“Sales Side” is a column written by the sales side of the digital media community.
Today’s column was written by CEO and co-founder Michael Jaconi. Button.
In the walled gardens of Facebook and Google, customer acquisition rates increased and ROAS decreased.
This is hardly new news at the moment. It’s also well known that without the conversion-based measurement they’re used to in walled gardens, marketers flock to media where they can reliably access their purchase data.
Companies like Honey, Ibotta, and Impact have achieved billion-dollar valuations following this transformational trend. I predict the next wave of unicorns in the marketing stack will rise above the retail media.
Amazon Ads, the first scaled version of retail media, proved that marketers will spend on a seemingly unlimited basis once they are sure of the link between ads and sales. Privacy issues add another feather to the retail media headline, as retailer platforms are largely unaffected by Apple’s changes.
But retail media strategies have taken their cues from the great walled gardens by targeting customers almost exclusively at their own retail properties, where first-party customer data has been applied.
Retail media can instead learn from affiliate businesses that employ similar strategies with high-intent traffic on the web, but without the power of retailers – a well-known commerce brand that people buy from.
Wait, what does retail media have to do with affiliate?
But in the affiliate world, publishers pursue the same goal as retailers: to turn online intent into a shopping journey.
Affiliate publishers train consumers to link from their sites to take action elsewhere through a mix of strong content, empowerment through social media influencers, promotional offers and expert reviews. For retailers, this is achieved through great UX, personalization, and a growing number of app downloads and loyalty programs.
There is minimal overlap between affiliate commerce and retail media (no one can confuse an affiliate network with an online store). But there is a huge untapped opportunity in this convergence.
Affiliate marketing may seem boring – this is no CTV or metaverse – but retail media can learn (and profit) from the affiliate.
What is suitable?
Traditional affiliate marketing programs perform well and predictably – after all, they make money by connecting directly to a sale. But they don’t scale dynamically to meet demand, and there’s little way for marketers to increase their affiliate channel spend or for publishers to increase their revenue. It’s just that too many readers click a hyperlink, and that number cannot be increased, at least without publishers spending an unsustainable amount on their buyout marketing.
Retail media is a way for affiliates to escape the corporate value cuteness they encounter by incorporating media and shopping intents into a retail media offering.
How does retail media help the affiliate?
Affiliate networks on static commissions can use retail media as a step towards auction dynamics. For programmatic, there’s a huge chunk of lost value in the market to sync sales with media that can correlate.
Because affiliate marketing is almost always done instead of predetermined commissions on sales, retailers can determine when commissions should increase when they need to clear a particular inventory or decrease if a product is selling organically. And that’s just the low-hanging fruit. Retail media platforms can auction off affiliate links to brands as a page loads, and greatly increase the value of the media, just as retailers do with sponsored search units.
So how does retail media benefit?
It looks like a big deal for affiliate networks and publishers, but there’s also meaningful value for retailers and tech companies tracking their retail media dollars.
First, there is pure corporate value.
Affiliate networks (or “commerce marketing platforms, if you prefer to call it”) are valued in the 2-10X revenue range. Shopify and many commercial advertising companies are trading with 15-20x or more revenue. Retailers can make up for these gains if they add an affiliate network at relatively low prices.
Affiliate networks can also help retail media break out of retail marketing silos. The affiliate industry works with savvy performance marketers – just the kind that retail media should be devoted to digital native advertisers with a premium on intent and first-party conversion data.
The affiliate will create entirely new inventory opportunities for retailers; these are now mostly limited to banner ads or sponsored search results on their site.
If the retail media doesn’t seize the opportunity, big tech
It’s not just retailers and tech startups pursuing a retail media business. Oftentimes, it is the outsiders who see the opportunity most clearly.
When Microsoft Advertising bought Xandr this year, the headlines were all about the AppNexus story.
But Microsoft’s headline was “Microsoft will acquire Xandr to accelerate the delivery of digital advertising and retail media solutions”.
When Satya Nadella sees a deal, she understands. And retail media is an absolute steal right now compared to social media ROAS.
Best of all… users need it!
The inhabitants of the Internet also benefit from it.
Recipe sites are a prime example of how ads fail on the web. Pages are full of ads and the category has struggled to grow despite high intent.
There are affiliate relationships out there, but they make money at a fraction of the potential value and are often not linked to where online grocery shopping takes place. The recipe posting category cries out for sending hungry traffic to Instacart or Kroger, but right now sites are drowning out under banner units instead. And recipe sites have no way of capitalizing on this supposed revenue stream.
The same is true for retailers that compete intensely with each other for the same audiences of online shoppers, but still leave all that intent-laden traffic on the table from other channels such as affiliates.