Retargeting & Affiliate Marketing: Friends or foes?

Affiliate marketing has by now become quite a mature online marketing methodology. Growth rates have slowed down over the last three years as many sales managers pretend that the biggest chunks of the cake have already been distributed in terms of advertiser offering and publisher reach. Many customer portfolios are budgeted on the basis of general e-commerce growth rather than ambitious gold-rush planning. The margin wars are fought with increasing intensity and consolidation takes place on international scale. The top management of affiliate networks all over have begun to realize that innovation is needed to maintain growth rates, market shares, and gross profits.

It is in this climate that affiliate marketing people look around and start to wonder what has been going on in the market — a whole new class of service providers have emerged on the basis of a technology that the affiliate networks owned for more than a decade.

Retargeting is the keyword, and there are quite a few fast-growing companies (some with more than 100 employees already) that are pushing hard on their internationalization. And guess what? Many of them officially price on CPA.

Now is that a threat or an opportunity? They have their own tracking and get their pixels much deeper in the shops on the advertisers’ pages. Moreover, they start to recruit publishers and build own networks by offering decent CPMs. Their reach is based upon smart remnant inventory buying from large portals, ad exchanges, and/or ad networks. On a first impression, this appears to be not quite the reach that affiliate networks have been able to monetize with regards to their eCPMs. On a second view one could say that affiliates have been reaching out to that type of inventory already via post-view commissioning, programs with 100% confirmation rate and some other tweaks that allow for proper publisher risk-handling in that little arbitrage universe.

Retargeting seems to be an additional way to generate sufficient eCPMs in order to buy reach from the “brand sellers,” and affiliate networks start to come up with ways (like enhanced container tracking) to integrate that business into their networks. Ideally those retargeting players would become an additional powerful publisher segment in their portfolio. The value proposition of the affiliate networks is strong as they can wave the banners of hundreds of potential advertisers (though not every advertiser works in that model).

The downside is that retargeters (alternatively called “remarketers”) did a good job in selling their services to advertisers directly. Moreover, they managed to sell unlimited campaigns on less risky and more profitable models (CPC and post-view CPA). And the advertisers are happy with the CPC model, as they see the retargeters reinvest their profits much faster in additional reach on the basis of a strengthened cash flow.  So the question is: will retargeters start to move into a kind of symbiosis with affiliate networks for the sake of fast advertiser growth, or will they dare to continue to place their own tracking tags, grow their own sales forces, and maintain their pricing levels in a direct customer relationship?

This will be interesting to follow…