How have affiliate marketing commissions changed the business?

Markus Kellermann: "Affiliate Marketing makes advertisers more independent of GAFA"

The state of affiliate marketing has been the subject of controversy in the digital industry for years - a Google search for “Affiliate Marketing is dead” currently shows 26,700 results. Markus Kellermann has been in the industry for around 20 years, today one of the best-known figures on the German affiliate scene and, of course, an ardent supporter of the discipline. The 41-year-old talked to OMR about the consolidation in the industry and the challenges in affiliate marketing, but also about the revenue contribution affiliate marketing is still making in e-commerce.

Almost 25 years ago, in July 1996, today's e-commerce giant Amazon started its “Amazon Associate” program. Even if Amazon was not the first company with such a kind of "partner program", whose participants received a commission for each purchase made, the success of the program means that this date is considered to be the starting shot for affiliate marketing.

From trainee office clerk to class representative in the affiliate scene

Markus Kellermann

Markus Kellermann has been in the industry almost from the start. As early as 1999, he began training as an office clerk with website programming and search engine optimization for his employer, while also creating his own affiliate projects. Over the years, his path has led him via the mail order company Erwin Müller and the agency Explido to the performance marketing agency xpose360 (more about Markus ‘

Way in one of the early episodes of the OMR podcast). He has been managing director for almost seven years. At the same time, Markus and xpose360 organize the Affiliate Conference, one of the most important events in the scene. And the performance marketing pioneer deals with the development of the industry in his affiliate blog.

This has not only made positive headlines recently: Consolidations, new data protection regulations and the dominance of the large, digital platforms are constantly presenting challenges for affiliate marketing. We spoke to Markus in an interview about how the industry is coping with this.

OMR: In the beginning, large online shops were one of the growth drivers in affiliate marketing. In the past few years, two major e-commerce companies have heard rather negative things about their affiliate programs. According to hearsay a few years ago, Zalando reduced its affiliate marketing considerably; Amazon terminated the partnership with some of the major publishers in Germany in 2016, and in the USA the group cut commissions significantly this spring. Can one deduce from this that affiliate marketing is on the decline?

Markus Kellermann: I do not believe that. We tend to see that our customers are growing their budgets in the affiliate area. This is also reflected in the Affiliate Trend Report 2020, which we prepare every year, and for which not only our customers are surveyed, but over 1,000 representatives from the affiliate industry. Of course, there are also individual advertisers who change their strategy from time to time. In the case of Zalando, however, one also has to say that they have not only changed their affiliate but also their entire online marketing strategy and, to my knowledge, they have also entered into direct collaborations with some large partners. In contrast, there are always individual shops that grow strongly with affiliate marketing and whose sales go through the roof. The Bundesverband Digital Wirtschaft (BVDW) estimates that affiliate marketing in e-commerce generated sales of ten billion euros in 2019 - out of a total of 70 billion euros. In my opinion, there can be nothing better for an online shop than being able to buy performance-based traffic and becoming more independent of the GAFA platforms.

A trend that I have heard from in affiliate marketing over and over again in recent years is that some advertisers no longer operate their partner programs under the umbrella of large affiliate networks, but buy the technology for it and buy a “private” themselves Network ”. Is it still like that?

Markus: Yes and no. In any case, one notices that the interest in private affiliate technologies has increased in recent years, especially in large online shops. In our survey in 2018, 28 percent said that they dealt with the topic of Private Network ’; In 2020 it was already 48 percent. Most cite the reduction in costs and closer ties to affiliates as the reason for this. In my experience, however, the cost reduction often does not bring the hoped-for benefit for many advertisers, because at the same time the cost pressure of the networks and technology providers can also affect the service. In addition, there are now different pricing models for public affiliate networks, depending on the requirements of the advertiser. Many online shops now also operate a private network parallel to their public partner program. In the private network, they then enter into direct cooperation with large publishers, and they map the longtail via the public network.

Do you advise your customers on this dual strategy?

