What is affiliate network 2.0?

It kinda implies that it is a better affiliate network than the original. And I believe this will happen and it is just a matter of time.

Before I give away the secrets of this article, I’ll start at the beginning for what affiliate networks are today for context. I’ll explain what I think is the new affiliate network 2.0 and who knows, maybe there is an affiliate network 3.0 around the corner.

As a tease, I’m going to classify AffiliationCloud by Raketech as part of this affiliate network 2.0. 

Let’s see if I got your attention now. 

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What is an affiliate network?

I consider this to be a broker service where the network attracts affiliates (or publishers) into their ecosystem and connects them with operators (or affiliate programs). Outside of iGaming, the operators or affiliate programs would be considered the advertiser. 

I know it can get confusing. I mean aren’t publishers people that also advertise by putting tracking links and banners on their sites? I digress. 

Here are the benefits and the main reasons why people join any affiliate network.

  • 1 payment
  • 1 affiliate manager
  • Better deals
  • Power of a network

Affiliate payment pain

When you work with 10, 50, or 100s of affiliate programs, you are chasing a lot of payments and this can eat up a lot of your admin time. An affiliate network will do all that dirty work on your behalf, at scale, and sort the payments for you. 

A single point of contact

If you work with 50 brands, that could be spread over 35 affiliate programs which implies 35 different affiliate managers. 

Would you be happy with just 1 affiliate manager? If so, then affiliate networks are for you!

Better offers for affiliates

This isn’t only about getting a better offer to send to your customers to help referrals but a better commission plan.

As a small affiliate, I would ask for any CPA deals and it was the same story. I’d need to send more traffic than was possible so I never would get those deals.

The irony is that I could sell that same affiliate site tomorrow to a big affiliate and now those programs are instantly forced to pay higher commission plans. Beautiful affiliate arbitrage at work. 

Power of an affiliate network

An affiliate network can offer affiliates some form of protection.

I’m not sure all affiliate networks enforce quotas (MAQ) but you can protect yourself from some of the ridiculous compliance requests affiliates get. An example like being emailed on a Friday night from a program informing you that you have 24 hours to change an offer and failure to comply will result in losing of your affiliate account.

If we agree that the largest affiliates likely never have their affiliate accounts closed then we could argue the same for some of the larger affiliate networks. Losing 1 large affiliate or hundreds of affiliates in one go is no way to run an operation.

At the expense of ruffling a few feathers, I wonder if a guy like Daniel Hansson Sokcic from Bigwinboard® would have had any accounts closed if they were part of an affiliate network. That of course assumes he would be happy doing this in the first place of having his accounts or deals in the hands of another company. I always like hearing his opinion on things :)

Let’s pivot and talk about how big affiliate networks are today. 

Cons of an affiliate network

Affiliate networks are not perfect and they are not for everyone. A few points to potentially consider and it depends on the affiliate network in question as not all affiliate networks exhibit these characteristics.

  • Own a copy of your data
  • Possibly own the revenue share accounts
  • They can also go out of business and/or close your account under their t&cs

It might be these cons that push some affiliates from using an affiliate network in the first place. With that said, it seems more affiliates are still giving networks a chance and testing them out. 

Affiliate network T&Cs

I don't know what is inside most of the terms and conditions of these affiliate networks but we'll likely need to start caring just as much as we do for regular affiliate programs.

How many affiliate networks are there in the market?

I’ve asked as many people as I could and I don’t quite have a concrete answer. I’ve asked software companies like Everflow , Affise , Intelitics and it is hard to quantify because they don’t know what their competitors have for numbers. The rough numbers I hear from people that give their estimate is 5000 to 7000. 

Of course we know who the biggest affiliate networks are in the space that isn’t specific to say iGaming.

  • ShareASale.com
  • impact.com
  • Awin Global
  • ClickBank
  • CJ

Some of the affiliate software players in the market are

ShareASale

How big is ShareASale? On their website they have the following stats:

  • 30,000 merchants
  • 1 million publishers
  • 200 million sales generated

Not bad for a listed 181 employees on LinkedIn. 

GIF banners?

Yes, those are GIF banners. 

Depending on the sources, I’ve read that adblocking is 42% of the global population with all their browsers and supposedly costs the advertising industry $54 billion per year in lost revenue. 

