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[00:00]
A
Foreign. Welcome to another amazing episode of Always Be Testing.
[00:12]
B
Brook.
[00:12]
A
What's up, man?
[00:13]
B
Thank you for having me, Ty. It's a pleasure to see you again.
[00:16]
A
It's good to see you. Just had a beautiful lunch with our friend Kyle Schumacher, may he be named in lights on this pod. We're here at the Capital factory in downtown Austin. And it's good to see you in person.
[00:30]
B
Great to see you.
[00:31]
A
Let's go. You made a good observation on our attire just now.
[00:36]
B
Yes. Both sides of Austin. Cowboy boots and the flip flops.
[00:40]
A
We're covering everything.
[00:43]
B
Yeah.
[00:43]
A
We're here on the eve of Affiliate Summit East. We'll all be in New York shortly. Right?
[00:49]
B
I will not be there.
[00:50]
A
You will not be there. That's true.
[00:51]
B
I'm doing a month in Japan with a family, which is super exciting.
[00:55]
A
Way better.
[00:56]
B
Although I'm not looking forward to the flight.
[00:59]
A
That would be my biggest fear. And I will say that is like my probably top bucket list thing.
[01:06]
B
Yeah. There's this program called Boundless and they do schools around the world.
[01:10]
A
Okay.
[01:11]
B
Yeah. So one month stints and three months since we're doing the former. And I've heard it's awesome. I'll report back.
[01:18]
A
Wow. I can't wait to check that out. Always wanted to go and heard nothing but amazing things.
[01:23]
B
Will be my first time.
[01:24]
A
Yeah. Bring in the kiddos.
[01:26]
B
That's. Yeah. So the older two do the school thing and then we'll have some help with the. With the children.
[01:32]
A
Yeah.
[01:33]
B
And so we should be able to. To do all the things, including work. They have a co. Working space for the. For the parents. Wow.
[01:40]
A
Now I'm really interested.
[01:42]
B
Yeah.
[01:43]
A
Good deal.
[01:44]
B
Throw a note in the link, in the chat notes.
[01:47]
A
There you go.
[01:48]
B
Affiliate link.
[01:48]
A
The true affiliate way as we'll get into. Yes. Well, Brook Schaff is a legend in the affiliate industry. He's been on multiple sides of the business. Agency, great retail experience, brand experience, building out. Co founded fmtc. Very important tech player in the space. Right.
[02:10]
B
Small but mighty.
[02:13]
A
And now an author. Got a new book coming out which we're excited to talk about. Tell us a little bit about what you got cooking with this book because I think that's something very interesting for the industry for you and I. We've talked about it. But affiliate hypotheses. What's. What's going on?
[02:30]
B
Yeah. So the book has been cooking for a few years. I write a lot, but not especially quickly for that. I think it's come out better because there's been a lot more to Kind of absorb over the years and process. And the book is kind of two things. You know, in part it's a love letter to fully marketing and there's also a call to arms for our channel. And I suppose maybe it's three things. It's an explanation of the channel as well, which I argue it is a channel as opposed to a form of payment and so on. The love letter part, it's very elegant. It allows for big and small players to come in the space, hang one of a number of shingles from an agency to a publisher to a bigger platform. And there are just so many great stories and great people in our space. And it's a call to arms in the sense that I argue our channel should be multiples, larger.
[03:19]
A
Yeah, I love that it echoes a lot of the things that we've talked about, having worked together in the industry for so long and champion the industry and trying to kind of educate people on what it is and what it isn't, which is an ongoing thing. We've talked about this a lot around. I love how it's so democratized. There's so many players in the game. There's small shops, there's huge ones, there's medium sized one. There's so many ways to monetize it. And I like that theme that you kind of came up with with affiliate hypotheses. What, what is the kind of key problem that you, you think that affiliate hypotheses is trying to solve or suggest that maybe industry people or ancillary industry people are still trying to understand?
[04:08]
B
So the, the, the specific conjecture is that affiliate as a form of monetization is the best indeed sometimes the only way to monetize certain things. You know, one of the people I talked to for the book, out of many, including you, thank, a big thank you to everybody who gave me time was Jared Grimm, who, you know, whose company was acquired years ago by Impact. And he made this very interesting point that affiliate, though not called such, is sort of like the native form of monetization of the web, right? Like you have commercial intent, you have commercial action, and the two can be tracked from impression through the click to the action. So we don't think of Google or Facebook or Open Web programmatic as being affiliate links, but this idea of the harvesting and the monitoring of this commercial traffic kind of is affiliate ish, even if we have a more specific definition. And so the thought is, you know, look, anything that is commercially relevant accrues benefits to the recipient of that traffic or in the LLM era the person or the company who is even just mentioned. And so if that can be monetized as through affiliate monetization methodologies which now go beyond the commission and even the click for us with hybrid deals, then it should be monetized in as much as is fair and ethical and so forth. And that is what we have not been doing a great job of doing. But I think it's pressing for us to do so. The subtitle that we ended up with shout out to the Forbes Advantage team is, you know, universal Link monetization to save the Open Web. Now we're not going to really get to full universal link monetization, but we can go much, much further. And if we do so, I think that it can help to save the open Web, which you know, in the LLM answer and era is actually imperiled because people don't click through to the sites, you know, yeah, can't show an ad, you can't get an affiliate commission, et cetera. This is a big challenge facing the open web and I think it could go ways to solving the problem.
[06:11]
A
Yeah. Could we. I'm going to zoom out a little bit when you. When we talk about the open Web for people that are not as familiar with the concept and kind of like, why is it worth saving? You and I, I think understand that's very important. But like, can you give a little bit of a primer for people on like, why that's an important thing to be saving and thinking about?
[06:30]
B
That's a great question. And I guess we shouldn't just sort of presume it. You know, the, the Internet famously goes back to the DARPA project and the universities being connected. And then mid-90s, the world wide Web blows up. And I would say that it's a societal good because, you know, we have access to information. Of course there's commerce, there are communities and so on and so forth. And it's just so integral now to our lives. And you know, the Internet admittedly has a dark side, but that the dark side of human nature predated the Internet. But it also for that has, has a light side. And it's so wonderful to be able to find this information to enjoy these modern conveniences. And you want to think that anybody out there can participate, you know, that has. If they have a fair shot, you can like have your publishing blog about beekeeping, whether or not you're making money from it. Y and so, you know, there has to be an infrastructure to, to support that. And this really speaks to that yeah, absolutely.
[07:26]
A
No, it's great reminder for people and I think kind of progressing through the thoughts of the affiliate hypotheses and you're making a case for affiliate in all the right ways and not going in like, hey, it's perfect. But it reserves a bigger awareness, a bigger seat at the table, a bigger investment in your perspective. Why do you think it's remained smaller, like vis a vis the triopoly, if you will, of Google, meta, Amazon, others. What's behind that, despite it's having its benefits?
[08:02]
B
Well, great questions and I think there are two answers and one's a little bit spicy.
[08:07]
A
We're going to get spicy today. Let's go.
[08:09]
B
I think there's too much of one thing and not enough of another. I think there's too much friction, which you've covered many times on this podcast. And then I think there's not enough sociopathy.
[08:21]
A
Sociopathy. Tell us more about that.
[08:23]
B
Well, if you look at other players out there, I'm not saying this does not exist in affiliate.
[08:27]
A
Sure.
[08:27]
B
But a lot of the other players out there, especially ones that take advertising dollars, are very aggressive about taking and claiming those advertising dollars.
[08:36]
A
Yep.
[08:36]
B
You know, so if for the listeners who might not be familiar with this, you know, the open web is in contrast to what's the closed web in an advertising context, that's a walled garden. Right. So in an app, you, you know, you access all the Internet through the app. Facebook, kind of like a Google within the Amazon app within the Amazon ecosystem.
[08:55]
A
Google's kind of straddling a little.
[08:57]
B
Yeah, right. Yeah, because they have their whole, their whole ecosystem of properties. But the idea is that like the closed web, you know, accessible by permission, access can be closed off, access controlled, as opposed to the open web, you
[09:10]
A
can be removed if you're not behaving properly, which is part of why affiliate makes a lot of sense strategically.
[09:17]
B
Yeah, absolutely. And so if you look at the players, whether it's open web or closed web, because you have these walled gardens. Right. So that's Google Alphabet and Facebook meta and then also kind of like Amazon, but Amazon's a little bit different, but they take in tens of billions of dollars with advertise their advertising, but they mostly charge their sellers.
