Widgets and the Future of Affiliate Marketing

Steve Rubel writeswidget.gif

Within a year we’re going to see blogs transforming themselves into customized start pages. This won’t happen with all blogs. It will start with high-traffic sites that zero in on popular verticals like tech and politics. As these tools become more sophisticated and easy to use, the trend will migrate down the Long Tail into other niches.

As I have mentioned before, you can easily transform your default home page into a one-stop-shop that covers most of your basic needs. So why can’t a blogger provide the same service to people who share a common passion on a topic?

Similarly, affiliate marketing in general (from the mom-and-pop sites up to the large loyalty sites) could see such a transformation if a 3rd party platform was made available to the industry. What would spur this metamorphosis? Limitations of scaling.

Rubel points out that one of th reasons this transformation has not occurred en masse in the blogosphere (particularly high traffic niche blogs) is because of the lack of infrastructure. Widgets require registrations (how about co-registrations??) and the ability to cope with large amounts of demand for personalized data. Simply put, most affiliates (and affiliate networks) don’t have the tech infrastructure for such an undertaking. Rubel suggests that in the next year, 3rd Parties will see this deficit and

“will handle the back end processing in exchange for a piece of the generated advertising revenue. This is a great next step for AdSense.”

Take this one step further into the realm of affiliate marketing. Providing a platform for delivering personalized data based on registrations in exchange for a piece of generated advertising revenue sounds very much like the model which most affiliate and CPA networks already operate under. That is no accident, because serving widgets and serving ads (particularly customized ads based on user choices and user registrations) have more in common than anyone in the affiliate marketing world has taken time to notice.

With the introduction of attention and more venture capital into the CPA network space, companies with familiarity of API’s and widget technology are also bringing new tools into the industry. Could the utilization of widgets enter with these newcomers?

The idea of building or morphing a high traffic affiliate site (especially think of loyalty sites such as uPromise, eBates, FatWallet or BizRate) into a widgetized one stop shop beyond the context of just hyperlinks into the realm of customized and portable content is not hard to imagine. Would this be profitable? Yes. Would this encourage user interaction? I definitely think so.

Transforming an affiliate site into a widget building blocks site requires one central thing besides the technology: relationship. Relationship is something (in theory) affiliate marketing is capable of producing across a wide variety of diaspora channels. And this producing of relationship engenders a community receptive to certain forms of communication. Of course, email marketing was effective before we killed it, and RSS has been called by many the next great hope.

However, let’s move beyond those models which still enforce that top-down dictation model and focus on models (like widgets) that produce a back and forth between user and affiliate site. That’s where affiliate marketing shines, and that’s the promise that widgets specifically have for pushing certain parts of the industry in the right direction.

For example, the new email company Gigya shows how utilizing widgets to communicate ideas, data and micro-entertainment might work in practice. Using Gigya’s interface, users can embed widgets containing music, videos, games and even their MySpace layout into an email. The person who receives the email will be able to play back the video, song or whatever has been embedded if they can view HTML email. Imagine an affiliate site or loyalty site pushing company or user generated content in such a format.

Jeff Molander makes the following lucid and well thought out insights about affiliate marketing’s scalability in the context of the relationship paradigm…

Why the freak-out by traditional affiliate managers and executives as Google enters the space? One word: Scale. It’s a word that, to many, is not comfortable in a realm that is dominated by relationships (those nasty little things that don’t scale!). The concepts of transparent (you know who, what, how, when you’re dealing with) advertising and opaque (you have less of an idea) are central as the former offers less scale, the latter more. As time goes on (competition for advertisers heats up) making performance-based ad buying frictionless is becoming more important. Hence, “traditional” (relationship-oriented, transparent, high maintenance) affiliate programs become more focused (coupon and loyalty shopping sites) and receive less attention (as they require more people power to scale).

The link is dead. Content customization based on a relationship (even as simple as user registration or co-registration) and micro-systems of delivery of that content is the new black. Affiliate marketing, with its ability to make relationships, has a great opportunity to make use of widgets and widget delivery to set the larger industry standard.

