Maturation of the Incentive Space
The affiliate incentives space is changing fast. The industry has already gone through its introduction stage, on to the tail end of its growth, and beginnings of maturity stage– all in a matter of a few years. The concept started as simple as “sign up for an offer, get a free nominal gift (such as a dvd),” but with the rampant growth of the market and emergence of countless competitors, the business has had to evolve rapidly. Each phase has brought its unique challenges and depending on stage of development, new strategies adapted at each step.
The traditional Industry (Product) Life Cycle, which many of you probably covered in Marketing 101 allows us to view the online incentive marketing space with some structure. In most any industry, firm numbers first rise as innovation opportunities fuel entry, and then later fall when the relative failure to innovate prompts exit. Although several variations of the Industry Life Cycle exist, the same basic stages are apparent in all. Here are some major ones:
1973: Fox: precommercialization – introduction – growth – maturity – decline.
1974: Wasson: market development – rapid growth – competitive turbulence – saturation/maturity – decline
1984: Anderson & Zeithaml: introduction – growth – maturity – decline
1998: Hill and Jones: embryonic – growth – shakeout – maturity – decline
If you look at the online progression of the incentive space, it was once as straight forward as: visitor enters email address, completes offer, company sends gift to qualified users. Acquisition costs were low (as low as $0.30 cpa just a year ago), requirements to qualify for the incentive straight forward, and everyone was happy. The influx of new competition, all vying for the same consumers has created an arms race to who now offers the most appealing (higher and higher premium) incentives and who can pay the most for distribution. This heated competition to create the best performing offers in combination with the highest payouts has lead to more and more sophisticated monetization paths.
The growth and resulting competition has also resulted in more companies utilizing questionable tactics to gain a competitive edge. The increased pressure to perform, along with an influx of many fly-by-night companies, has degraded the creditability of this industry in the eyes of many outsiders (despite legitimate players). The best comparison I can make is what steroids did to baseball. All is not lost however as the long-term, committed players will evolve their internal capabilities and processes enough to set them apart from imitators. A great example is the dedication by companies such as Netblue (my employer) to develop great customer service support that includes a toll-free hotline. Companies that fail to innovate, not only on the technology and product side, but on the internal processes and service side of the business will naturally exit.
The online incentive space has gone through its first two-and-a-half Life Stages so fast that it makes me wonder how long its maturity stage will last. And, what will lead to its decline? Will it be saturation of the market and growing savviness of consumers? Will it be legal legislation? Or even regulation from direct marketers who start to get more selective on how their CPA offers are promoted? Everyone has a different opinion.