[09:37]
A
Yeah.
[09:37]
B
So sort of a form of seller rent extraction where Facebook and Google get money from everybody on the web and then you have open web programmatic advertising, you know, when you're on the app and you get the screen takeover, the banner ads. And so those guys are very good at charging very big amounts of money. Which are many times what all of the affiliate channel collectively gets. And it is intended to be a little bit playful as well as critical. But I don't think that those pathways necessarily serve the best interests of the advertisers. Now a lot of people would say, well affiliate deserves a lot of criticism and that's undoubtedly fair and reasonable. But the advertiser still has a degree of transparency and control that they do not have in the other channels.
[10:21]
A
Just double clicking on that point where, and we don't need to necessarily like try to like totally litigate like Facebook and Google's issues. But it's interesting to me where, where are they kind of taking that from the brand as an example, just, just to give people a sense of like where that's falling short in the transparency side of it for the brand to say. I wasn't really clear that I was giving that up to Google and Meta in this case. Can you like maybe elaborate more on that? I'm curious. We can talk talk in some of those, some of the issues that we see there.
[10:55]
B
Yeah. One key phrase here is grading your own homework, right? So if you're in a walled garden, they get the tracking pixel and then they are doing the advertising, right. And now more and more by the way, a lot of people are not really tuned into this. But it went from being like Google, you buy a keyword, you have negative keywords and then there's the broad match but you can do exact match. Now it's more, you know, there's these performance max products, right?
[11:20]
A
Algorithmic driven.
[11:21]
B
Yes. All your money, just tell us your goals and then you'll do it. So what kind of can get lost here? Even though it's hyper scrutinized and affiliate and reasonably so is what's true attribution for that. Where should credit be claimed? So I referenced this in the book. There was an ad exchanger article from last year, the year before and they interviewed anonymously because they wanted to get into trouble these advertisers and they were saying that some of their walled garden advertising, they literally didn't know how the walled garden knew about the transaction because by their internal metrics it was so far away. You'll see that a lot. Right. So anything that they get within 10ft of like, so there could be the click, there could be a view through. Right. Because you know your correction based advertising is a thing like a billboard makes an impact. But it's less true online if you have ad blindness and you don't know see the ad and so it's very easy for that, for, for you to claim excessive attribution to yourself when you're grading your own homework. Yeah. And then on the other side of that things, the open web programmatic space, it seems to largely be driven by false signals. Right. Because the theory is, hey, I want to advertise the ties demographic. I buy this whole ad tech stack and it tells me I'm, you know, I'm advertising to man, a father with children who lives in a certain area. But that information might be bad, Right. Some advertising platform might think that you're a woman who lives in Florida or something. And there's a lot of case studies about this. Not to mention the fact that there's all these banner farms made for advertising sites which take up a double digit percentage by everybody's admission. By the way, the people in that space, they don't pretend otherwise. It's true. They just talk about it periodically and they wring their hands and say darn. But the dollars keep flowing. And those dollars, by the way, so made for advertising sites are sites that basically replicate all these desirable signals and then they suck up all these ads because the ads are, they're all, they're bid. They're bid. Right. So you have like the demand side platform where the advertiser says hey, I want this. And then the supply side platform where the publisher says I've got this and then they meet in the middle with an exchange and the MFA sites basically send fake signals and then the dollars flow through. Just considered, it's largely considered wasted money. Right?
[13:35]
A
Yeah.
[13:36]
B
And those wasted dollars are probably bigger than all of affiliate.
[13:40]
A
Yeah, I, I think that's a really good call. We've talked about programmatic. It's not to say there's, you know, don't necessarily want to say there's zero value in programmatic up here on this in the conversation, but I think there is a really good case to be made that affiliate done right most certainly should have a larger seat at the table. Most or it's probably undercounting in a lot of examples like we've talked about. It's a whole nother topic. And then, you know, Programmatic, Google meta, all three of those have some very severe pitfalls. I mean I think about 30 day view through. My goodness, what is that going to mean for somebody? Just the default. I talked about this with Mike, good friend COO of RBL in terms of his meta experience and the depths of that and this was like a year and a half ago of how if you just Go in with default settings, you could easily lose your shirt. It's not to say you shouldn't advertise on meta. It's not to say you need to cut your spend. But there are a lot of that is happening and not as talked about with the skepticism that's talked about with affiliate or partner or even influencer to an extent. So I think you're onto something here. Yeah.
[14:48]
B
You know, Kyle made this great point at lunch which is like if you're Facebook and you, you know, like or Google and you see so much data, you wouldn't necessarily advertise to who might buy. You can advertise to who is most likely to buy and then you get credit for the transaction on the back end. And so if you take all that together and you say, well, the average overspend is, I don't know, 10%. If these channels are making hundreds of billions of dollars a year, then that 10% also is probably bigger than all of affiliate marketing.
[15:18]
A
Yeah, yeah. You're kind of picking on the smaller player. And I think just stepping back and this is maybe sharing a bit more of my perspective on it, I think that the sooner and we talked about this at ipx, we talked about this with leadership at Impact, at Rakuten, at Capital One, at various players to say the sooner partner, affiliate corrects some of those really important things that can be corrected and calls out more the soonest each of these channels can race to trust. Where we have such a gap in an issue which is kind of my concept we've talked about a lot and it's a concept we've all dealt with and I think you touch on in your overall theme of your book. I think the sooner we're going to be able to capture more of that larger pie that's out there in a. What trillion dollar.
[16:13]
B
I believe that's a trillion dollars now.
[16:16]
A
Pretty crazy.
[16:17]
B
Pretty crazy.
[16:19]
A
Is there a counter argument, we talked about this a little bit prior to this here where you get some pushback on your thesis that, you know, what's the counter argument to this?
[16:31]
B
I think there are a few. I think probably one of the big ones is affiliate is inelastic. Right. Commission goes up, the commission goes down, the traffic stays the same. And if that's true, you shouldn't have an affiliate program to begin with.
[16:43]
A
Right.
[16:44]
B
But I think that the data again is probably as scrutinized as possible. Is that like whether your affiliate program is very wide and opening or is constrained and locked down as tight as possible? If you as an advertiser cross some sort of traffic or revenue threshold in terms of your leads or in terms of the volume that you're doing, you are leaving money on the table if you don't have an affiliate program. And that's probably doubly true in the LLM era and actually circle back to what you were just kind of mentioning there, you know all these mentions, a double digit percentage of which kind of probably come from affiliate sites. I've seen different numbers. Right. I think Lily Ray has presented on that. I think she said 25% or more. I've seen more than 50% by some counts.
[17:28]
A
What's that metric again?
[17:30]
B
The critical sites that are referenced for LLM?
[17:33]
A
Oh yeah, yeah, yeah. 30 to 40 gets referenced a lot in our, in our data and some of the third parties from like Profound and some of the others calling that out, that's really, it's. I think that's close proximity to that 25 number you just referenced. Yeah.
[17:47]
B
And my guess is that I think some of them are constrained the data set to like the more commercially applicable stuff versus like just the more general answer stuff. So commercially applicable you get like a lot of the more content guys, coupon content gets queried and other stuff like that versus like you know, more like how do I do this in my garden?
[18:07]
A
Yeah, yeah, totally.
[18:09]
B
And so if a lot of that is like affiliate content site then you know you are making money off of those affiliates writing content about you. Right. You as the manufacturer brand or you as the retailer and you're not giving a penny to those affiliates. And partner Eyes has been leading the charge on this with their kind of like LLM attribution which you know, kind of came out of their Connecto acquisition last year and they published something I think it was last week that you're seeing like a three, eight so roughly like four times as many transactions would have affiliate in the. It's not the click stream anymore. Right. It's like the thought stream or the reference or, or reference stream but you know, so almost four times as much as they're getting credit for. And of course that credit might be lost for a variety of reasons.
[18:51]
A