Markus: You can't really rate that in general, you have to look at it individually for each advertiser and their industry. It always depends on what is important to the advertiser: the broad or the specific reach. In the finance sector, for example, there is a well-positioned, specialized provider with financeAds. In the retail segment, the choice is bigger. Our customer Schöffel, for example, the manufacturer of outdoor clothing, wants to focus primarily on target group-oriented content portals in affiliate marketing and is now starting a partner program at Awin because they also have the right content pages in their portfolio. If we had started there with a private network, we would have had an elaborate process to convince the relevant publishers of a private network and to activate them to register there.

The merger of Affilinet and Zanox to form a large provider under the name Awin made waves in the public network market in 2018. There were other takeovers as well. What is your view of this development? Can you read from it that the market has shrunk?

Markus:It is true that the affiliate network market has moved a lot over the past few years and has seen consolidation. Awin certainly got the most attention there. In Germany, for example, Retailerweb, now Retail Ads, was taken over by the Vertical Ads Group; Belboon has entered into a cooperation with Ingenious Technologies. One of the drivers of this development is that today many advertisers are only exclusive to one network. In the past, the more network partners, the greater the customer's reach. This is actually no longer the case today because most affiliates are registered with almost all networks.

But that doesn't mean that the market is shrinking, on the contrary. On the one hand, there are always new providers, including international ones, such as recently in Germany Rakuten or Impact. On the other hand, affiliate marketing has become more complex over the years; through a large number of devices on the end customer side, many different publisher models, various remuneration models, higher data protection requirements and thus more complicated tracking ... That is why, for example, new players have emerged who are more technology-focused. The BVDW recently counted 50 networks and 40,000 affiliates. Then there are 150 agencies. A total of 95,000 specialists are supposed to be employed in affiliate marketing in Germany.

What has happened in terms of remuneration models?

Markus: There were massive changes. In the past, affiliates were remunerated purely on a cost-per-order basis: for example, for shoes purchased for 100 euros, the affiliates received a five percent commission. Today it's even more data-driven; On the advertiser side, there are various attribution models and so-called tracking switches to assign which touchpoint made which contribution to the conversion. Because this is not always transparent for the affiliates, new forms of remuneration have emerged with which the affiliates want to balance their entrepreneurial risk a little. One means that has become established is WKZ, i.e. advertising subsidies. Affiliate publishers collect this from advertisers, for example for home page or newsletter placements. In our annual survey, 70 percent of advertisers said they were already using WKZ or other hybrid models, and 60 percent reported increasing sales as a result. Ultimately, however, it is always about that both affiliates and advertisers have to act economically and the bottom line is that the effective CPO, including all costs, counts. If this works for both sides, a long-term partnership can be guaranteed.

And how much is the affiliate industry affected by the changes in data protection and tracking?

Markus:
Very strong. There are so many different changes that this topic will overshadow everything else in the next year. Many companies are therefore working hard to find new solutions here. On the one hand, there is the elimination of third-party cookies. Most networks have already found solutions for this and offer alternatives, such as Awin with bouncless tracking, or with server-to-server tracking, which most networks and technology providers now have in their portfolio. In addition to third-party cookies, the topic of TCF 2.0 was recently discussed in the industry - an update of the “Transparency & Consent Framework”. With this, the Internet Advertising Bureau wants to standardize how the industry obtains and stores the consent of users to save data.

At first, Awin did not want to participate in TCF 2.0 because they feared that they would not be able to assert what is known as a "legitimate interest" at the legal level. When the pressure from publishers became too great, they changed their minds. The next step is a new ePrivacy regulation, which is to come into force in the EU within the next few years and which, as things stand, will bring with it an even stricter cookie regulation. At the moment, however, the affiliate industry can still refer to the “legitimate interest” in most cases. Just last week, the BVDW published new guidelines on this. The experts come to the conclusion that the attribution in affiliate marketing is processing in which the interests of the user are only minimally affected, even if a cookie is used. In general, however, I am sure that the topic of data protection and tracking will keep the affiliate industry on the go in the years to come. Therefore, one should also deal with the so-called "log-in alliances" such as NetID, which could be an alternative to the previous cookie tracking for the online industry in the future.

Thank you for the interview, Markus!