, and to keep looking for traditional style affiliate relationships or a new job.  One of these conversations really stuck out with me recently, so that is why I’m finally publishing this post.

So is affiliate dead, can you still get partners on a performance only basis, and what’s left?

What You Can Do

Affiliate marketing is not dead, its thriving.  While smaller brands and mid-size companies have large barriers to entry, they can still compete.  If your company goes viral, this opportunity can be seized to bring in performance only partners and scale your program faster because you are in demand.

But this wears off so make sure you use the opportunity while it exists and say no to “talent managers” as they reach out for their “talent” to demonstrate product and ask for media fees.  Have their talent earn commissions on a performance basis.  The talent wants to use your product or service to grow their audience, they need you right now, but the scales will turn eventually so tread lightly.

Stick to your position and do not let it become the norm, especially while your company is the “it” brand that everyone wants.  But also build the relationship and find a way that works for both of you, this normally involves pulling the management company out of the picture.  Easier said than done, but very doable when the management company won’t cooperate and the influencer wants to work with you.

The same thing goes when you have media companies, influencers, and content creators knocking on your door to promote you.  Have the affiliate program as an option but insist on no reviews and no coupon or deal content.  The goal is to have them drive new customers to you, not intercept your own traffic and send it back for a fee.

For the rest of us, here’s what we can do to make affiliate work if we don’t want to pay media fees.  But remember it is going to take a lot of work and a heck of a long time to get close to break even.  And be ready for rejection, you’ll get a lot.  But with the rejection can come feedback about the product including features you are missing but the partners and consumers want, selling points you forgot to include on your website, and opportunities to learn how to get more competitive in the space.

Have data and be ready to make a revenue case

Know your data and make a case based on the partner’s audience and traffic once you get their attention.  When you know the affiliate has a video showing up for “XYZ phrase” in Google or YouTube, talk to your PPC team to find the conversion rate.  Next go to the data team and ask them what the AOV is.  If you’re a small brand, congrats, you’re likely both of these people and you can find it in Google Ads or analytics.

Share this information with the partner.

$100 AOV on ABC phrase

5% conversion rate

10% commission

For every 100 clicks the affiliate can expect to make $50 on a repeat and regular basis with us.  That’s a potential $600 per year if they get exactly 100 clicks each month.  As long as no brands come in and sponsor or pay for the content, this is where you can compete.

Audience matches can work too.  Ask the partner what the majority of their audience is, then look in your conversion data to see which products and variants of the products convert best for that specific grouping.  Now do the calculations based on views and impressions from media buys and ad serving.  If the partners is making $20 off of ad serving or a big brand with lower commissions that has leaks and low-value affiliates overwriting tracking, they could make an extra $30 with you, and that is a big selling point for them.

Run a clean program

One very important thing is to have a clean program meaning no end of sale touch point partners.  You can approach the niche site and influencer affiliates promoting big brands and let them know that you will protect their commissions rather than letting a coupon site or browser extension swoop in at the last second and take credit for their sales.

This is one of the most effective sales pitches we use once we have an open line of communication with a potential partner and they say “affiliate doesn’t work”.  I’ll sometimes go as far as filming a quick video showing their tracking being overwritten.

While creators are more inclined to work with big brands, if they understand what you’re saying, they may go with your company as they’re more likely to keep the commissions on the customers they referred.  But you have to convince them to try affiliate again and make a case for it.  Clean programs are one of the talking points you can use that is effective if you can share it in an easy-to-understand way.

Pitch the editors

The ad sales team that used to be affiliate relationship managers do not like when you do this, but if they don’t return emails and they won’t give you a chance, you have little to lose.  Editors are still editors and when they get a pitch that is unique or something they want to cover, you get the pickup.

Once you’re featured, the media company normally joins your affiliate program directly or uses a sub-network to turn the backlink into an affiliate link, so the media company can monetize (as they should.)  One thing I have seen is that when enough pickups happen, the media team starts to reach out for more opportunities because they’re seeing revenue come in.

They will pitch ad sales, but you do not have to give in.  If traditional PR is working, build and keep those relationships.  It is a heck of a lot more work and you will get some headaches as it upsets the ad sales team that join affiliate programs.  They may be upset, but they’re still making money.  The issue for them is that they are not hitting their ad sales quotas so there is stress coming from their bosses.

The good news is that you now have data to show your boss what the ROAS is from the content on the media company’s website, what the CAC is, and can share what an increase in exposure may look like.  This is how you can get budget and do a hybrid buy.  The media company will do their advertorial pushes and work to keep EPCs high so their bosses are happy, and you get more coverage so your boss or your clients are happy.  If done well and based on data, revenue and sales should grow and everyone wins.  The ad sales teams get their media buys, your company gets the sales.