Yeah, it's, it's crazy and it's a great segue into the AI explosion that we've seen. You know how it's small percent gaining massive adoption. I mean for us also thinking about like B2B and partner and how much of those decision making things start at the alms point of reference is crazy high. I was talking to brand in the SaaS world where you know, they were basically almost entirely partner led. So when I, you know, we think partnerships and partner led and partner led growth. Not to derail this into a different direction, but so much of that is really in some ways an affiliate mechanism which is you are exactly describing and you're advocating for in your book. And I just got off a conversation before this with a brand that's native AI SaaS, they're not pouring money into LinkedIn ads and Google, they're relying solely on partner.
[19:45]
B
Good for them. And yeah, no, it is. I think it's actually only going to grow in importance as a channel and then on the far side of that we got to figure out monetization mechanisms for it, which I just don't. Nobody really quite, quite knows yet.
[20:01]
A
Right. It's funny because it reminds me, and I'm going to, I'm going to butcher the name and the reference, but there was an Andreessen investor and this was Talked about like 10 years ago and I've made some, some references to it. I want to say maybe it was Connie Chen, but she had talked about kind of the wave of like the micro actions, ways of monetizing and I think it was becoming observed and measured in a lot of Asia in consumer. And I wonder if there's a, there's maybe a corollary there to look at with what you're advocating for which is saying, hey, if we take the affiliate model, take the open web, it's a way to save the open web. If we think about ways to transact in an affiliate type way, that's, that's value additive to save it and keep it going is that. I'll have to pull that up and share that in the notes, but I don't know if there's any reference to that or if there's any. And what are your thoughts on that? Is that kind of what you're getting at?
[21:02]
B
You know, I think it kind of goes back to the friction and the sort of like open heartedness. You know, right now as it is, the merchants tend to get a lot of information that they don't share with the affiliates. Right. So you get to say, hey, here's everything bad and I'm not going to pay for that. And that's usually fair. But the affiliates might be able to do a lot more. If you say, hey, here's everything good. And I think the elasticity point is really hard to disprove especially if you get like the example that you just brought up some spaces, reviews are so important, you know, so I think it's, I think it's still true from everything, from like this last click because like the consumer is looking for something before they had the confidence to buy. And you know, as I always say, like if they don't have that, their default is probably going to be Amazon, which has its own version with Amazon's choice.
[21:46]
A
Right. Yep.
[21:47]
B
That confidence inducer to like a much longer buy cycle where it's like, hey, what software do I invest in? This is not just money, this is my time, my team's time. And affiliate, the influencer, the creator world, you know, what better way than that? They have the trust, they have the affinity, they have the audiences. And you can work with affiliate, you know, you can scale out to work with thousands of people.
[22:09]
A
Yeah.
[22:10]
B
Incredible.
[22:11]
A
Yeah. With AI coming and zero click here and that growing so quickly. How does that play into your suggestions in the book and kind of where you see people rewarding or not rewarding affiliate.
[22:26]
B
Well, so I do cover this in the book because it's, you know, some of the stuff I think is kind of patterned out, but not the LLM stuff and the monetization. One pathway that seems likely to me would be like enhancing this trust so that when the merchant sees all those signals, these, the micro signals, as you mentioned, that they can share those in some fashion with the affiliate. And that could lead to anything from the affiliate saying, hey, I'm not making a contribution here. The merchant says, hey, thanks for trying to the affiliate saying, hey, you know, let's really collaborate on this and do some stuff together, which can be, you know, that can lead to fantastic partnerships. Actually, your last guest talked about how they were trepidatious about working with a retargeter and I think they ended up being the number one affiliate.
[23:06]
A
Yeah.
[23:07]
B
For Apollo. Right? Yep. And then they went away, which would have happened there.
[23:11]
A
Yep.
[23:12]
B
But you know, that's a great example. Right. Like, you know, because they probably say, I'm just imagining internally, oh, we can do our own retargeting.
[23:19]
A
Yep.
[23:19]
B
But like there's some extra juice the affiliate can add. Yeah. And what a wonderful way to enter a partnership and is so elegant because the remuneration, you know, is appropriate to the value driven.
[23:30]
A
Yeah.
[23:31]
B
And no better channel for that. You know, they might have some talent or audience that you don't have. It's elusive to you. That's how you get it.
[23:38]
A
Yeah.
[23:39]
B
But in order to like really make that work, it does have to be typically like some, some partnership. And so we as a channel, I think are really bad about that because the merchants tend to be guarded. And in fairness too, you know, the merchants deal with fraud and there's politics inside the merchant. And so I think, you know, you can't just snap your fingers and get past that. I think that the forward thinking agencies can maybe show a better path and then the sort of like the hurry can kind of catch up to them. Yeah, technology is largely there.
[24:08]
A
Yeah, I think that's really, I think that's a great call out to the other aspect of the industry that I think is something we appreciate is there's a human on the other side, there's a conversation to be had and maybe the core model in this case maybe like the retargeting play we'll call it can be nuanced and complimented in saying, well, let's not fire on these cases, let's fire on these cases. So therefore you're getting what we estimate to be is more accretive value. And so you're obviously not going to be able to have that conversation with Google. I'm not saying that, you know, Google isn't required as part of your mix, but I think it continues to call validate the model, validate the channel, validate affiliate. To your point of what? You know, obviously I'm doing the same thing. But your book really calls out in a way that I think captures a lot of your great experiences over the years, which has been tremendous.
[25:02]
B
Yeah. So in addition to that information sharing, I would think that something the merchants should move toward would be kind of like a neutral arbitration platform which you know, a lot of people don't have. Like, because you have your, you know, your wall garden silos over here, that's where they grade their own homework. And then maybe you know, you got like a container or something over kind of like here and everything else lives there, you know, so affiliate reconciles against itself. That doesn't happen with the other channels and you don't really have like that full picture. So you should take as much of that picture as you can kind of get for internal purposes which frankly speaking it's going to be more work. Don't be afraid of doing that work well.
[25:37]
A
And I think that's probably where that's where people get stuck. Goes back to the friction piece. Right. It's like to do this well, it's, it's not as easy as plugging into a Facebook or Google. And yes, there's challenges to setting up Google and Facebook rights so you don't lose your shirt as we discussed, but it's, it's sort of a, that catch 22 of. There's insane value here. But it's the, the, the hurdle to get there is, is high. Is that kind of what we're saying? Is that what you're saying, not just
[26:08]
B
the hurdle but the, frankly I, I think the ongoing work too.
[26:10]
A
Yes.
[26:11]
B
So yeah, the hurdle is high, but you want to, you want to leap over that hurdle to be excellent.
[26:15]
A
Yeah, no, absolutely, absolutely. It. Do you, do you feel like the publisher from the publisher's perspective? And that's really interesting with regard to the open Web. How much do you cover that in the book and what are your thoughts there?
[26:31]
B
One of the things I cover in the book that's pretty interesting is this disillusionment a lot of the publishers have. And this kind of gets away from affiliate into the more open web stuff because the big news sites, they depend on open web advertising. And in the zero click era, from what I can tell, they're hurting more than affiliates because there's, there's still more incentive to click through which still gets tracked in affiliate. In fact, very recently, like literally in the last couple weeks, there have been a couple news articles actually Mike McDerney posted this one on Ad Week mentioning that some affiliates are thinking of going nuclear and blocking Google's crawler.
[27:05]
A
Right.
[27:06]
B
Because Google's AI and crawler and their search crawler are conjoined, which you know, seems very deliberate and they've been called out on this for, from, you know, from, by the CEO of people and many other players in the space. And so I, you know, on a, if you can call it a positive note, like at some point, if you have nothing left to lose, like I inbound search traffic, then like maybe it'll, it'll force creativity which apparently a lot of these guys have found and maybe think it'll be better on the far side. But there is some short term pain that we're going for that I think in a lot of respects is undue because basically the deal was you get a lottery ticket for traffic in exchange for creating the desired content. And now that content is extracted, even coupons, product feed information, all the review stuff, unless it's behind the paywall and then you can't get any money for it. So it's just not fair. Right. And so something's got to give on that. And the good news is I think there's a lot of ways that we can kind of approach this. The bad news is that there's, you know, there's a lot of work and then There's a lot of resistance to it too, of course.
