Publishers’ Affiliate Revenues Are Flagging

After rising to historic peaks during the depths of the pandemic, some publishers’ affiliate businesses have slowed or declined in growth this year due to a variety of factors, tempering hopes that the programs could help media companies withstand market fluctuation. Conversations with media executives and proprietary data shared with Adweek by the affiliate marketing platform Skimlinks paint a complex picture of an industry that has seen an explosion of interest in the last three years, but one whose fortunes have risen and fallen in line with broader economic trends. Four main factors have affected publishers’ affiliate businesses over the past 12 months: slumping traffic, which shrinks the number of potential conversions; declines in consumer purchasing power, which reduce propensity to spend; two key changes to the Google algorithm, which affect affiliate businesses unevenly; and supply-chain issues, which have throttled retailer supply. Altogether, these headwinds have led total commission growth––a measure of affiliate revenue––to drop to 2% this year, down from 163% in 2020, according data from Skimlinks' cohort of U.S. Managed Service Publishers, which includes a high concentration of publishers within the Comscore Top 250. Compounding these factors, the field of premium affiliate marketing has grown more crowded since 2019, said Lauren Newmann, Skimlinks’ senior vice president of revenue, U.S. As more publishers waded into the affiliate business to take advantage of soaring ecommerce adoption during the pandemic, competition for search rankings and favorable commission rates increased. Now, with demand dropping and prices rising, a growing number of media companies are competing over a dwindling number of shoppers, Newman said. “Because you have so many more publishers who are doing commerce intelligently, there is much more competition,” Newman said. “Still, despite the current headwinds, building an affiliate strategy is the right strategy for publishers to build a sustainable revenue stream long-term.” Below are the four main factors contributing to the increasingly competitive world of affiliate revenue. Less traffic, fewer clicks Affiliate marketing is essentially an equation, where publishers anticipate converting some percentage of total visitors into shoppers. If web traffic drops––and it has this year––so too will the number of converted shoppers, even if a publisher maintains its same conversion rate. As a result, readership declines have turned into a drop-off in total clicks to affiliate content. However, publishers have improved the efficiency of their conversion rates, due mostly to a continuing process of optimization that sees publishers tweaking the copy, imagery and visibility of articles with affiliate links, one media executive told Adweek. So although publishers’ click growth has slowed over the last few years, many have managed to compensate for that decline––at least marginally––by improving their conversion rates. Declines in consumer purchasing power Many publishers embraced affiliate commerce early in the pandemic, when work-from-home mandates combined with stimulus checks to boost consumers’ online shopping. Now, with shoppers returning to stores and inflation reaching record levels, both of those key factors have been muted. As a result, the average value of online shoppers’ carts has decreased, as have the average earnings publishers take home per click. Savvy publishers foresaw that online shopping would normalize after the pandemic, and they knew stimulus checks were providing a one-time pop of spending power. But many did not anticipate the rising levels of inflation, which have led consumers to trim unnecessary spending. However, not all affiliate businesses are alike, and those that help consumers find budget-friendly items or must-have products have fared far better than those curating discretionary products, one media executive said. Changes to the Google algorithm Most publishers rely heavily on Google search for sending traffic to their affiliate articles, so changes to how Google ranks pages can dramatically affect their business. Two changes to the Google algorithm––one made in April 2021 and the other in March––have disproportionately affected certain kinds of publisher affiliate businesses, media executives tell Adweek. The first change penalized publishers whose affiliate articles lacked original photography, while the second penalized pages that lacked a diverse make-up of outbound links or clear testing criteria, among other changes. Why Publishers’ Ad Revenues Skyrocketed Last Year, in 5 Charts These updates more dramatically affected publishers whose affiliate businesses lean more curatorial, rather than empirical, sources tell Adweek. Publishers conducting tests on products are more likely to photograph them and list the criteria they used to inform their selections, whereas curatorial programs are more likely to use existing imagery and focus on factors like style. “A lot of publishers have seen their Google ranking get demoted, and that has contributed to a major decline on some of their most important pieces of content,” Newman said. “And it's a little unclear why, because even publishers who followed the new parameters to a tee have seen some penalisation.” In addition, Google has decreased the amount of space on Page One rankings for organic links, Newman said. For highly contested keywords, like best mattress, Google now devotes three-quarters of its search results to paid products and other Google products, like Maps or alternate inquiries. Supply-chain pain points Publishers have little control over the supply chains their retail partners use, but they have been negatively affected by the kinked loops nonetheless. With retailers unable to maintain their supply of in-demand items, they have responded by lowering commission rates in an effort to discourage publishers from directing traffic to out-of-stock products. In other instances, publishers have been forced to pause or remove affiliate links that send shoppers to unavailable items. These factors have led commission rate growth to decline this year, meaning publishers have had to fight harder for traffic only to see their profit margins tumble. Most publishers do not see these temporary measures as discouraging their long-term investment in the affiliate business, but they have adversely affected bottom lines. “As with everything, it pays to have a diversity of options––having more irons in the fire will help hedge against these disruptions,” Newman said. “But with the supply chain, some turbulence is unavoidable right now.” Atlantic Ventures Is on Pace to Bring in 10% of Total Revenue

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Publishers’ Affiliate Revenues Are Flagging—These 4 Charts Show Why

The once-hot business has cooled since its pandemic peak

Mark Stenberg

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Mark Stenberg