One added bonus with a media buy is that you can require some form of guarantee whether it is impressions, clicks, or revenue if you negotiate the ad buying contract well.   You’ll also be guaranteed certain types of coverage which can help with AIO/GEO, and makes less work for you as the mentions and features will now be guaranteed to happen.

Each media company is different, but these are people that need to hit revenue goals, so the two of you are aligned more than you think.  Your boss wants performance only, their boss wants ad sales + commissions.  Use your similar objective to find a way and make it work.

Other times it is purely revenue based and performance based and you’ll need to stick to pitching editors.  You’re going to anger the commerce ad sales team, so proceed lightly as this can burn bridges.  Your goal should be opening the door to lower fees, more coverage, and new opportunities, not alienating your brand from their media outlet.

Send product

Years ago brands could get away with requiring affiliates to buy product at full price or a discount.  This was never a good practice, but it was an industry standard.  Now brands have to ship product and cover the costs hoping the affiliate will follow through and produce content.

Affiliates are not your sales team or your influencers.  They are working on a rev share basis so it is fully their decision on what to do and when.  If you want to guarantee the content goes live, you need to pay a media fee and lock them into a legally binding contract, but this now becomes influencer and ambassador vs. affiliate.

If you don’t send product, your competitors will.  This makes the competitor the one that wins.  Unless you have an army of influencers, bloggers, streamers, and creators that want to promote you, you need to spend money and take a risk because I can guarantee the big brands will.  That is why it is harder for smaller brands and newer companies to enter in.  This goes back to the affiliate channel does not have an army of marketers ready to promote your brand.

Test if you have an affiliate army: Add an email address on the “become an affiliate” section of your website.  Small brands that have affiliates banging on their door will have at least five or ten people emailing daily ready to get excited and go.  Global brands may get 100 per day.  These are the very few exceptions where there is an army ready to promote you and you can do it on a performance only bases.  If this is your situation, you’ll watch growth month-over-month with no coupon, deal, comparison, and review content being created.  It is highly unlikely you are in this situation though.    

Onboard Comparison Partners and Be Added to Big Brands

Comparison partners that do videos and write guides comparing two or three large brands are working to intercept the consumer that is deciding between them.  By having your brand featured as a third option, you can funnel the customers from their pipelines to your business.  To do this you’ll need to be more competitive payout wise than the big brands, so be ready to lose money on the first two or thre purchases or a full year or two of subscription fees.

One other benefit to this is that machine learning systems may discover you including LLMs like ChatGPT, Perplexity, and Claude.  Once you’re on the radars of these “AI” engines, you may find your brand appearing in the outputs as a bonus.

Find Other Sources of Partnerships

The final thing you can do is to think about where your customers are and meet them there.  Communities they’re involved in, apps they use, things they research and enjoy online.  Now find ways to get these information resources to join your program.

Integrate an up-to-date datafeed into apps that let people demo a product or service on themselves or in their homes.  See if you can host contests and offer custom discounts only to people that entered but didn’t win (while making sure this is ok with your legal team).  Try giving product or offering your service as a prize, and the affiliate link can be used as the sponsor link to raise money for the group if people shop.

AI has and is opening up a ton of new opportunities for the affiliate marketing channel.  One example are the apps that let people see what things could be like.  Some have started joining affiliate programs to monetize and may be in your application queue under a different brand name.  It’s the new blogger/creator style that came in and I could easily see these partners becoming a new backbone of the affiliate industry.

• Fashion apps that get your body shape and height then match you with clothing or celebrity style alternatives.
• Wedding apps that let you customize and design the room, bouquets, wedding favor kits, recommend personalized gifts based on interests in the wedding party, and mix and match dress and bridesmaid dresses, fabrics, and colors.
• Travel planning apps that detail everything from transportation to excursions, where to book, accessories to buy and bring based on the season and potential weather, where to eat, resources to apply for passports and visas, checklists that can be monetized with links, where to stay, how to get there.
• Home renovation and interior design apps that snap shot your home or room and let you mix and match furniture, wall colors or decor items like wainscoting, the furniture, accessories like lamps and area rugs, and that make recommendations for the flooring and ceiling.  Some will likely let you pick an aesthetic which you can then customize to fit your budget, and it shares where to find products.

Affiliate marketing is not dead, it has evolved.  It was a pay on performance channel for many years, but now it is like PPC and social media ads, you pay and hope for performance if you want to see any measurable results in a reasonable time frame.  You can still get pay on performance partners, but when a big brand comes in and spends the money up front, you will lose.  So you need to always be recruiting, maintaining relationships, and finding ways to keep partners profitable and happy.