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The Affiliate Hypothesis

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Exploring the best monetization strategy for affiliate marketers — any ideas?

Written by Brook Schaaf

I’m looking for some information — maybe you can help me out? 

The hypothesis is that affiliate is the best way for publishers to monetize certain content under certain conditions. This may sound obvious or overly qualified, but hear me out. It might seem obvious in the sense that any number of businesses make a lot of money from affiliate marketing in a good number of categories, like coupon, reward, commerce content, media arbitrage, etc. It might seem overly qualified insofar as any kind of monetization would qualify under these conditions, so let’s look at the main monetization pathways and the conditions favorable to affiliate.

Monetization structures include payment based on impressions (CPM), clicks (CPC), actions (CPA, including CPS for sale), or lump sums (paid placements, minimum guarantees, etc.). It seems fair to say that the most favorable structure for the publisher is CPC, as with Google Ads, which generated almost $240 billion in 2023. Last year Meta, which can charge on both a CPM and CPC basis, generated over $130 billion. This long-maintained duopoly has recently become the triopoly with Amazon, which generated almost $47 billion in advertising revenue for the calendar year. (TikTok showed a relatively modest $16 billion.) 

Amazon typically charges a CPM, but consider that in at least the first three cases, the advertisement is highly targeted and very likely to reach an outright intent buyer, even if they haven’t searched for a particular keyword. This high intent space is also where affiliate excels, reaching buyers when they are doing product research or price shopping. This also opens up an opportunity for deft arbitrage for both retail and lead publishers, who might buy ads on Google or Facebook.

But these expansive walled gardens are not easy to build or maintain. Ad sellers must have a critical mass of traffic in order to attract enough advertisers to bid up prices. Years ago — and for a long, long time — you could buy clicks on GoTo or Overture for a nickel. A publisher that lacks this critical mass can take distributed CPC inventory from a walled garden, pursue direct CPM or lump sum sales, allow programmatic display, or post some kind of affiliate links. 

Distributed CPC inventory may not be easy to come by and may look even worse than banner ads, which, frankly, direct sales or not, are hardly ever clicked on. (Can you even remember the last time you engaged with one?) This is what leads to the infamous clickbait chum boxes seen so frequently across the internet. Tell me that someone who wants to learn one weird trick is a likely customer. Sensitive categories or content, such as guns and ammo publishers, may not even be able to participate in any of the above because of “safety” rules. 

That leaves lump sum payments and affiliate. The former is great if you can sell it, but unless it’s for access to some kind of event, there is sooner or later going to be the expectation of performance, which leads back to affiliate.

So, straightforward enough, but it brings us back to my request — are you aware of any studies or models that prove the above? 

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