[28:13]
A
Yeah. I mean, yeah, it seems like a call to arms to operate more fairly with regard to the invest the heavy dollars going into, you know, certain key incumbents, if you will, platforms. You know, that's a big part of this. And it seems like a more fairer distribution is sort of what you're calling out as well. Like there's no reason why it needs to be. We need to be like one tenth of what Google's getting right now based on the value that's there. Is that kind of the direction you're going in with the book?
[28:45]
B
Yes. And may I bore you with some statistics?
[28:47]
A
We love data. We love statistics.
[28:49]
B
You love data.
[28:50]
A
Yeah.
[28:52]
B
Okay, so here's. These are some IB 2024 numbers you want to remember. The numbers are largely what kind of estimates from the different channels and they're defined differently.
[29:00]
A
Yep.
[29:01]
B
So this one tracks 259 billion in U.S. digital ad spend goes from search at 103 per year. Per year, yeah. Then social media at 89, display 74, digital video at 62, commerce retail media at 53. So remember, that's not commerce content so much as like Amazon ads and then podcast at 2.4. So a few things here. So one that actually have a disclaimer note, channels overlap. A social media video ad accounts both in social and video categories. So in the book I focus on the walled gardens and then open web programmatic advertising and then affiliate. Which brings us to the second point, which is you'll note, affiliate is missing from this list. So by the PMA's numbers, which I think are pretty good, you know, affiliate probably being around 12, 13 billion for the 2012 number. That sounds right to you? Way bigger than the podcast. But we're not mentioned on the list. That's we overlook this a lot. But like people don't. People overlook affiliate. They're confused by affiliate, you know, and we need to really kind of push through to have our seat at the table. And I think people often kind of get confounded by the definition, but we have an opportunity to kind of make that definition more flexible. It kind of already is. Right. You do a hybrid deal, it's still basically an affiliate deal. It's done by the affiliate agency. It has a performance attention and so forth. And then the other piece of the picture here is, you know, we need to work on the attribution in a big way. And so last week, hello partner published a piece, an opinion piece by me arguing and I called it like Affiliate marketing needs to get ratioed in the sense that you have like the deterministic say, click, you know, this sale associated with this, click. And then you have like the, the probabilistic estimates. So, and this is where Partner Eyes is arguing from a probabilistic perspective. You know, affiliates contributing four times more, which I find totally plausible, by the way. And so if you look at these other channels, they're kind of getting credit for basically the probabilistic part of things. And so we should push forward with this kind of universal attribution concept is to say, look, we're confident in our channel, we're not afraid to take the challenge. We're going to put ourselves out there and then we'll come up with two numbers for every channel. One is the deterministic thing where there's something very specific and then you track it through to the user, anonymized, of course. And then two is the probabilistic and we'll compare. So not just to say, like, hey, affiliate got credited for one, but it contributed four. But we'll look at the ratio of affiliate versus the other channels. I believe affiliate will compare favorably in multiple respects. And I think it's up to us, up to us in the channel to really push for that. I think that's going to be very healthy for our channel, deservedly so.
[31:44]
A
Yeah, I can almost see it's almost sounding like a, a universal attribution standard is the direction you're going in.
[31:54]
B
100%.
[31:54]
A
Yeah. And I think that's needed so badly for whatever close approximation to a governing body there is. It's needed from the network, agency, publisher, brand side of things. And I would even, and this is part of some of our recent conversation and conversations with others where I think looking ahead to the importance of incrementality, which is really the, you know, from the brand's perspective, as, you know, how they're really looking at value here. And so you've got to have that attribution question standardized a little bit better, I think. I think similarly, I think you have to have the, the impression exposure data and the, and start to speak the language of the MMMs more effectively. Something we've been talking about too, because that's the, I think that's the next step. We're not even at second base yet in baseball and I think that to be able to get that standard would be amazing. And then hopefully as part of that, we can get some standards around. Hey, you're going to benefit by showing transparency or referring URL you're going to benefit by showing exposure and impression data because then the brands that are cutting the checks can say, I have so much more trust in this. I have so much more transparency in this process. I'm going to give it the more attention that it deserves. That, I think is a great thesis of your book. Yeah.
[33:21]
B
And that trust should really go both ways. I hate to say a lot of merchants, we were talking about this at lunch. Yeah. Like a lot of merchants get away with, you know, broken tracking and problems on their websites. They can't get their data out.
[33:34]
A
You know, they're not incentivized to fix it either.
[33:36]
B
No. And it's crazy. I mean, that's actually why I think as a business is like so much the coupon data that comes out is bad on a landing page. The code doesn't work, it's mislabeled. The same thing with product feeds. And so, you know, it's great that we have a business cleaning, cleaning that up, but it would be, you know, it'd be better if it weren't an issue to begin with because there's always going to be more data to process. And so, yeah, no, it definitely goes both ways. And you can, you know, realize that as best possible if, you know, you believe in the value of the channel. Right. So you get more resources to the channel because we're often. Yeah, you got to get the developer's hours and it's got to go in the queue and stuff. As well as the dollar budgets. There's a very good case to be made for expanding that affiliate. It's happening right now too, which is awesome. Right? This vast expanse of the creator economy, along with all the other existing, the coupon, the cash back, some of the arbitrage guys, all the emailers, just tons and tons of affiliate models we really offer. I mean, it's very diverse.
[34:35]
A
Right.
[34:36]
B
There's, there's just so much interesting stuff and so many ways to engage with affiliate as advertiser.
[34:40]
A
Yeah, absolutely. And I, and I think like, there is a bit of that race to like develop that trust and improve. I mean, even with metas rolling out of their incremental attribution solution, I'm seeing some early data come through on that. And I think, again, it's not going to answer your concerns, but I think there, there's going to be that, that battle for wallet from the marketer, it's not going to end. And I think if you can, we have an opportunity, I think, to rip that band aid off a little bit. You know, follow some of the suggestions from your book and keep moving this thing forward in a positive direction. I think that's. That's brilliant. I think that's what we're all trying to do and solve for the greater good. Really. I mean, if you're. If you want to. I would rather to say we all want to compete on a level playing field to some extent and to have enough information so people can make an informed decision to say, yeah, if we don't perform as well as video ads or podcast ads, it's fantastic. That's the way it breaks. It doesn't mean you necessarily don't have an affiliate offering or you don't de invest, but maybe it just changes that balance for that particular situation. You'd rather win in a fair game than one that's rigged. Yeah.
[35:54]
B
And in theory, that could be remedied with, you know, for example, adjustments in the tracking methodology, adjustments in the commission rate, you know, changing over to new advertisers, changing over to new publishers.
[36:04]
A
Yep.
[36:04]
B
You know, a really important thing not to lose sight of is in affiliate. We are very focused on the intra channel competition and conflicts. We lose sight of the inter channel competition and conflicts.
[36:15]
A
Yep.
[36:15]
B
And I don't think the other channels do that.
[36:17]
A
Absolutely. Absolutely. That's a. That's a huge one. This is awesome. I can't wait to read the book. Where can people find it and how can we people buy it?
[36:27]
B
Well, thank you so much for your support.
[36:28]
A
We're plugging it. We're plugging it hard.
[36:30]
B
Yes. I appreciate it. I appreciate everybody who's.
[36:33]
A
Who's.
[36:33]
B
Who's. Let me know they bought copies so far. I think it will be very much worth reading. It's available on Amazon, of course, Barnes
[36:39]
A
and Noble and Remove the friction. It's not an issue.
[36:43]
B
You gotta face reality.
[36:44]
A
Good. All three. I'll see how many Barnes and Nobles orders come through. Hopefully some. They're making a bit of a comeback. I hope so. I'm cheering for Brooke. You're the man. You came on right before your big trip to Japan, and we thank you for that. And it's always a pleasure to see you in Austin.
[37:04]
B
Pleasure to see you. Thank you for having me.
[37:05]
A
Thank you, man. See you, buddy.

