Charting Choppy Waters: The Road Ahead for the Partnership Economy in 2023

It was great to be back in person, collaborating with colleagues, customers, and partners at Affiliate Summit West 2023 this year! I had the privilege to participate on the keynote panel with other industry leaders as we discussed some of the biggest challenges facing the partnership economy along with opportunities for improvement, innovation, and growth in our field. We also dove into how the current economic climate is impacting our industry and the role affiliate marketing has to play in helping brands, publishers, creators, and more to succeed.

As we continue to evolve despite tenuous times, it was great to have a moment to really delve into these topics and look ahead toward the future of partnerships.

Charting Choppy Waters

The main theme of the panel focused on how the affiliate and partnerships industry continues to navigate macroeconomic challenges and what we as leaders see as potential roadblocks for our industry. With each new COVID strain and its ripple effect on everything from the stock market to the supply chain, the pandemic and uncertain market conditions continue to influence how we live and operate. We’ve all had to chart choppy waters the last three years and adapt, along with our clients.????

But affiliate marketing has continued to prove resilient during tough times and has been able to ride the waves of these macro trends. Whether it was focusing on coupon and loyalty programs back in the recession of 2008 to meeting homebound consumers via creator and commerce content in 2020, affiliate marketing has gotten stronger each time. As the economy fluctuates and brands have to decide where to invest their marketing dollars, tighter budgets are typically a net benefit to our industry because of its traditional performance-based roots, providing a tailwind and disruption with traditional channels.?

“A Smooth Sea Never Made a Skilled Sailor”

However, it’s not all smooth sailing if we truly want to reach the potential of our channel and expand our total addressable market (TAM) by 100x. To that end and in answer to the question on stage, the only real challenge I see for our industry is the industry itself. Most of the industry is still relying on old methods and the mental block of associating “affiliate” with only a performance pricing model (and last-click attribution for that matter). Too much of the “affiliate” industry is trying to cram a round peg into a square performance pricing hole when attempting to work with influencers or commerce content publishers, for example. Partnerships run deeper than that, and as an industry, we need to more deeply understand what truly makes our channel unique. What makes our industry unique is that the brand does not fully control the messaging as they do in other marketing channels. With partnerships, which includes affiliate marketing, brands relinquish control and let the publisher speak to their audience in their own voice.?

And the wind in our sails moving forward will come from better understanding how publishers and businesses connect with their audiences through commerce content and then helping brands authentically tap into those relationships. With traditional advertising in the past, brands fully controlled the message and mitigated any risk of it being re-contextualized. It was a simple placement transaction with little feedback or interaction. And because the brand fully controlled the message, they also assumed the risk of performance and therefore predominantly paid for this media on a CPM or CPC basis.?

While traditional advertising reigned, affiliate marketing originated during a time when publishing in our industry was mainly about discounts and loyalty programs. It was relatively easy to automate publishing this type of content, and that made it easier for the publishers to carry 100% of the risk of performance in this scenario.

However, affiliate marketing has evolved and expanded, and today a different type of publishing is occurring. Creators of all backgrounds, publishers of all sizes, and even other businesses are investing more time in understanding the brands and products they're partnering with and recommending. The content they're producing is longer-form, more detailed, and of a higher production value. It includes real-world experience, research, photos, videos, software integrations, and so much more that truly resonates with consumers. But what makes our industry unique still remains: brands relinquish control to the publisher to speak to customers in their own voice.?

Brands must embrace the fact that these publishers of commercial content are in a unique position to truly connect with their audience and to refer customers. Higher production effort goes into what they do, and they’re all having influence at different stages of the consumer journey. That value needs to be isolated and understood, including higher funnel contribution, and compensation to these partners needs to be adjusted based on incremental value throughout the buying journey. I’m proud the impact.com platform is a pioneer in our industry to this end, providing both the insights and ability to do this. Because of this unique capability and the automation impact.com is addressing for administrative management tasks and workflows across the partnership lifecycle and across all partnership types, impact.com is becoming the global standard platform used for all partnerships.

So the challenge for our industry ahead is whether brands can break the status quo of “affiliate marketing” and re-think their modern partnerships strategy. This will involve embracing compensation to partners on a combination of fixed fees plus commission, what we call “PostPlus,” and adopting technology (like impact.com) that both provides full-funnel data and enables them to update contracts and pay partners for incremental value and their influence higher up in the conversion funnel instead of only last click. If brands are looking to scale, this is especially important, as currently there is more demand than supply with influencers. One way to appeal to and attract more creators is by offering some component of fixed fees and crediting them for more upper funnel events. If we can do this, we will see tremendous growth for our industry as we look to move beyond traditional discount and loyalty rewards affiliates, and significantly expand our TAM by working with all forms of commerce content publishers, including creators and other businesses.?