ShareASale is making all that $200 million per year on a cold fusion tech stack. 

Someone tell me again that affiliate networks don't have any room for disruption.

Back to affiliate networks. 

How many of them are in iGaming?

I don’t know but I’m going to guess there are at least hundreds of dedicated iGaming affiliate networks. I’d estimate there are many more that work in multiple verticals. 

Who are the most notable affiliate networks in iGaming?

  • AffiliationCloud by Raketech
  • ClickOut
  • Confido Network
  • RevenueLab.biz
  • Lead Chiefs Affiliate Network
  • KeyAffiliates.com
  • MatchingVisions.com

AffiliationCloud, the big elephant in the room

I think affiliate networks were always great business models but Raketech seems to have made a great entrance into the market. I’d consider Raketech’s AffiliationCloud to be part of this affiliate network 2.0 in that they do something a lot different. 

They are to my knowledge providing some adtech to their network and giving affiliates a solution that might cost them significant money to build themselves. 

I think adtech is going to be a big wave of change for all affiliate networks.

I mean it is 2024 and still to this day, almost all affiliate programs and affiliate networks are serving the same thing over and over again.

  • Tracking links
  • GIF banners

If we are lucky, we're going to get some advanced tracking tech like postbacks or dynamic variables. 

Just in case you didn't know, StatsDrone has dynamic variables.

Thankfully, Raketech is a publicly traded company so we get to see their sub-affiliation numbers which I track every quarterly results that get published.

It looks like the sub-affiliation segment produced 32M EUR in revenue in 2023 which is not too bad. 

Automation for affiliates

I think the affiliate network 2.0 will have more advanced tech that goes from basic tracking links and GIF banners to advanced tracking links and advanced adtech. 

We know affiliates want a done-for-you service. Actually doesn’t everybody want that too? 

So if we break down the 2 components that will be the foundational building blocks of the new affiliate network, it will be

  1. advanced tracking tools via affiliate stats aggregation (hello StatsDrone!)
  2. adtech widgets

We are talking about adtech widgets that will have built in compliance when needed, updated offers and potentially automatic ranking of offers.

Compliance at scale

There are numerous compliance companies that aim to spot compliance issues with affiliates so operators can stay on top of it. Adtech can sort compliance at scale.

I’ll share a short story when I was trying to get my small affiliate site off the ground and compliance started becoming a weekly occurrence. 

I had one program, forget the name, but we needed to be compliant. The tech work required was nearly $10,000 and this was spent to save an account that had less than $500/month in revenue. 

I thought, this sucks. Either I need more SEO traffic to pay for this pain or I need to sell this adtech as a service to someone else whom is experiencing the same pain.

Speaking of more compliance, this makes tools like Rightlander a bit more valuable because their services would perfectly plug into any affiliate network.

Centralized data

When a signup offer changes, every affiliate promoting that brand MUST change that signup offer.

For all the affiliates that fail to do this, those clicks are wasted by both the affiliate and the operator suffers too. This is another reason why companies care about compliance to ensure offers are up to date.

If you want to know how big of a pain this is, just ask affiliate managers how long it would take to get 50% of their active affiliates to update a welcome bonus offer.

Affiliate Network 3.0

This week on the Affiliate BI podcast, I had a chance to chat with Lou Viveros whom does M&A advisory.

You can listen to that podcast episode here on Spotify.

We got talking about affiliate networks saying technically, affiliate networks are incentivized to help their affiliates perform because that helps their bottom line.

So if we are doing to incentivize those affiliates by giving them not just good deals (affiliate network 1.0) and adtech (affiliate network 2.0) but maybe help them optimize their business.

In the 15 years of running affiliate sites with over 2000 affiliate accounts, not once has this conversation happened. That is an affiliate manager gave me a better converting landing page to use. 

What are the other ways of optimizing an affiliate?

  1. SEO - search engine optimization
  2. CRO - conversion rate optimization
  3. Product design
  4. Content optimization
  5. Data analytics via S2S tracking
  6. Inventory management and optimization

There is a lot here. 

Typically all of these skills are the responsibility of the affiliate.

This conversation is now going full circle back to the sweat equity debate and we’ll use SEO as the example.