Summary7 min read

Podcast Summary: Always Be Testing – Episode #131

Can Affiliate Marketing Save the Open Web?
Host: Tye DeGrange
Guest: Brooke Schaaf
Date: August 11, 2026

Main Theme & Purpose

This episode dives into the evolving landscape of affiliate marketing—highlighting its foundational role in supporting the “open web” and exploring how it can counterbalance the dominance of walled gardens (Google, Meta, Amazon). Brooke Schaaf joins Tye DeGrange to discuss his new book, "Affiliate Hypotheses," which presents the idea that universal link/affiliate monetization could be key to saving the open web. The discussion covers key challenges for affiliate marketing, AI’s impact (especially LLMs and “zero-click” search), issues in attribution, and why affiliate deserves a far larger share of the digital marketing conversation (and budget).

Key Discussion Points & Insights

1. Introduction & Industry Context

Brooke’s Background: Agency, retail, co-founder of FMTC, tech player, and now author. (02:10)
Book Introduction: "Affiliate Hypotheses" is a love letter, call to arms, and explanation for affiliate as a channel, not just a payment model. (02:29)
Universal Link Monetization: The core thesis—if commercial actions are happening, they should be trackable and monetized in fair, ethical ways to benefit the open web. (04:07)

“The book is kind of two things. In part it's a love letter to affiliate marketing and there's also a call to arms for our channel... the subtitle... is universal link monetization to save the open web.”
— Brooke Schaaf (02:29)

2. Why the Open Web Needs Saving

Definition & Value Proposition: Internet as societal good—information, community, commerce, democratized access for all publishers, big and small. (06:30)
Threats: Dominance of closed platforms (walled gardens: Meta, Google, Amazon), rising zero-click LLM searches, and declining incentives for content creators. (06:30–07:25)

“You want to think that anybody out there can participate…if they have a fair shot…”
— Brooke Schaaf (06:55)

3. Barriers to Affiliate’s Growth

Friction: Setting up affiliate programs is still harder than simply buying ads. (08:01)
Aggressiveness (“Sociopathy”) of Walled Gardens: Google and Meta are “grading their own homework,” capturing outsized budgets with little transparency. (08:20–10:54)

“I think there's too much friction... and not enough sociopathy... other players out there…are very aggressive about taking and claiming those advertising dollars.”
— Brooke Schaaf (08:08)

Transparency Issues: Walled gardens both control the media and the measurement (grading their own homework), leaving brands unclear about what drove conversion. (10:54)
Programmatic Pitfalls: Open web programmatic is plagued by false signals, “made for advertising” (MFA) sites, and significant wasted spend—often larger than the entire affiliate industry. (12:50–13:40)

4. Affiliate’s Strengths & Missed Opportunity

More transparent; advertisers have greater control—not always true with platform giants. (09:37, 10:20)
Affiliate is often “undercounted,” while programmatic and walled garden spends are inflated through loose attribution windows and default settings (e.g., 30-day view-throughs). (14:48)

“If you just go in with default settings, you could easily lose your shirt…there are a lot of that is happening and not as talked about with the skepticism that's talked about with affiliate.”
— Tye DeGrange (14:21)

If friction reduces and trust increases (between brands, agencies, publishers), affiliate could capture a much larger share of digital budgets. (15:17–16:13)

5. Counterarguments & Affiliate Elasticity

Counter: Affiliate is “inelastic”—raising or lowering payouts doesn’t change traffic. Brooke pushes back: data shows at meaningful scale, not having an affiliate program is to leave money on the table, especially in B2B and partner-led SaaS. (16:30–17:47)
Role in LLM Era: A significant portion of LLM-cited sites are affiliate/publisher content (around 25–50%), but many brands aren’t rewarding those mentions fairly. (17:33–18:08)

6. Affiliate, AI, & the Zero-Click Era

AI is reshaping discovery: Brands—and partners—must adapt to zero-click results and think about new monetization and attribution models. (19:44)
Micro-actions analogy: Could affiliate’s transactional model be adapted for new “micro conversion” events tracked in the era of LLMs and AI-powered search? (21:01)

“If we take the affiliate model, take the open web, it's a way to save the open web. If we think about ways to transact in an affiliate type way, that's value additive to save it and keep it going…”
— Tye DeGrange (21:01)

Information Sharing: Merchants rarely give affiliates insight into what works (beyond “what wasn't allowed”), missing opportunities for deep collaboration. There’s potential for value if this shifts. (21:01–22:09)
Partnership Examples: Affiliates can bring unique audiences or capabilities that in-house teams cannot replicate (e.g., with retargeting or influencer trust). (23:06)

7. Structural & Attribution Challenges

Proposed Universal Attribution Standard:
- Push for a common framework that reflects both deterministic (clear click-to-sale) and probabilistic (contributed, but not last-click) impacts.
- Brooke references stats: Affiliate likely contributes 4x what it’s currently credited for, per Partnerize's reporting. (29:00–31:43)
- Other channels are already getting “credit” for fuzzier impacts—affiliate deserves a fair measurement. (31:43)

“...for every channel. One is the deterministic thing where there's something very specific, and then you track it through... and then two is the probabilistic, and we'll compare. Not just to say, like, hey, affiliate got credited for one, but it contributed four.”
— Brooke Schaaf (31:43)

Industry Data Points:
- Affiliate at ~$12–13B/yr in spend (PMA estimate), dwarfed in reporting compared to channels like search ($103B), social ($89B), display, and video. Affiliate is notably absent from major IAB lists—and that’s a big problem for awareness and budget share. (28:49–29:00)
Friction & Ongoing Work: Strong affiliate programs require more effort, ongoing optimization, and cross-team buy-in than self-serve ad platforms—but are worth it for the transparency, control, and incremental value. (26:07–26:14)

8. The Publisher View & The Coming Reckoning

Open Web Publishers: Many major editorial publishers are disillusioned, as LLMs now extract their content and reduce incentives, threatening viability. Affiliates are considering blocking AI crawlers to force fairer distribution of value. (26:31–27:05)
“Lottery Ticket” Social Contract:
- The old deal: create content, win traffic from search.
- The new reality: LLMs extract content, credit and value evaporate unless new monetization models are adopted. (27:05)

9. Call to Arms: Fair Distribution & Building Trust

Mutual Trust & Transparency: The next breakthroughs will require both brands and affiliates to increase transparency (attribution, exposure, impression data) and trust. (33:21)
Industry Cooperation: Need for a neutral arbitration platform or standardized attribution framework to help brands invest with confidence. (25:02–25:36)
Intra- vs. Inter-channel Competition: Affiliate industry obsesses over internal disputes, while other channels focus externally and win more share. (36:04)

“We are very focused on the intra-channel competition and conflicts. We lose sight of the inter-channel competition and conflicts.”
— Brooke Schaaf (36:04)

