Sitting in McCarran Airport, listening to the slot machines jingle, I feel an odd sense of deja vu. Somehow, I am back in Vegas less than two weeks after CES. I attended the Affiliate Summit West today, as part of my effort to better understand digital economies. It is a much smaller show than CES, but just as crowded. Fewer gadgets, but lots more energy.
For those of you who prefer your technology in some solid form like semiconductors or networking boxes, the Affiliate Summit is a portal into a very strange world. Conversations here have as many, if not more, acronyms than any telecom conference, but the product on sale is always a bit vague.
Let’s start with the basics. Affiliate Marketing is the term for the exchange of online actions for some form of ad dollars. Much of the time, when we talk about online advertising, we are talking about someone paying a website based on the number of times their ad is viewed, or impressions. This is the show where advertisers may for performance. If you have a website, you can run an ad for someone, and if one of your viewers clicks on that ad, and then buys something from the advertiser, you the website owner get paid.
Affiliate Marketing has been around for a long time, but in recent years it has grown very rapidly. I told an old-time Internet-eer that I was attending, and he described the show’s money makers as “a cancer”. Because another word for much of this form of marketing is spam.
Admittedly, there were a very large number of companies selling vitamins, supplements and other “nutraceuticals”. And the number of companies touting their affiliation with payday lenders is probably a red flag too. However, Affiliate Marketing has come a very long way since the 1990’s. This is a big robust industry, where virtually every retailer and product company has some form of affiliate program.
I first got interested in affiliate marketing when the website Wirecutter launched. The Wirecutter was founded by several well-known tech bloggers. It is one of the best product review sites out there, with thorough analysis of every consumer electronics category. They generate all of their revenue by the links from their site to Amazon, which as you can guess, redirect through Amazon’s affiliate program.
So those are the two extremes – Wirecutter with its excellent reviews at one end, and Male Enhancement pills at the other.
I think the real driver of the industry in the past few years has been the rise of mobile, especially mobile gaming. There is a very hot market for buying app downloads or ‘installs’. The amount of money thrown at the category has provided an underpinning for growth across the affiliate market. My opinion is that the mobile install business is very frothy, with too many companies chasing installs with too much venture money. That being said, I think we passed the inflection point for affiliate marketing, that even when the mobile gaming bubble bursts the rest of the industry will largely carry on, albeit on reduced budgets.
I have always assumed that one of the big appeals of online marketing is the vast amount of data the system generates. With TV commercials, advertisers never know exactly how many people see their ads, let alone what the affect those ads have on purchases. On the Internet, advertisers can get a highly precise figure on viewership and performance. It would seem that online advertising should be a very quantitative field.
However, on the ground, this business resembles Hollywood much more than Silicon Valley. There is a strong element of it being a hit-driven business. Right now, apparently, the big money in mobile ads is coming from companies looking to attract users in India. But the pocket of demand moves around. Nine months ago it was China.
As a result, this show has a very personal feel to it. When I talk to people in the industry they often lament how low-tech much of their work is. Signing individual deals and tracking everything in Excel. True, there are companies employing sophisticated Big Data tools on expensive Hadoop clusters, but the big money seems to remain in salesman lining up advertisers.
For part of the day, I walked around with an agent for a US video network. He owns several highly rated, niche YouTube channels that generates a respectable amount of traffic. Vendors were happy to talk to him, but were not that interested in what he was doing. By contrast, I inadvertently followed two agents for a small Indian ad network. In every booth they visited, they were aggressively courted, with repeated requests for follow-on meetings. I do not know this for a fact, but from what I overheard, I am fairly certain the US video agent had at least as much traffic as the gentlemen from India, but numbers are not all of the story.
I chatted with one industry veteran who I have known for a long time. I commented that the industry seems to be maturing, “Not so scammy, but still relationship driven,” was my comment. “No,” he replied “It is extremely scammy still.”
The bottom line is that Affiliate Marketing is firmly established in the marketing stack. But it is far from mature, there are going to be some big opportunities in the future to layer on technology and build very robust, automated markets here. In the mean time, be careful what ads you click.