Not all SEO consultants will take equity in a company, they would rather get paid. I rarely hear about successful sweat equity deals and it only seems to happen when money is involved for direct investment.

I am hearing in the background some companies are leveraging the equity playbook a little more these days. 

If we make an extreme generalization that affiliate networks rake in the equivalent of 25% of the revenue that an affiliate would make, doesn’t that mean the network should help grow this revenue?

Maybe an affiliate network would also want some SaaS tools that would monitor when your search traffic has gone south or even help you out with your content strategy. 

If a network is meant to bridge the gap between affiliates (publishers) and affiliate programs (advertisers) then there is an incentive for that network to help both sides of the fence. 

That was just an SEO example. 

If you think about other consulting services, these could be done the same but in-house. I mean the affiliate network doesn’t have actual equity in the affiliate sites but they do indirectly in some capacity. That is technical ownership of the player. 

There are people that do consulting to help you automate your business using tools like n8n.io.

Why can’t this service also be put in an affiliate network? Affiliate networks can use it to automate parts of their business and if they can help affiliates save time, that will likely translate to further revenue.

Win/Win

PE model

If you look at what a lot of Private Equity groups are doing, they buy companies and they take their optimization expertise and they pump them up so they make even more money.

I can't be the only person thinking there is a new business model in here somewhere.

SaaS vs Sub-affiliation

This is where things get interesting. What is the market appetite for people that would rather pay for the equivalent of SaaS tools versus having them free in an affiliate network?

Adtech SaaS

  • Lasso
  • Affiliatable

Stats aggregation, BI and analytics

The future of iGaming affiliate networks

I think there could be many different paths in the future of iGaming affiliation where affiliate networks are a part of it.

I’ve been saying for the past year that affiliate networks will continue to capture more market share as some affiliates start seeing the upsides of using an affiliate network. When people say they are happy with networks like AffiliationCloud and Confido Network, you know it is a product worth building on top of and investing further. 

The margin dilemma for operators

I had someone in the M&A space ask me a bunch of questions on where I see the sub-affiliate space going. He had one concern that if these networks get bigger and all the top affiliates launch their own network, won’t that imply that operators will be paying more commissions for the same affiliates?

That is affiliates that don’t have good deals in place, those operators typically make more profit from these affiliates. Now if more and more affiliates go through the affiliate network meat grinder, then won’t these margins disappear for operators?

In theory the answer is yes, no or maybe.

Actually I think the answer is yes but I’m going to give you they maybe answer and perhaps this is a market opportunity for someone crazy enough to consider it.

Let’s propose a scenario that looks like this. 

  • Super Network X - gets 45% revenue share + $150 CPA, gives Affiliate Y 35% revenue, maybe $50 CPA
  • Affiliate Y - stuck on default 25% revenue share

You can see in this scenario, the operator would tell Affiliate Y they need to get more players before they can pay higher than the default 25% revenue share.

However if they work with Super Network X, they’ll instantly get that higher rev share and maybe even a CPA on it. In the example, the sub-affiliate network is gaining 10% rev share and $100 CPA for their efforts. 

So yes, if affiliate networks gain more power, more affiliates will feel protected through affiliate networks and it could hurt the margins of operators.

The irony is it is their fault for only rewarding the big players which when they acquire affiliate sites, the first thing they do is swap in their new deals!

Is there a way to cause less disruption assuming anybody actually cares about the operators.

The answer might be an affiliate network that would take less commission from their affiliate partners and play the volume game.

Who knows, this might be wishful thinking.

At the end of the day, closed affiliate programs means lost revenue share.

At the time of writing this since April 2021, StatsDrone has 1406 supported affiliate programs and 1042 closed programs. This is more revenue leak potential. 

Back to the affiliate network 3.0 concept. Just like how large affiliate groups share various resources amongst their numerous websites, the same concept could be applied in an affiliate network. 

The race is on to build a better affiliate network.

Sharing data is the key

I’m adding this last section in part on what Richard Dennys, CEO of Game Lounge, wrote on LinkedIn this morning which is that the industry needs to share more data. I fully agree!

I think affiliate networks could be the first frontier for sharing of that data but it might come down to affiliates participating in this. Affiliates want to see more under the hood from the operator side so there has to be a win/win collab here.

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