Affiliate marketing and attribution 2: Take the red pill
Attribution
As we’ve just seen in Part 1, there are several touch points along the consumer’s path to purchase. For example, they may have read about the product on a blog or review site prior to researching further on some other sites and finally making their purchase somewhere else entirely. Each step in the process played a useful role in leading to the ultimate purchase. However, if only the “last click” is rewarded then this is discouraging for the affiliates early in the purchase process and could also be detrimental to retailers if they don’t optimise their approach to affiliate marketing. Consequently, there has been some recent interest in attribution modelling.
Affiliate attribution is one of the hottest and most controversial topics in the performance marketing industry today, and many Internet retailers are trying to figure out the best approach…
…The question remains: how do you fairly compensate affiliates for their involvement with your customer based on the touch-points they’ve had during the purchase path?
Marketing Land: “2013: The Year Of Affiliate Attribution?”
The last-click approach frequently means that content sites, such as blogs, perform the service of educating and informing the customer but often receive no financial reward. Therefore, owners of content sites are likely to be in favour of a more equitable approach to attribution. On the other hand, those who have built their business around the later stages of the purchase path tend to be in favour of the last-click-wins approach. Even so, this first-click vs last-click approach is too simplistic – a single-source attribution model is only one option available to the marketer.
Attribution models
Single-source attribution
This model assigns all the credit to one single event, eg first click, last click, and in some instances the last website to display the advert prior to the purchase.
Last-click attribution assigns the entire value of a conversion to the last campaign the consumer clicked prior to converting. Naturally, last-click attribution favors campaigns that influence the lower end of the funnel. In contrast, first-click attribution favors campaigns that influence earlier in the funnel. Both are simple to use, widely supported by analytics tools, and are still the most common attribution models used…
iMedia Connection: “The problem with click-based attribution”
Not so very long ago, single-source attribution was the only game in town. Even as recently as two years ago, some marketers were still arguing that the last-click commission model would remain, as it was fundamentally fair and implementing a split commission model was unlikely to make any significant difference to individual affiliates anyway. These days most people consider this approach to be less accurate than other models because it doesn’t take into account all the contributing factors which led to the purchase (or other desired outcome).
Fractional attribution
This model uses weighting to assign the credit to various parties according to their contribution to achieving the desired outcome. Sometimes this is done by mathematical modelling. Other times the weights are simply decided by educated guesswork along with experience. There’s also a U-curve fractional model which assigns the credit to the first and last, ignoring all the events in the middle of the process of conversion.
Algorithmic attribution
This model uses proprietary algorithms to assign credit to all touch points on the conversion path. The algorithm automatically computes which weight should be assigned to each touch point in order to calculate where to allocate the attribution. These algorithms are sometimes also able to identify previously hidden correlations and insights which may be occurring within the marketing process.
However, regardless of what attribution model is used, advertisers often use retargeting to increase their ROI by increasing conversions (and also by reducing affiliate commissions). In other words, it’s probably cheaper to pay for an AdWords campaign than it is to reward the affiliate who enabled the retargeting process to start in the first place.
Low take-up of alternative attribution models
Despite the interest in attribution models, relatively few advertisers appear to have been using them up to now, with most retailers content to simply take the “last-click” approach.
Today’s digital consumer is exposed to a huge number of marketing messages via display ads, search, email, mobile, social media and other sources along the path to purchase. But until recently, many retailers mainly paid attention only to customers’ “last click”—an approach that ignores all other marketing touchpoints that lead to a transaction…
eMarketer.com: “Retailers Use Attribution Modeling to Measure the Touchpoints Driving Sales”
This is bad news for many affiliate marketers, but it could be bad for the advertisers too. Given that a conversion is the result of a number of events in the purchase process – display ads, sponsored ads on websites and on search queries, it’s useful for the advertiser to analyse who is doing what exactly to make that conversion happen. Understanding this process is critically important because it’s precisely this sort of information and data which is required to make certain key financial decisions, such as how and where to allocate the advertising budget. It also has implications for assessing the sales and brand value generated by advertising on different channels. Of course, having gathered and analysed such data, there’s no onus on the advertiser to actually change the attribution model.
Leaving aside value judgements about whether or not the last-click approach is equitable, there is evidence to show that those businesses who do use attribution models find that it benefits their businesses.
While it’s a hot topic, according to a recent Econsultancy study on marketing attribution, only 54% of businesses carry out any form of attribution; but, of those who do, 89% say attribution had a positive impact on their business, with 29% saying the impact was major.
Marketing Land: “2013: The Year Of Affiliate Attribution?”
Despite this, the use of attribution modelling has not been widely adopted. Many marketers are still on the blue pill.
Marketers know something is wrong with last-click attribution, but they still view the world through this lens. And while ignorance is bliss for many in “The Matrix,” for marketers, it can be a bane to budgets and returns. Because evaluating campaigns and understanding cross-campaign interactions are critical in assigning budget and planning the marketing mix, companies embracing video strategies employ a different approach.
iMedia Connection: The problem with click-based attribution
Last click’s last hurrah?
So, are we nearing the end of the road for last-click attribution? It’d be nice to think that after getting on for two decades of online marketing experience, affiliate programmes could move to something a bit more sophisticated. And with affiliate payouts being eroded by stratagems such as retargeting, merchants may find they have to improve rewards for the earlier touchpoints in the purchase funnel if they’re not going to alienate the webmasters of content sites – and thus lose the awareness benefits of those sites – altogether.
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