New Zealand affiliate marketing, what we can learn from abroad

It was interesting to read this article in Marketing Magazine recently, where Annabel Grey discussed the state of affiliate marketing in Australia versus bigger markets, where it has grown to be the most effective performance marketing and lead generation channel. In New Zealand digital marketing circles, we sometimes look to Australia and lament how far behind we are when it comes to affiliate marketing. That’s why it was a surprise to see that Australia was looking further afield and feeling inadequate about their own state of affairs. This story looks at what’s happening overseas, where New Zealand is right now when it comes to affiliate marketing and why retailers and publishers should pay attention.

What is affiliate marketing?

Affiliate marketing is a performance marketing channel where advertisers pay affiliates for referring them online shoppers. Affiliates (or Publishers) have audiences with specific interests. They could be bloggers, platforms, loyalty sites, media, influencers, comparison engines or anywhere shoppers seek inspiration and information before they shop. Affiliates promote brands relevant to their audience and use tracked links, so if the users they send to advertiser sites buy something or take action, the affiliate gets paid a commission.

The appeal of affiliate marketing for advertisers is the high return on spend, with a 2018 PWC/PMA study in United States reporting the channel delivered an estimated return on investment of 12 to 1. This is likely due to the fact that advertisers set the commission rates that they are happy to pay, so it’s easy for them to ensure the cost of acquiring new customers is lower than the value of the new customers delivered.

Publishers on the other hand inform and inspire audiences at many stages of their buying journey and promoting affiliate links gives them freedom to decide what they promote and how they promote it. Its also a way to earn revenue from more specialised content such as buyers guide stories that rank well in google search and deliver visitors in-market for specific products. This is valuable content and affiliate links can support making it pay. The model also encourages innovation as start ups find new ways to engage shoppers.

So, what’s happening overseas?

The research referenced in Marketing Magazine reports that 70 of the top 100 retailers in Australia operate an affiliate program which they suggest is much lower than in bigger markets where almost every top retail brand operates an affiliate program. In the US, $6 billion was spent on performance marketing last year, 39% with content publishers and bloggers. Big Commerce suggests 15% of publisher revenue is generated via affiliate links, while the channel is also estimated to deliver 15% of all ecommerce sales in the US.

Overseas markets, including Australia, are home to a diverse ecosystem of affiliates, publishers, partners and platforms that promote brands at every stage along the purchase journey and in relevant moments of purchase intent. Many operate successful affiliate based businesses simply by providing valuable reference information for shoppers looking to understand more about the products they buy.

Examples of international publishers to embrace affiliate links from stories that inspire and inform readers on their path to purchase include GQ, who told Digiday that audiences spend more time on this content and that commerce revenue grew 500% last year. Publishers like GQ use SEO and on site search data to inform what products their audience are interested in, and are well positioned to give them ideas.

Other success stories include Dennis Publishing and BuzzFeed who have grown their affiliate business by providing trusted review content, timely lists and daily run downs on products for people in-market. Dennis reported that developing their affiliate strategy grew revenue while strengthening relationships with advertisers as the publisher could, for example, create specific audience segments for retailers around Black Friday, for targeting.

Meanwhile perennial digital trail-blazer BuzzFeed reported earlier this year that commerce and affiliate links are an increasingly important part of their relationship with advertisers. In fact just last month they announced a partnership in the United States where all recipes in the BuzzFeed Tasty app will be seamlessly shoppable in partnership with Walmart.

Michael James, former Audience Development Director at Bauer Media New Zealand recently transferred to company's New York office. Commenting on the role affiliate marketing plays for publishers in the United States versus New Zealand, James told us: “Digital marketing in the US is programmatic-dominated with low margins, so publishers have had to work to diversify their revenue . A commerce content strategy is table stakes in that mix. I think it's definitely a window into the future for New Zealand publishers”

These are examples in the mainstream publishing realm, however this represents just a small part of the total universe of affiliates active in the large markets. There are many types of innovative platforms and business models which create new online avenues for engaging shoppers with social proof, information and inspiration before purchase.

While affiliate marketing appears relatively evolved in Australia when looking from this side of the Tasman, the conclusion they appear to be drawing is that they are behind the big markets due to lack of awareness about how far the channel has evolved. A channel that was once dominated by coupon sites and travel blogs, has evolved into a diverse network of sophisticated and mutually beneficial relationships between brands and partners.

How does New Zealand compare?

While there is a distinct lack of data on partnership and affiliate marketing in New Zealand, looking at the statistics from across the ditch it is easy to draw some conclusions. We know that 70 of the top 100 retailers in Australia operate affiliate programs, and that’s deemed low by industry commentators. So how do we compare? Would you believe In New Zealand based on what we see in the market, that number is more like 15 of the top 100!

There could be a number of reasons for this. Some online business models are harder to get off the ground in New Zealand due to our lack of scale. The local industry has also lacked education of how the channel has evolved too . That’s changing though. With two local networks that help with independent tracking, market education and making connections both publishers and advertisers are starting to take more interest.

What’s clear to me is there is a growing list of innovative, influential publishers, platforms and influencers in New Zealand, but its trickier for them with so few local brands running programs, and the smaller scale here. This list includes leading New Zealand publishers with online brands that shoppers go to for product ideas, through to innovative start ups like Shook that help the next generation of shoppers find the right products on their phones.

Shook is an AI beauty product recommendation app helping people find the right beauty products. It's a chatbot powered by data, expert knowledge and ethical considerations like animal testing and skin safety. Founder, Olivia Panzic currently promotes Amazon affiliate links to her audience. "We'd love to work with New Zealand businesses that have affiliate programs but find ourselves turning to Amazon's until more local retailers catch up"

The internet is a big place. Its full of people talking about products, whether they are technology review sites, beauty or home inspiration, financial product comparisons, fashion blogs or any other place consumers go to get information or inspiration before buying online (or in store for that matter). For creators of this type of niche content that attracts users with purchase intent, it is tough to get by on banner ads, so in New Zealand many of these creators have no choice but to link shoppers off to international retailers.

Commenting from New York on ecommerce marketing for brands in the US versus New Zealand, James added: “On the brand side, I see more sophistication in the way advertisers use technology to create paths to purchase. Casper, for instance, has publisher partnerships that enable them to re-market to in-market consumers with publishers’ product reviews and affiliate content across every touch point”

The upshot? As this channel evolves in New Zealand, and it is growing fast, it may be the international brands like Amazon and others that service New Zealand who stand to win spend in categories where affiliates play a role. It’s perhaps all the more reason for Kiwi marketers to explore the channel and decide whether affiliates may be good partners to help them cost effectively grow, while lowering their reliance on Google and Facebook ads.

Time to think of your 2025 self

So what’s at stake? Last year online shopping accounted for around 9% of all retail spend in New Zealand, topping $4 billion. Compare that to the UK, a sophisticated online market where affiliates are as mainstream as Google ads and online spend is 18% of total spend, and you get a glimpse of the future. If the New Zealand retail market grew at 4% per annum over the next five years, and the online share of this grew close to that of the UK (around 18%), then Kiwi’s would be spending around $10 billion online by 2025.

For retailers whose primary focus in 2019 is buying Google ads and sending mailers to drive shoppers in store, it’s a good time think about your 2025 self. Your competitor in five years may not exist yet, they might be nimble direct-to-consumer brands or forward thinking traditional retailers that transition well to omni-channel. One thing is certain, they will be sophisticated online marketers striving to ensure their brand is present at every relevant online moment, knowing that shoppers do their homework long before they enter the store.

Like this story?

Michael FuyalaSeptember 26, 2019