Is Yahoo planning on making a big new jump into affiliate marketing? A Wall St Journal report yesterday indicated that it just may be. New CEO Scott Thompson is apparently keen to find new revenue streams so that Yahoo is less dependent on its struggling display ad business. His approach? He "wants to push the Internet company away from its advertising roots and get more of its revenue from fees and commissions."
If these reports hold up – and more on that below – then this will be the second time in the last few days that one of the current Internet traffic-giants has adopted affiliate marketing as a core monetization strategy. Just last week it emerged that Pinterest is using Skimlinks to generate affiliate revenue, a report that attracted interest from the New York Times, TechCrunch and CBS, among other major new outlets.
Is this the beginning of a new phase in affiliate marketing? One in which the biggest of publishers run traffic through their own affiliate links rather than simply selling that traffic to display advertisers?
We don’t yet know for sure exactly what Yahoo has in mind but clues can be gained from the fact that the new CEO has a background with PayPal and so is comfortable with transaction-based revenue streams. Furthermore, Yahoo’s display ad business has been stagnating, even while Facebook, Google, Pinterest and Twitter have seen dramatic growth.
The problem for Yahoo is that much of their portal traffic is simply not well situated within a purchase funnel and so they either need to buy new more-targeted online properties or they need to find a way to monetize their existing traffic more effectively, hence affiliate marketing. They do make some $1 billion already from travel, shopping, auto and other transaction oriented sites but with margins in e-commerce so tight, it is hard to see how that could be rapidly expanded without new acquisitions or a significant refocusing on performance marketing.
On the downside, there is the potential effect of any new approach on Yahoo’s display ad business. As Greg Sterling has commented: While it’s smart to “diversify” revenue and perhaps to develop more commission or fee-based income sources it would be a mistake to neglect Yahoo’s core display ad business. Yahoo cannot simply hope that its ad business can run on autopilot. If neglected, revenue will decline and that decline will accelerate as marketers shift their attentions (and money) to other places and platforms such as Google’s Display Network and Facebook.
So far as Pinterest is concerned, they seem to have fully bought into the strength of affiliate marketing as a way to monetize the enormous amount of traffic they are generating. Since they are not endorsing the products that they are linking – their users are – they avoid any FTC-related disclosure issues and are making money even though they are still technically in Beta.
Whatever strategy Yahoo eventually adopts, the fact that Pinterest is using performance marketing is – on its own – amazingly good news for the affiliate marketing industry.