In this mode of widget usage, scalability is not a detriment to affiliate marketing. Rather than adhering to that long held belief that the non-scalability of affiliate marketing is what’s holding the industry back from the major leagues, realizing that new platforms (such as widgets) provide a way for affiliates and networks to utilize the relationship factor as a positive… an incredibly profitable and long-term solution positive.

13 thoughts on “Widgets and the Future of Affiliate Marketing”

  1. Amen, brother. And I’d argue that its not just “widget” marketing that’s perfect for affiliate marketing, but just about every form of consumer generated content and niche social networking and more — all of it is about being able to get highly specialized content to users. And once the user picks their provider(s) for this content, that platform becomes not only a trusted source of information (referral marketing!), but becomes the starting point for every browser session. How powerful is that?

  2. Sam…
    Anyone who links to me (although links are dead; I learned that — FROM A LINK!) is brilliant but you take it to another level. Okay, brilliance aside I have to say that what you and Jeff may be neglecting here are the economics involved from the advertisers’ perspective. What I’m getting: cost per acquisition advertising has, traditionally, been all about customer acquisition (not retention). It has FAILED (are you listening Commission Junction, Linkshare, Performics?) to adapt to what advertisers demand — a model that includes cost mechanisms for customer RETENTION.

    Affiliates maintain tight relationships with consumers? This translates to the same (existing) customers clicking through. Aside from “customer ownership” issues that can be debated endlessly I’m suggesting that we must also talk about changing the cost model. I’m confident you’ll agree.

    Indeed, “affiliate marketing” lacks creativity in the area of delivery! Innovators like FatWallet stand apart but not because of innovations in delivery (although affiliates have experimented none really stand out — other than CouponCabin of course; nothing beats Yahoo.com as a delivery device). Some affiliates have achieved remarkable levels of success due to their ability to tap into **community** and a tangible benefit (chiefly discounts) to consumers. Even though these affiliates struggle with advertiser relationships from a pure economics perspective.

    You can open up the delivery mechanism and explode the options — let creativity run wild. It’s exciting but I don’t know that it solves the very real problem that exists for “affiliate marketing” which is a “pure CPA” environment. Why? It’s been retarded by the cost structure. Mainly the vendor (affiliate network) structure that is tied directly to the affiliate fee.

    Brief rant:
    It’s time for a change. Affiliate networks do not hold the keys to affiliate relationships. Who does? It’s a long list: netExponent, PartnerCentric, PartnerPerform, Commerce360, The Partner Maker, LinkProfits… and on and on. Affiliate networks must be reduced to what they are: tracking and reporting tools, not business development tools.

    Back to cost:
    Perhaps what this may lead to is a new ad platform that is centered on widgets and blends the media cost models?

    Why am I typing this on a blog? Why are you? Are we insane? Someone pay me now!

  3. Sam, Jeff & Jeff: Great discussion here and in the Weekly Insight podcast. I have spent most of my time in Affiliate Marketing on the advertiser side of the fence (why is it a fence? Yes, I know it shouldn’t be and I do my best to level it). Jeff Molander correctly points out that this conversation brings us back to the age old question of who owns the customer. It takes time for a merchant to build a direct relationship with the customer.. and of course, that is dependant on the merchant having a product that the customer wants again and again. Otherwise, that first transaction is more like a one-night stand (vs. a relationship). Now, having worked with merchants at all stages of development of their affiliate program (pre-launch to mature)…I am realizing that the affilaite marketing solution must adapt over time. There are acquisition focused affiliates and retention focused affiliates (right?). And, there are merchants that care more about acquisition and merchants that care more about long term customer relationship and cost management. Question is.. how do we match up the right merchants with the right affilaites. What happens when a mature merchant and a retention affiliate continue down the path and end up in a place.. well, where both parties are frustrated. I’d say – relationship therapy is needed. I think Jeff is onto something with a commission model that adapts to the change in the relationship. Also, mature merchants that are frustrated with affiliate marketing as a whole (which is unfair) should consider taking their programs private and managing those partnships differently. Your widget conversation merely highlights that we are going to be seeing more and more frustration and that we will need more therapy.

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