by Matthew Wool, CEO of Acceleration Partners, and co-author of “Moving to Outcomes: Why Partnership Are the Future of Marketing“
In one way or another today, every brand is competing with the same black-and-orange giant: Amazon. This is especially true in the retail world, which Amazon has completely upended in the past twenty-five years. And while Amazon is known for its low prices and remarkable shipping power, they provide perhaps the stiffest competition in marketing.
Amazon spent over $22 billion on marketing in 2020, and 197 million people purchase from their platform each month. With their resources and a direct relationship with a monthly customer base the size of Russia, Amazon is a formidable competitor for almost any business. Remember that if you invest in digital marketing channels like display ads, paid search, and other input-driven models, you may very well be competing with a Goliath that can outspend you exponentially for the same target customer.
Amazon has tremendous customer loyalty, and the size of its marketing apparatus creates a bit of a dilemma. Most businesses, even successful ones, cannot outspend Amazon in traditional marketing channels or erode their market share through conventional means. On the other hand, if they sell through Amazon, they enter fierce competition with other brands, including possibly Amazon itself.
Plus, in cases where a brand can sell effectively through Amazon, the customer often becomes Amazon’s customer and not their own.
In other words, brands need to be smart about their market tactics to compete with goliaths such as Amazon. They cannot just rely on channels like paid search, paid social or display ads. This is where partnership marketing comes in.
Partnership marketing is a high-growth channel where brands leverage trusting, transparent relationships with marketing partners and only pay for the outcomes they receive. In contrast to channels that charge upfront fees for uncertain returns, partnership marketing allows brands to pay for sales, leads, traffic and other outcomes only after they’ve secured those results.
This channel isn’t new, and has existed in several forms over the years, most effectively as affiliate marketing. It’s a profitable, scalable and sustainable alternative to the dominant channels of today and needs to be front of mind for every marketing leader.
Amazon has what is almost certainly the largest affiliate marketing program in the world, the Amazon Associates program, with what has been estimated to be more than one million affiliate partners. But, despite this, in partnership marketing, Amazon’s strength—its sheer scale — presents an opportunity for smaller brands.
First, because of the size of the program, Amazon must understandably rely on widespread automation. Therefore, the vast majority of the publishers in the program will not have a direct relationship with someone at Amazon. Smaller brands can step into the void in areas where that personalization and a human connection can make a difference, especially given that many partners are looking for more than just dollars in the programs they join. These brands are able to work more closely with partners than Amazon can, offering specific ways to optimize performance, more relevant content to entice audience members, and potential access to offers and exclusive opportunities that would not otherwise be possible.
Second, when Amazon makes a shift in its affiliate program strategy, it tends to have a big impact. For example, Amazon made major changes to its program early in the COVID-19 pandemic, changing its commission structure and removing large publishers when it was faced with more demand than it could fulfill. While these decisions make sense for a program of Amazon’s size, they can be disruptive for partners, especially those who have not diversified their partnerships. Many brands used this as an opportunity to reach out to new publishers who had never worked directly with the brand before and saw a big uptick in the growth of their partnership programs as a result — growth that largely continued even after Amazon reversed some of its commission changes, due to the new relationships that were formed.
Finally, partnership marketing may also be changing how Amazon thinks about their partnership program for third-party sellers on their platform. As of the writing of this book, Amazon is testing an initiative to open its attribution pixel, allowing transactions sent by publishers in outside partnership marketing programs to be tracked and reported through to conversion for the first time. This means that brands that are selling on Amazon can possibly create their own partnership programs on the Amazon platform, where they own and manage the relationships with publishers directly. In these programs, brands pay the commissions and influence how these publishers market their products.
This trend makes a ton of sense for Amazon and other marketplaces such as Apple and Walmart, which should be very willing to stand aside and let brands absorb the direct costs of partnership marketing for their own products, because they generate the majority of the revenue in a transaction. This change would allow smaller and midsize brands to have the leverage of Amazon or other marketplace platforms and work more personally with publishers who promote their products specifically.
To compete with Amazon, it’s better to play a game where your business has less of a structural disadvantage. Leveraging scalable, outcome-based marketing partnerships can help any brand build sustainable marketing ROI and outmaneuver the goliaths in their verticals.
Matthew Wool is the co-author of “Moving to Outcomes: Why Partnership Are the Future of Marketing“, and the CEO of Acceleration Partners. After joining the company as its fourth employee in 2012, Matt served as General Manager and then President of the company before becoming CEO in 2021. During his tenure, Matt has been a driver of Acceleration Partners’ success including the company’s numerous placements on the Inc. 500 list of fastest growing private companies.