The Next Decade of Partnership Marketing

Partnership marketing isn’t new or revolutionary, but it might as well be.

Faique Moqeet
Founder and CEO

Partnership marketing isn’t new or revolutionary, but it might as well be. Taking a step back to trace developments in the marketing landscape offers insight on where we are and where we're headed.

The Need for New Acquisition Channels

The chart below shows US ad spend over the last 85 years. Newspapers once represented a majority of US ad spend but now comprise less than 10 percent of marketing spend. Meanwhile, spend has increasingly shifted to the internet since 1995. The dot-com era brought about the shift of dollars into digital marketing channels and the 2008 financial crisis further solidified this shift as it became imperative for businesses to allocate their budgets to channels that provided clear, attributable ROI.

US Ad Spend as % of GDP
While US ad spend has remained stable at about 1% of GDP, where advertisers spend this money has radical shifted over the last few decades. Source.

Diving deeper into US Internet ad spend, it’s clear that the bulk of this spend has gone to two companies: Google and Facebook. For both of these platforms, because of their highly sophisticated targeting capabilities, clear attribution, and ease of scaling spend, they have monopolized internet marketing spend. Google and Facebook are the first place brands look when they want to grow. This is especially true for Direct to Consumer (DTC) brands, which have grown up in a digital first world.

Over time, because of the auction based pricing system, the cost of acquisition has risen as the number of advertisers competing for the same inventory has grown forcing advertisers to look at other avenues to grow. While there are other large platforms, they lack the targeting capabilities of Facebook and Google, which keeps advertisers around even as prices have started to reach unprofitable levels.

Costs have gone up across the board. CPMs have gone up. CPCs have gone up. Everything has gone up. Competition is higher. That cost-per-acquisition for a brand that sells a product that’s $100, it might have been $15 to $20 to acquire that customer three or four years ago and now it’s $40 to $50 to acquire that customer.
— Confessions of a DTC media buyer on the consequences of rising CPAs Digiday, 2019

Finally, given the sheer power of these platforms to change their algorithms at their whims, brands also understand the importance of diversifying their acquisition channels. Given that Google owns YouTube and Facebook owns both Instagram and WhatsApp, it's hard to imagine these companies losing their market power outside of massive regulatory changes. Yet, for brands, as they look forward to the next decade, they will need to discover new ways to profitably acquire customers at scale.

US Digital Ad Spend Market Share
Google and Facebook combined represent a majority of digital marketing ad spend. Note: The decline over the last few years is due to Amazon's advertising business taking share. Source. Source.

The Rise of Partnership Marketing

Affiliates -- traditionally seen as a last-click conversion channel -- has undergone a massive change in its technology stack. Affiliates used to be a channel you could run on autopilot with a low commission structure. A decade ago the leading players were affiliate networks that merged program management and technology. Today, because of the emergence of SaaS tracking and payment platforms, brands can manage their programs fully on their own.

These new tools focus on automating the partnership lifecycle helping brands to discover new partners, optimize their performance, monitor for compliance and handle payment. These capabilities give brands the ability to successfully scale partnerships as a channel while retaining full control and visibility into who is promoting them and how. Ten years ago, this was hardly possible.

Juxtaposing the development of the partnership world with the need to find new ways to efficiently acquire outside of search and social, the case for brands to build partnership programs is clear. Finally, while it’s early for the channel, it’s clear that leading brands have started to think more ambitiously about their partnership program.

This feeds into why we started Hamster Garage: we're an agency build for the next 10 years of partnership marketing. We're not tied to how things have been. Instead, we're focused on helping brands realize value from partnerships in the context of a changing marketing landscape.

Shifting Consumer Behavior
While ads aren't going anywhere, consumers are less receptive to them. Likewise, consumers trust brands less than ever. Instead, they are relying on word of mouth, influencers and sites they trust to guide their purchasing decisions. Source. Source. Source.

The average consumer sees anywhere between 6,000 to 10,000 ads per day. If that's surprising, it's because consumers are ignoring most of them. Consumers are tired of being marketed to and prefer doing their own research to make their decisions. This is especially true with Millennials and Gen Z, who grew up with Yelp, Glassdoor, and YouTube product reviews. They trust other consumers and people they have built a relationship with over years, which includes affiliate partners, influencers, podcasts, and other brands.

The push nature of marketing messaging is becoming less effective and brands that want to adapt will need to adopt a pull approach by meeting consumers where trust is established. Partnerships offer an opportunity for marketers to discover and work with an endless supply of partners who can authentically connect and promote brands.

As we look to the next ten years of brands building relationships with consumers, it's hard to see a world where a successful marketing strategy does not include a robust partnership program.

This article was written in 2019 when we first started HG.