Notable Quotes & Memorable Moments

“The love letter part, it's very elegant…so many great stories and great people in our space. And it's a call to arms in the sense that I argue our channel should be multiples larger.”
— Brooke Schaaf (02:29)
“You wouldn't necessarily advertise to who might buy. You can advertise to who is most likely to buy and then you get credit for the transaction on the back end.”
— Paraphrased from a lunch conversation cited by Tye (14:48)
“Channels overlap... So by the PMA's numbers... affiliate probably being around 12, 13 billion for the 2012 number... But we're not mentioned on the [IAB] list.”
— Brooke Schaaf (29:00)

Timestamps for Key Segments

02:10 — Brooke’s affiliate marketing background; introduction to “Affiliate Hypotheses”
04:07 — Why affiliate is the “native” monetization model of the web
06:30 — The value and peril of the open web
08:08 — Why affiliate has lagged behind mega-platforms (“sociopathy” and friction)
10:54 — Platforms “grading their own homework”; attribution pitfalls in walled gardens
13:35 — Programmatic advertising’s wasted spend vs. affiliates
16:30 — Is affiliate “inelastic”; challenging the counter-argument
17:33 — LLM-era: How much content in AI is affiliate or commerce-driven
19:44 — AI/zero-click, partner-led SaaS, and affiliate mechanism parallels
21:01 — Micro-actions, Asian models, and future of affiliate monetization
22:26 — Models for collaboration: sharing more intent data; retargeting example
25:02 — Industry proposal: Neutral arbitration & universal attribution for affiliate
26:31 — Publishers, news sites, and the existential problem of LLM/AI content extraction
28:44 — Fairer distribution of digital marketing budget; the case for affiliate’s greater share
29:00 — U.S. digital ad spend stats & missing “affiliate” line item
31:43 — Deterministic vs. probabilistic attribution; need for ratioed marketing metrics
33:21 — Two-way trust: friction in merchant-affiliate relationships
36:04 — Inter- vs. intra-channel competition; path forward for affiliate industry

Conclusion & Where to Find the Book

Brooke’s new book “Affiliate Hypotheses” is available on Amazon, Barnes & Noble, and more. (36:26) He and Tye stress that the next phase of growth for affiliate, partnerships, and the open web will require radical transparency, shared standards, and a willingness to address industry friction head-on. The future is about building trust, re-allocating fairly, and making it easier for everyone to measure what really works.

For marketers, publishers, and SaaS growth leaders, this conversation is a front-row seat to where digital partnerships are headed and why affiliate marketing could be the secret weapon for an open, thriving web ecosystem.

