Affiliate: In The Stream if Not in the Main

Swedish Buy Now, Pay Later (BNPL) giant Klarna has made an impressive comeback to profitability earlier this year, thanks in part to affiliate marketing.

According to European media company Sifted, “‘affiliate marketing revenue’ in the fourth quarter was SEK 1.6bn ($144m), or 10% of total global revenue…” Moreover, “Klarna said 16% of its net operating income came from ‘other’ income, the category under which Klarna places its marketing income and Klarna card interchange income.” The article goes on to say that Klarna’s interchange income is reportedly “negligible,” so this presumably is mostly affiliate income.

I see two patterns playing out, one good and one bad:

First, affiliate has indeed risen as a formidable revenue driver, often referred to as the “third tentpole,” as discussed on a Martech Record panel over two years ago. In this context, it was set against display advertising and subscriptions, but there’s no reason it shouldn’t work for any publisher that has an audience with some interest in shopping, whether or not it can also garner subscription, display, interchange, or any ad dollars (or Swedish krona).

A month earlier that same year, Insider Intelligence cited a late-2020 survey that ranked affiliate income as an anticipated top three revenue source in Q1 of 2021 for 31% of respondents and as the top revenue source for 9%. (I did not see a follow-up survey with actual results.)

Here lies our segue to the troublesome pattern:

Second, while affiliate is present and significant in more and more revenue streams, it is not clearly segmented or even acknowledged. For example, the Insider Intelligence article author acknowledges that affiliate might also represent much of what is nebulously titled e-commerce. “E-commerce” is how many commerce content sites typically label affiliate revenue, but one cannot then distinguish between transactions that take place on an advertiser site versus those originating from an affiliate’s efforts.

This is a disservice to the channel because it keeps affiliate out of view. It’s hard to find comparisons by channel. For example, this Statista page projects $271.2 billion in United States digital advertising in 2023 across influencer, audio, search, banner, video, and … classifieds, with no mention of affiliate marketing.

It’s great that our channel has earned its place among the top three players; it’s terrible that it does so as an off-menu item, overlooked and underappreciated in the broader landscape.