Affiliate advertising has now been around for many years and its popularity shows no signs of waning. It has been heavily promoted by online marketing experts such as Neil Patel as a high-value, low-risk means of making passive income from a simple website or blog. The aspirational stories shared by the proponents of affiliate marketing are often not exaggerated.
UK financial services behemoth Money Supermarket is one example of affiliate sales done right. From its inception as an online mortgage and loan reseller, the company reported revenues in excess of £300m ($400m) in 2017 and is one of the top 350 companies listed on the London Stock Exchange.
Success stories such as these have led to the expansion of an industry now worth $13 billion annually. Currently, the affiliate marketing business appears poised for healthy growth of more than 10% each year. However, this estimate is based on its current landscape, which is about to change–with the introduction of blockchain.
Role of the Affiliate Network
One of the key features of blockchain is its ability to reduce or eliminate the role of the middleman in transactions between two parties. Once the customer has made a purchase, the affiliate marketing relationship is essentially a transaction between two parties–the publisher and the merchant. In the case of affiliate marketing, the growth of the industry to date has been predominantly based on services provided by middlemen–the affiliate networks.
Some online merchants are big enough to run their own affiliate programs. Amazon Associates is the biggest and the most frequently used. However, many online merchants are too small to run their own affiliate programs. So out of the need for small merchants to connect with publishers to sell their products, grew affiliate networks like CJ Affiliate or Clickbank, acting as middlemen.
These companies take around 10-25% of commissions earned, simply from the provision of platforms available to publishers and merchants to connect and make payment transactions. Consider 25% of an industry worth $13bn–this represents a healthy revenue for a middleman.
Blockchain Tech – a Peer-to-peer Connection for the Affiliate Marketing Relationship
A number of startups have been quick to see that the peer-to-peer (P2P) capabilities of blockchain have great potential within the affiliate marketing industry. Most notably, this offers a significant reduction of the fees taken by the affiliate networks. Reftoken and Hoqu are two such startups who are offering low fees between 0.5% and 3% for using their platforms.
The reduction of fees to this level could prove to make affiliate marketing even more lucrative for both brands and publishers alike. The introduction of blockchain to the industry could therefore open up the industry to a bigger growth potential than previously estimated.
Other features of blockchain can bring further benefits to the publisher-merchant affiliate relationship. One common complaint from publishers is that earnings from sales can take a long time to pay–weeks or even months. Blockchain offers far quicker transaction times. Sometimes, earnings may even be underreported or disputed after the sale has been made. The affiliate networks usually remain passive in such issues, meaning publishers have little recourse. Recording sales on the blockchain offers a level of auditability, transparency, and immutability that the traditional affiliate networks cannot provide.
However, one barrier to using blockchain-based solutions for the everyday consumer is the requirement to transact in crypto-tokens. Asking publishers to switch their affiliate earnings into volatile digital currency could be a tall order. Additionally, most blockchain affiliate networks are operating on existing blockchain platforms–mostly Ethereum. The current transaction speed of Ethereum limits the tracking and reporting of affiliate activities to sales alone.
Attrace – The Custom Blockchain Affiliate Network
There is now one blockchain affiliate network building its own distributed ledger. Attrace aims to become the first ever blockchain-based affiliate network that is able to create an immutable record of every single affiliate link click on its network. It will achieve this by generating a smart contract each time a link is clicked.
The smart contract will then be able to follow the customer actions, through the sale of the promoted product, and automatically conclude the payment of the affiliate earnings to the publisher. This offers an unprecedented level of transparency in reporting affiliate activities.
Attrace is also one of the only blockchain affiliate networks that will allow its publishers to be paid in fiat currency. Not only does this protect publisher affiliate earnings from the notorious price volatility of cryptocurrencies, but it also lowers friction for publishers using the Attrace network given that it means there is no requirement for them to convert their earnings back into fiat themselves using an exchange.
Attrace is looking forward to launching the first release of a dashboard that can be used by publishers and merchants in the later part of 2018. The Netherlands-based company says it will immediately be able to contribute the traffic flow of an existing affiliate marketing business, meaning that the product will have a market share from the moment it goes live. The team behind Attrace brings credentials in the affiliate marketing business, as well as wider e-commerce and fintech.