Loading summary

Transcript141 lines

[00:00]
A
Foreign. Welcome to another amazing episode of Always Be Testing.
[00:12]
B
Brook.
[00:12]
A
What's up, man?
[00:13]
B
Thank you for having me, Ty. It's a pleasure to see you again.
[00:16]
A
It's good to see you. Just had a beautiful lunch with our friend Kyle Schumacher, may he be named in lights on this pod. We're here at the Capital factory in downtown Austin. And it's good to see you in person.
[00:30]
B
Great to see you.
[00:31]
A
Let's go. You made a good observation on our attire just now.
[00:36]
B
Yes. Both sides of Austin. Cowboy boots and the flip flops.
[00:40]
A
We're covering everything.
[00:43]
B
Yeah.
[00:43]
A
We're here on the eve of Affiliate Summit East. We'll all be in New York shortly. Right?
[00:49]
B
I will not be there.
[00:50]
A
You will not be there. That's true.
[00:51]
B
I'm doing a month in Japan with a family, which is super exciting.
[00:55]
A
Way better.
[00:56]
B
Although I'm not looking forward to the flight.
[00:59]
A
That would be my biggest fear. And I will say that is like my probably top bucket list thing.
[01:06]
B
Yeah. There's this program called Boundless and they do schools around the world.
[01:10]
A
Okay.
[01:11]
B
Yeah. So one month stints and three months since we're doing the former. And I've heard it's awesome. I'll report back.
[01:18]
A
Wow. I can't wait to check that out. Always wanted to go and heard nothing but amazing things.
[01:23]
B
Will be my first time.
[01:24]
A
Yeah. Bring in the kiddos.
[01:26]
B
That's. Yeah. So the older two do the school thing and then we'll have some help with the. With the children.
[01:32]
A
Yeah.
[01:33]
B
And so we should be able to. To do all the things, including work. They have a co. Working space for the. For the parents. Wow.
[01:40]
A
Now I'm really interested.
[01:42]
B
Yeah.
[01:43]
A
Good deal.
[01:44]
B
Throw a note in the link, in the chat notes.
[01:47]
A
There you go.
[01:48]
B
Affiliate link.
[01:48]
A
The true affiliate way as we'll get into. Yes. Well, Brook Schaff is a legend in the affiliate industry. He's been on multiple sides of the business. Agency, great retail experience, brand experience, building out. Co founded fmtc. Very important tech player in the space. Right.
[02:10]
B
Small but mighty.
[02:13]
A
And now an author. Got a new book coming out which we're excited to talk about. Tell us a little bit about what you got cooking with this book because I think that's something very interesting for the industry for you and I. We've talked about it. But affiliate hypotheses. What's. What's going on?
[02:30]
B
Yeah. So the book has been cooking for a few years. I write a lot, but not especially quickly for that. I think it's come out better because there's been a lot more to Kind of absorb over the years and process. And the book is kind of two things. You know, in part it's a love letter to fully marketing and there's also a call to arms for our channel. And I suppose maybe it's three things. It's an explanation of the channel as well, which I argue it is a channel as opposed to a form of payment and so on. The love letter part, it's very elegant. It allows for big and small players to come in the space, hang one of a number of shingles from an agency to a publisher to a bigger platform. And there are just so many great stories and great people in our space. And it's a call to arms in the sense that I argue our channel should be multiples, larger.
[03:19]
A
Yeah, I love that it echoes a lot of the things that we've talked about, having worked together in the industry for so long and champion the industry and trying to kind of educate people on what it is and what it isn't, which is an ongoing thing. We've talked about this a lot around. I love how it's so democratized. There's so many players in the game. There's small shops, there's huge ones, there's medium sized one. There's so many ways to monetize it. And I like that theme that you kind of came up with with affiliate hypotheses. What, what is the kind of key problem that you, you think that affiliate hypotheses is trying to solve or suggest that maybe industry people or ancillary industry people are still trying to understand?
[04:08]
B
So the, the, the specific conjecture is that affiliate as a form of monetization is the best indeed sometimes the only way to monetize certain things. You know, one of the people I talked to for the book, out of many, including you, thank, a big thank you to everybody who gave me time was Jared Grimm, who, you know, whose company was acquired years ago by Impact. And he made this very interesting point that affiliate, though not called such, is sort of like the native form of monetization of the web, right? Like you have commercial intent, you have commercial action, and the two can be tracked from impression through the click to the action. So we don't think of Google or Facebook or Open Web programmatic as being affiliate links, but this idea of the harvesting and the monitoring of this commercial traffic kind of is affiliate ish, even if we have a more specific definition. And so the thought is, you know, look, anything that is commercially relevant accrues benefits to the recipient of that traffic or in the LLM era the person or the company who is even just mentioned. And so if that can be monetized as through affiliate monetization methodologies which now go beyond the commission and even the click for us with hybrid deals, then it should be monetized in as much as is fair and ethical and so forth. And that is what we have not been doing a great job of doing. But I think it's pressing for us to do so. The subtitle that we ended up with shout out to the Forbes Advantage team is, you know, universal Link monetization to save the Open Web. Now we're not going to really get to full universal link monetization, but we can go much, much further. And if we do so, I think that it can help to save the open Web, which you know, in the LLM answer and era is actually imperiled because people don't click through to the sites, you know, yeah, can't show an ad, you can't get an affiliate commission, et cetera. This is a big challenge facing the open web and I think it could go ways to solving the problem.
[06:11]
A
Yeah. Could we. I'm going to zoom out a little bit when you. When we talk about the open Web for people that are not as familiar with the concept and kind of like, why is it worth saving? You and I, I think understand that's very important. But like, can you give a little bit of a primer for people on like, why that's an important thing to be saving and thinking about?
[06:30]
B
That's a great question. And I guess we shouldn't just sort of presume it. You know, the, the Internet famously goes back to the DARPA project and the universities being connected. And then mid-90s, the world wide Web blows up. And I would say that it's a societal good because, you know, we have access to information. Of course there's commerce, there are communities and so on and so forth. And it's just so integral now to our lives. And you know, the Internet admittedly has a dark side, but that the dark side of human nature predated the Internet. But it also for that has, has a light side. And it's so wonderful to be able to find this information to enjoy these modern conveniences. And you want to think that anybody out there can participate, you know, that has. If they have a fair shot, you can like have your publishing blog about beekeeping, whether or not you're making money from it. Y and so, you know, there has to be an infrastructure to, to support that. And this really speaks to that yeah, absolutely.
[07:26]
A
No, it's great reminder for people and I think kind of progressing through the thoughts of the affiliate hypotheses and you're making a case for affiliate in all the right ways and not going in like, hey, it's perfect. But it reserves a bigger awareness, a bigger seat at the table, a bigger investment in your perspective. Why do you think it's remained smaller, like vis a vis the triopoly, if you will, of Google, meta, Amazon, others. What's behind that, despite it's having its benefits?
[08:02]
B
Well, great questions and I think there are two answers and one's a little bit spicy.
[08:07]
A
We're going to get spicy today. Let's go.
[08:09]
B
I think there's too much of one thing and not enough of another. I think there's too much friction, which you've covered many times on this podcast. And then I think there's not enough sociopathy.
[08:21]
A
Sociopathy. Tell us more about that.
[08:23]
B
Well, if you look at other players out there, I'm not saying this does not exist in affiliate.
[08:27]
A
Sure.
[08:27]
B
But a lot of the other players out there, especially ones that take advertising dollars, are very aggressive about taking and claiming those advertising dollars.
[08:36]
A
Yep.
[08:36]
B
You know, so if for the listeners who might not be familiar with this, you know, the open web is in contrast to what's the closed web in an advertising context, that's a walled garden. Right. So in an app, you, you know, you access all the Internet through the app. Facebook, kind of like a Google within the Amazon app within the Amazon ecosystem.
[08:55]
A
Google's kind of straddling a little.
[08:57]
B
Yeah, right. Yeah, because they have their whole, their whole ecosystem of properties. But the idea is that like the closed web, you know, accessible by permission, access can be closed off, access controlled, as opposed to the open web, you
[09:10]
A
can be removed if you're not behaving properly, which is part of why affiliate makes a lot of sense strategically.
[09:17]
B
Yeah, absolutely. And so if you look at the players, whether it's open web or closed web, because you have these walled gardens. Right. So that's Google Alphabet and Facebook meta and then also kind of like Amazon, but Amazon's a little bit different, but they take in tens of billions of dollars with advertise their advertising, but they mostly charge their sellers.
[09:37]
A
Yeah.
[09:37]
B
So sort of a form of seller rent extraction where Facebook and Google get money from everybody on the web and then you have open web programmatic advertising, you know, when you're on the app and you get the screen takeover, the banner ads. And so those guys are very good at charging very big amounts of money. Which are many times what all of the affiliate channel collectively gets. And it is intended to be a little bit playful as well as critical. But I don't think that those pathways necessarily serve the best interests of the advertisers. Now a lot of people would say, well affiliate deserves a lot of criticism and that's undoubtedly fair and reasonable. But the advertiser still has a degree of transparency and control that they do not have in the other channels.
[10:21]
A
Just double clicking on that point where, and we don't need to necessarily like try to like totally litigate like Facebook and Google's issues. But it's interesting to me where, where are they kind of taking that from the brand as an example, just, just to give people a sense of like where that's falling short in the transparency side of it for the brand to say. I wasn't really clear that I was giving that up to Google and Meta in this case. Can you like maybe elaborate more on that? I'm curious. We can talk talk in some of those, some of the issues that we see there.
[10:55]
B
Yeah. One key phrase here is grading your own homework, right? So if you're in a walled garden, they get the tracking pixel and then they are doing the advertising, right. And now more and more by the way, a lot of people are not really tuned into this. But it went from being like Google, you buy a keyword, you have negative keywords and then there's the broad match but you can do exact match. Now it's more, you know, there's these performance max products, right?
[11:20]
A
Algorithmic driven.
[11:21]
B
