Video may have killed the radio star — but (spoiler alert) not even the biggest names in e-commerce can kill affiliate marketing.
If you’ve heard rumblings about the death of affiliate marketing, you might be wondering whether it’s still a worthwhile investment for your e-commerce business. Does it still work in the same way? Can it be profitable? Is it really worth the effort?
Before you believe any fatalistic rumors, consider this: 81% of brands use affiliate programs, and 40% of US merchants say affiliate programs are their top customer acquisition channel. In fact, affiliate marketing spend is expected to top $8.2 billion by 2022.
The reality is affiliate marketing is alive as ever — although there have been some big shifts in the industry over the past few years. For e-commerce businesses, affiliate marketing can still be a surprisingly profitable revenue stream that connects your brand with new audiences and customers.
But be warned: things might look a little different these days.
The scoop on whether affiliate marketing is alive or dead
- How does affiliate marketing work?
- Did Amazon give affiliate marketing the axe?
- What does it all mean for e-commerce brands?
- Is affiliate marketing worth it?
How does affiliate marketing work?
Odds are, you’ve visited blogs or read articles with some type of affiliate disclosure: “This post may contain affiliate links. If you buy through the link on our site, we may earn an affiliate commission.”
But you may not know exactly how affiliate programs work, or how to leverage them for your business.
Here’s how it’s done:
- To put it simply, affiliate marketing is a type of referral marketing and revenue sharing where advertisers (i.e. merchants) reward content creators, bloggers, or publishers who promote their products or services.
- The affiliate partner earns a commission for providing a particular result — usually a sale, but sometimes for new leads, app downloads, or free-trial users, depending on the advertiser’s goals and the affiliate agreement.
- In most cases, affiliate partners use a specific link, coupon, discount code, or product landing page that ensures each conversion they facilitate is attributed to them. Affiliate programs are often hands-off for the brand — it’s up to the affiliate to figure out when and how they’ll promote the product with their audience.
- The most well-known affiliate program is Amazon Associates (which has been around since 1996, believe it or not). But there are a variety of affiliate networks available to merchants and partners alike, including Awin, ShareASale, CJ Affiliate, and many more.
What’s the difference between affiliates and influencers?
If you’re thinking that affiliate marketing sounds a lot like influencer marketing, you’re not wrong.
Once upon a time, the main difference was that influencers were paid a flat fee in exchange for promoting a product, independent of the results. In contrast, affiliates only received a commission if their promotion resulted in a sale.
But while there are still plenty of influencers who are compensated with a flat fee, the lines between affiliates and influencers have become increasingly blurred… and it’s a good thing for merchants and affiliates alike.
The fact is, flat-fee influencer marketing can be a risky investment. There’s no guarantee of results — and as social media algorithms become smarter about how they deliver content to users, follower counts become an even less reliable indicator of reach.
With affiliate marketing on the other hand, merchants only pay the affiliate partner if they deliver results. And it’s not expensive to get started.
It also incentivizes the influencer/affiliate to create great promotional content because the better their results, the more they get paid. This is especially great for micro-influencers who can leverage their small-but-mighty audiences to generate big rewards.
Did Amazon give affiliate marketing the axe? 💀
The world of affiliate marketing got a huge shock in April 2020 when Amazon slashed its commission rates for the Amazon Associates program by about 66%. For one affiliate, the change caused a 75% decrease in earnings. 😲
Understandably, it was a big blow for content creators and publishers who rely on affiliate income. Especially those who spent years working hard to build their earnings — not to mention Amazon’s own traffic and reputation.
While it isn’t the first time Amazon has pulled this kind of move, the message to affiliate partners was loud and clear. Amazon doesn’t need them.
And let’s be honest: when the world’s largest online retailer takes such a direct shot at their affiliate program, it’s no wonder people are asking if it’s the kiss of death for the industry.
Why did they do it?
Of course, Amazon didn’t explain the decision to cut commissions. But given the company’s behemoth status, it’s an understandable business move. They definitely aren’t hurting for traffic or SEO juice, so why pay out fees for services they don’t need?
That said, Amazon may also have had some not-totally-selfish reasons for the change. At the time of the adjustment, consumers relied on online shopping more than ever before. With such a massive surge in demand, even Amazon was scrambling to keep up with the pace.
As explained by Reddit user /u/wirez62:
“[Amazon] slashed their affiliate program because they couldn’t even keep putting products out the door during COVID-19. … Affiliates will still be essential to Amazon’s business going forward, it’s just they hit such a wall of speed that nobody on the planet could keep up with. At that point in time, affiliates [were] useless to them, promoting products that they PHYSICALLY CANNOT SELL.”
Time will only tell whether Amazon returns to pre-pandemic commission rates (but don’t hold your breath).
What does it all mean for e-commerce brands?
Here’s the good news: Affiliate marketing is still a huge opportunity for e-commerce businesses.
Plus, if Amazon’s commission cuts lead savvy affiliates to seek greener pastures, other brands can swoop in to build strong, profitable partnerships.
The benefits of affiliate marketing for e-commerce
We’ve said it before and we’ll say it again: No marketing strategy can compare with word-of-mouth recommendations.
Not only are customers 4x more likely to buy when they’ve been referred by a friend, but referred customers are also 4x more likely to refer others to the same business. (Talk about a virtuous cycle.)
Fortunately, affiliate marketing taps into the same trust- and relationship-based psychology that makes word-of-mouth referrals and reviews so successful.
While affiliate partners aren’t always bosom buddies with every reader, subscriber or follower they reach, they’re typically far more connected with their audience’s wants and needs than other advertising and marketing channels. When they say, “I like this and I think you’ll like it too,” their audience truly listens.
Working with affiliates allows merchants to reach targeted audiences, get a warm introduction and increase brand awareness — with limited risk and low startup costs.
As an added benefit, affiliate programs are easy to monitor (they have to be so your partners can receive the correct payout), which means you always have a clear view of your affiliates’ performance and your ROI — so you can strategize and make more effective marketing decisions for your business.
Is affiliate marketing worth it?
Amazon may be putting the final nails in its affiliate program’s coffin (or maybe not). But that doesn’t mean you shouldn’t give it a try.
With changes in the affiliate marketing industry turning this once-passive channel into more of a collaborative partnership, there’s a lot to gain from getting involved. The affiliate evolution gives affiliates the info they need to be successful while allowing them full creative leeway to create content that truly resonates with their audience. And better content = more conversions.
We won’t sugar coat it — setting up an affiliate program can be a challenge, whether you use an affiliate network, deploy a Shopify affiliate marketing app or decide to go the DIY route. But the opportunity to drive more sales and grow your customer base is readily available if you’re ready to take it.