E-commerce boom drives affiliate marketing firms
The market for affiliate marketing is booming. Consumers are warming up to the idea of discount coupons and cashback when they shop online.
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Five years ago, global data-driven marketing and loyalty analytics firm Aimia wanted to enter India in collaboration with a renowned Indian business house with interests in retail, among other things, to launch a loyalty programme in this market. However, its effort came to naught and eventually it had to abandon its India plan. Aimia is the Canadian customer loyalty firm that operates programmes (Aeroplan and Nectar) in various countries.
Two months ago, Aimia returned to India after tweaking its business strategy. This time, it launched Nectar as an affiliate marketing programme for e-commerce firms. Nectar functions as a shopping assistant to consumers and aggregates multiple online retailers to showcase their products and prices. Consumers find the best price and earn points to redeem vouchers or coupons with online retailers.
In simple words, affiliate marketing recommends a product or a service to be purchased from a store. It basically refers to companies such as buy1get1.in, CashKaro.com and CouponDunia.in, which offer discount coupons and cashback facilities to people who are looking to shop online. It is defined as Internet advertising that allows any online business to affiliate itself with website owners (known as affiliates or publishers) using affiliate programmes. Affiliates make money by generating sales, leads and traffic for merchant business. Merchants use different affiliate programmes and commission-based models.
According to Swati Bhargava, co-founder of affiliate marketing firm CashKaro, several new forms of affiliate marketing have gained popularity. “For example, there are bloggers-turned-affiliate marketers, price comparisons, product discovery and cost-per-lead campaigns, among others, which have helped affiliate marketing evolve," she says.
It’s easy to see why Aimia changed its strategy and moved away from loyalty programmes with offline retailers to tying up with online stores and platforms to compete with existing affiliate marketers like CashKaro and CouponDunia, among others.
For starters, the market for affiliate marketing is booming. Consumers are warming up to the idea of discount coupons and cashback when they shop online. Ankita Tandon, chief operating officer at CouponDunia, says the biggest reason for the growth of affiliate marketing is that Indians are culturally inclined towards savings. While the Internet is the cheapest medium for goods, coupons and cashbacks make the deal even sweeter.
Clearly, consumers are seeking value, greater benefits and even paybacks.
Little surprise then that CouponDunia introduced cashback to its portfolio of coupon services in April. For a coupon company, cashback means giving away to the consumer a part of its own margin—so, it is real money that goes into his bank or e-wallet.
What’s driving affiliate marketers is the buzz around online shopping that has only grown stronger. Online retail sales were an annualized $12 billion in June, according to estimates by research and advisory firm RedSeer Management Consulting.
Besides, affiliate marketing has done exceptionally well in other markets and there is no reason why it shouldn’t work in India. It has worked in the US, UK, China and Japan.
Lastly, once e-commerce platforms are ready, they are looking for consumers. They do not care where they come from—directly or through affiliates. In fact, e-commerce firms have variously claimed that between 12% and 20% of their total business comes from affiliate marketers and that it works better than advertising for them.
Affiliate marketing companies have also attracted big investors. Ratan Tata, for instance, invested in CashKaro earlier this year. In 2015, CashKaro raised money from Kalaari Capital. Times Internet Ltd, the digital firm of Bennett, Coleman & Co. Ltd, in 2014 acquired a majority stake in CouponDunia. Clearly, the business is getting serious with brands that are coming into their own.
“Times Internet acquiring CouponDunia is a sign of the attractiveness and maturity of the cashback market. The fact that cashback business is a billion dollar market in the US and China, combined with the fact that Indians love to save money, means there is a lot of potential for cashback sites in India," says CashKaro’s Bhargava.
Considering that it is a fragmented market with a lot of small firms alongside large vertical leaders, “we can expect more external parties entering the sector and more such deals happening in the future", she says, adding that even CahsKaro has had a couple of compelling offers.
Even globally, Japan’s Rakuten acquired rebate website operator Ebates.com for $1 billion in September 2014, according to Tech Crunch.
For now, affiliate marketing firms, including Nectar, are eagerly waiting for Diwali sales, when the general buoyancy in the market with more people inclined to shop will spell a bonanza for them too.
Shuchi Bansal is Mint’s media, marketing and advertising editor. Ordinary Post will look at pressing issues related to all three. Or just fun stuff. Respond to this column at shuchi.b@livemint.com
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