Continued Growth in 2023

So how will we all capitalize on the big addressable market for partnerships this year, where will each of our businesses see growth this year? I loved this question because impact.com as a company very much lives a growth mindset (versus a fixed mindset) and has itself doubled in size over the past two years. My response to this question focused on several growth drivers for our business: continuing to push technological innovation, investing in new partnership types, incorporating new actors into our ecosystem and expanding further internationally.

impact.com has always led with innovative technology and products - from pioneering unique coupon code technology to isolating incremental value and powering compensation of higher funnel contribution and more. impact.com has been an industry leader that created significant channel efficiency for our clients, freeing up investment to expand into new partnership types. impact.com clients typically see 50+% channel savings when migrating from a traditional affiliate network program to our platform, with gross merchandise value (GMV) remaining the same or higher as a starting point. This level of investment in innovation and technology will continue this year. impact.com is focused on removing any points of friction in using the platform and automating more partnerships on the platform. This is especially important for smaller businesses as they come onboard the platform, for example through impact.com’s integration with Shopify, Adobe, BigCommerce and other e-commerce platforms. Every business regardless of size needs partnerships in order to be competitive and to acquire revenue cost effectively today, and therefore every business needs a partnership management platform.?

Moreover, the industry will continue to grow at a high rate by opening up its mindset and budgets to invest in new partnership types: such as with influencers, commerce content publishers, and other businesses. We need to embrace the fact that there is a sea of commercial information out there that didn’t exist even five years ago, especially on platforms like YouTube, TikTok, Wirecutter, CNN Underscored, etc., and I believe there is a tsunami wave of more commerce content coming. This supply will be driven by the consumer who demands this kind of third-party endorsement before they buy today, as well as by an increase in people wanting to be creators. All of this commerce content that’s being published in its many forms across all different publisher types provides brands enormous potential to expand their customer base, increase their revenue growth, and more importantly, become more relevant to customers compared to traditional interruptive advertising techniques.?

To that end impact.com is doing what I encourage others to do; break through the mental block and technological status quo. impact.com is proud to have recently announced powering Walmart Creator, which is Walmart’s platform for influencers and customer ambassadors. Our team identified solutions for Walmart based on innovations on our own platform and while it’s inspiring to say that we are powering a new technology platform for the world's largest retailers, it wouldn’t have happened if we were not focused on the customer, operating with a growth mindset and leading with technology innovation. Big risks lead to big rewards. Our industry is big, yet has a tendency to avoid change on its own, so I encourage everyone in our industry to be catalysts for change and growth.

And to meet the new demand for growth in our industry and accelerate our capabilities, impact.com has acquired companies like Mediarails to enhance discovery on our platform, Activate to enhance and scale our influencer and creator offerings, Trackonomics and Pressboard to help large publishers better understand the engagement of their commerce content, and Affluent to help agencies especially automate administrative tasks so that they can focus more time on strategy and relationships. The Partnership Economy is a diverse ecosystem of actors and all of them demand technology solutions to automate their diverse needs.?

It’s worth noting that impact.com has continued to invest in growing the entire industry beyond technology innovation and investments as well. impact.com has led the industry by tapping some of the most experienced professionals in our industry to create and share expert learning and inspiration for this generation and the next through the Partnerships Experience Academy (PXA); by hosting an annual thought leadership event, iPX, which attracts game-changers in our industry to inspire others; by publishing The Partnership Economy book last year to more clearly define and expand this new category for everyone; and by publishing many research reports to prove the effectiveness of the channel. Heck, even ASW called it "Partnership Week" this year largely based on our thought leadership and prompting!

One of the most tangible drivers of growth for our industry; however, has been impact.com’s effect on our agency partners. Ten years ago, agencies in our industry were essentially fighting for scraps. impact.com created a new SaaS business model focused on overdue, more advanced technical capabilities and innovation. This led to impact.com building out an ecosystem of agency channel partnerships where impact.com refers clients to agencies and vice versa, versus the traditional affiliate network model which competes directly with agency services. And look at these agencies in our industry now, they have flourished!

Losing Sight of the Shore: Blue Ocean of Opportunity

impact.com wants the whole industry to rise and to recognize the massive potential for partnerships this year. We must have the mindset that there are more opportunities than challenges if we ever want to lose sight of the shore and explore the blue ocean of opportunity ahead of us.?

My advice to the audience, and brands at large, was to return to your core and focus on the customer. Find a way to be relevant to them, to be authentic and genuine in how you capture their attention, and to help them in their decision-making. Trust has eroded in society, and most people find advertising to be a scam. People are now buying with purpose, and they are investing in finding out what other people think about products. They have higher standards for the brands they buy from, how they’re treated, and if they share the same values. It’s hard to communicate all of this on your own and stand out in today’s crowd, so businesses need partners to help do it for them.

Invest in your customers, understand what they value, identify where else they’re shopping, and where they’re sourcing their information before they buy, and then go partner with those sources.

Think outside of the box of traditional affiliate marketing, which has notoriously clung to the shore with rinse-and-repeat tactics. The channel is evolving, and we need to change with it in order to grow.?

It Takes a Diverse and Engaged Crew to Heel Into the Wind

On growth, I wanted to end this post with a note about how the panel discussion opened: the first question the moderator asked was about what businesses can do to get more women into C-level positions, which was appropriate considering no female CEOs were on the panel. I want to applaud ASW and Dhomonique Murphy for asking a tough question right out of the gate: I think calling it out in our businesses as well is the important first step. I shared several suggestions for how other companies can adopt a much more diverse hiring process as a first step; we’ve taken it on ourselves.?

It requires a conscious effort by both company Board members and executive leadership to adopt something like the NFL's Rooney Rule, which requires companies to interview diverse candidates for top jobs, especially for the CEO and other C-level roles. Companies need to challenge the recruiting status quo and consider using multiple recruiters who have a deeper network with diverse candidates. If companies continue to rely on the same recruiting sources, they will continue to hire more of the same. Diverse candidates are out there, and we need to put in the time to search for them, tap non-traditional sources of candidates and be patient. Boards especially need to take this seriously. Board members are ultimately responsible for hiring and firing the CEO. And executive leadership heavily influences the Board. Therefore, if we are to truly affect change at the top, it starts with making it a priority at the top.?

We’re very aware of this as well at impact.com, over the last few years we’ve added Ning Wang to our Board, have an incredible DEI Board advisor in Shaunice Hawkins, promoted Cristy Garcia to CMO, and we have a new Chief People Officer starting next month who will be announced soon. Our Greater China General Manager Jennifer Zhang is an incredible leader for us in the APAC region, we recently hired Sara Centemero as Country Manager of Italy, and have carved out a well deserved career path for Snehal Shah in engineering leadership as well. These strong senior female leaders have changed our company for the better: we’re having new conversations with new voices from different backgrounds, and they’re improving our company’s policies, breaking records, and driving growth for our business and industry.?

impact.com now has over 1,000 employees in 20 locations globally, and we fully embrace the fact that diverse teams win, and those team members need to look up and see leaders that look like them if we expect to engage and retain them at peak levels of performance long-term. And in my experience, when strong women step into leadership roles, they attract other amazing women to their teams, creating the next generation of C-level leaders for our company and for the industry.

One last recommendation, I had a chance to meet Sheryl Sandberg from Facebook years ago and asked her to sign two copies of her book Lean In for my teenage daughters at the time. I highly recommend Board members and other C-level executives in particular read it if you haven’t. It will underscore the importance and make you more aware of being an empathetic and inclusive leader, which I think are winning characteristics for today’s leaders.

It takes an entire industry and beyond to constantly apply this awareness and operate with this kind of purpose to affect change, and employees won’t settle for the status quo. Board members and executives shouldn’t either.

Godspeed

It’s time to set a course for a modern partnerships strategy, and the exciting thing for everyone in the room at ASW or tuning into the recaps is that where we’ve come from in affiliate marketing is an incredible foundation from which to build higher. On stage, we pledged to work together as industry leaders to identify new areas of opportunity for the channel; for example, something as simple as collaborating on a process to share information about bad actors. We all agreed this is easy to do, and I for one am pretty excited about this and other ways we can work together to drive the industry forward.

Many of us exited 2022 still navigating the choppy waters left by the pandemic and global events, but the key for 2023 is to both broaden our horizons and focus on being more resilient and more focused than ever before on enabling the partnerships channel to be the most reliable, profitable, trustworthy, and relevant option for brands and marketers.