Yes. All your money, just tell us your goals and then you'll do it. So what kind of can get lost here? Even though it's hyper scrutinized and affiliate and reasonably so is what's true attribution for that. Where should credit be claimed? So I referenced this in the book. There was an ad exchanger article from last year, the year before and they interviewed anonymously because they wanted to get into trouble these advertisers and they were saying that some of their walled garden advertising, they literally didn't know how the walled garden knew about the transaction because by their internal metrics it was so far away. You'll see that a lot. Right. So anything that they get within 10ft of like, so there could be the click, there could be a view through. Right. Because you know your correction based advertising is a thing like a billboard makes an impact. But it's less true online if you have ad blindness and you don't know see the ad and so it's very easy for that, for, for you to claim excessive attribution to yourself when you're grading your own homework. Yeah. And then on the other side of that things, the open web programmatic space, it seems to largely be driven by false signals. Right. Because the theory is, hey, I want to advertise the ties demographic. I buy this whole ad tech stack and it tells me I'm, you know, I'm advertising to man, a father with children who lives in a certain area. But that information might be bad, Right. Some advertising platform might think that you're a woman who lives in Florida or something. And there's a lot of case studies about this. Not to mention the fact that there's all these banner farms made for advertising sites which take up a double digit percentage by everybody's admission. By the way, the people in that space, they don't pretend otherwise. It's true. They just talk about it periodically and they wring their hands and say darn. But the dollars keep flowing. And those dollars, by the way, so made for advertising sites are sites that basically replicate all these desirable signals and then they suck up all these ads because the ads are, they're all, they're bid. They're bid. Right. So you have like the demand side platform where the advertiser says hey, I want this. And then the supply side platform where the publisher says I've got this and then they meet in the middle with an exchange and the MFA sites basically send fake signals and then the dollars flow through. Just considered, it's largely considered wasted money. Right?
[13:35]
A
Yeah.
[13:36]
B
And those wasted dollars are probably bigger than all of affiliate.
[13:40]
A
Yeah, I, I think that's a really good call. We've talked about programmatic. It's not to say there's, you know, don't necessarily want to say there's zero value in programmatic up here on this in the conversation, but I think there is a really good case to be made that affiliate done right most certainly should have a larger seat at the table. Most or it's probably undercounting in a lot of examples like we've talked about. It's a whole nother topic. And then, you know, Programmatic, Google meta, all three of those have some very severe pitfalls. I mean I think about 30 day view through. My goodness, what is that going to mean for somebody? Just the default. I talked about this with Mike, good friend COO of RBL in terms of his meta experience and the depths of that and this was like a year and a half ago of how if you just Go in with default settings, you could easily lose your shirt. It's not to say you shouldn't advertise on meta. It's not to say you need to cut your spend. But there are a lot of that is happening and not as talked about with the skepticism that's talked about with affiliate or partner or even influencer to an extent. So I think you're onto something here. Yeah.
[14:48]
B
You know, Kyle made this great point at lunch which is like if you're Facebook and you, you know, like or Google and you see so much data, you wouldn't necessarily advertise to who might buy. You can advertise to who is most likely to buy and then you get credit for the transaction on the back end. And so if you take all that together and you say, well, the average overspend is, I don't know, 10%. If these channels are making hundreds of billions of dollars a year, then that 10% also is probably bigger than all of affiliate marketing.
[15:18]
A
Yeah, yeah. You're kind of picking on the smaller player. And I think just stepping back and this is maybe sharing a bit more of my perspective on it, I think that the sooner and we talked about this at ipx, we talked about this with leadership at Impact, at Rakuten, at Capital One, at various players to say the sooner partner, affiliate corrects some of those really important things that can be corrected and calls out more the soonest each of these channels can race to trust. Where we have such a gap in an issue which is kind of my concept we've talked about a lot and it's a concept we've all dealt with and I think you touch on in your overall theme of your book. I think the sooner we're going to be able to capture more of that larger pie that's out there in a. What trillion dollar.
[16:13]
B
I believe that's a trillion dollars now.
[16:16]
A
Pretty crazy.
[16:17]
B
Pretty crazy.
[16:19]
A
Is there a counter argument, we talked about this a little bit prior to this here where you get some pushback on your thesis that, you know, what's the counter argument to this?
[16:31]
B
I think there are a few. I think probably one of the big ones is affiliate is inelastic. Right. Commission goes up, the commission goes down, the traffic stays the same. And if that's true, you shouldn't have an affiliate program to begin with.
[16:43]
A
Right.
[16:44]
B
But I think that the data again is probably as scrutinized as possible. Is that like whether your affiliate program is very wide and opening or is constrained and locked down as tight as possible? If you as an advertiser cross some sort of traffic or revenue threshold in terms of your leads or in terms of the volume that you're doing, you are leaving money on the table if you don't have an affiliate program. And that's probably doubly true in the LLM era and actually circle back to what you were just kind of mentioning there, you know all these mentions, a double digit percentage of which kind of probably come from affiliate sites. I've seen different numbers. Right. I think Lily Ray has presented on that. I think she said 25% or more. I've seen more than 50% by some counts.
[17:28]
A
What's that metric again?
[17:30]
B
The critical sites that are referenced for LLM?
[17:33]
A
Oh yeah, yeah, yeah. 30 to 40 gets referenced a lot in our, in our data and some of the third parties from like Profound and some of the others calling that out, that's really, it's. I think that's close proximity to that 25 number you just referenced. Yeah.
[17:47]
B
And my guess is that I think some of them are constrained the data set to like the more commercially applicable stuff versus like just the more general answer stuff. So commercially applicable you get like a lot of the more content guys, coupon content gets queried and other stuff like that versus like you know, more like how do I do this in my garden?
[18:07]
A
Yeah, yeah, totally.
[18:09]
B
And so if a lot of that is like affiliate content site then you know you are making money off of those affiliates writing content about you. Right. You as the manufacturer brand or you as the retailer and you're not giving a penny to those affiliates. And partner Eyes has been leading the charge on this with their kind of like LLM attribution which you know, kind of came out of their Connecto acquisition last year and they published something I think it was last week that you're seeing like a three, eight so roughly like four times as many transactions would have affiliate in the. It's not the click stream anymore. Right. It's like the thought stream or the reference or, or reference stream but you know, so almost four times as much as they're getting credit for. And of course that credit might be lost for a variety of reasons.
[18:51]
A
Yeah, it's, it's crazy and it's a great segue into the AI explosion that we've seen. You know how it's small percent gaining massive adoption. I mean for us also thinking about like B2B and partner and how much of those decision making things start at the alms point of reference is crazy high. I was talking to brand in the SaaS world where you know, they were basically almost entirely partner led. So when I, you know, we think partnerships and partner led and partner led growth. Not to derail this into a different direction, but so much of that is really in some ways an affiliate mechanism which is you are exactly describing and you're advocating for in your book. And I just got off a conversation before this with a brand that's native AI SaaS, they're not pouring money into LinkedIn ads and Google, they're relying solely on partner.
[19:45]
B
Good for them. And yeah, no, it is. I think it's actually only going to grow in importance as a channel and then on the far side of that we got to figure out monetization mechanisms for it, which I just don't. Nobody really quite, quite knows yet.
[20:01]
A
Right. It's funny because it reminds me, and I'm going to, I'm going to butcher the name and the reference, but there was an Andreessen investor and this was Talked about like 10 years ago and I've made some, some references to it. I want to say maybe it was Connie Chen, but she had talked about kind of the wave of like the micro actions, ways of monetizing and I think it was becoming observed and measured in a lot of Asia in consumer. And I wonder if there's a, there's maybe a corollary there to look at with what you're advocating for which is saying, hey, if we take the affiliate model, take the open web, it's a way to save the open web. If we think about ways to transact in an affiliate type way, that's, that's value additive to save it and keep it going is that. I'll have to pull that up and share that in the notes, but I don't know if there's any reference to that or if there's any. And what are your thoughts on that? Is that kind of what you're getting at?
[21:02]
B
You know, I think it kind of goes back to the friction and the sort of like open heartedness. You know, right now as it is, the merchants tend to get a lot of information that they don't share with the affiliates. Right. So you get to say, hey, here's everything bad and I'm not going to pay for that. And that's usually fair. But the affiliates might be able to do a lot more. If you say, hey, here's everything good. And I think the elasticity point is really hard to disprove especially if you get like the example that you just brought up some spaces, reviews are so important, you know, so I think it's, I think it's still true from everything, from like this last click because like the consumer is looking for something before they had the confidence to buy. And you know, as I always say, like if they don't have that, their default is probably going to be Amazon, which has its own version with Amazon's choice.
[21:46]
A
Right. Yep.
[21:47]
B
That confidence inducer to like a much longer buy cycle where it's like, hey, what software do I invest in? This is not just money, this is my time, my team's time. And affiliate, the influencer, the creator world, you know, what better way than that? They have the trust, they have the affinity, they have the audiences. And you can work with affiliate, you know, you can scale out to work with thousands of people.
[22:09]
A
Yeah.
[22:10]
B
Incredible.
[22:11]
A
Yeah. With AI coming and zero click here and that growing so quickly. How does that play into your suggestions in the book and kind of where you see people rewarding or not rewarding affiliate.
[22:26]
B
Well, so I do cover this in the book because it's, you know, some of the stuff I think is kind of patterned out, but not the LLM stuff and the monetization. One pathway that seems likely to me would be like enhancing this trust so that when the merchant sees all those signals, these, the micro signals, as you mentioned, that they can share those in some fashion with the affiliate. And that could lead to anything from the affiliate saying, hey, I'm not making a contribution here. The merchant says, hey, thanks for trying to the affiliate saying, hey, you know, let's really collaborate on this and do some stuff together, which can be, you know, that can lead to fantastic partnerships. Actually, your last guest talked about how they were trepidatious about working with a retargeter and I think they ended up being the number one affiliate.
[23:06]
A
Yeah.
[23:07]
B
For Apollo. Right? Yep. And then they went away, which would have happened there.
[23:11]
A
Yep.
[23:12]
B
But you know, that's a great example. Right. Like, you know, because they probably say, I'm just imagining internally, oh, we can do our own retargeting.
[23:19]
A
Yep.
[23:19]
B
But like there's some extra juice the affiliate can add. Yeah. And what a wonderful way to enter a partnership and is so elegant because the remuneration, you know, is appropriate to the value driven.
[23:30]
A
Yeah.
[23:31]
B
And no better channel for that. You know, they might have some talent or audience that you don't have. It's elusive to you. That's how you get it.
[23:38]
A
Yeah.
[23:39]
B
But in order to like really make that work, it does have to be typically like some, some partnership. And so we as a channel, I think are really bad about that because the merchants tend to be guarded. And in fairness too, you know, the merchants deal with fraud and there's politics inside the merchant. And so I think, you know, you can't just snap your fingers and get past that. I think that the forward thinking agencies can maybe show a better path and then the sort of like the hurry can kind of catch up to them. Yeah, technology is largely there.
[24:08]
A
Yeah, I think that's really, I think that's a great call out to the other aspect of the industry that I think is something we appreciate is there's a human on the other side, there's a conversation to be had and maybe the core model in this case maybe like the retargeting play we'll call it can be nuanced and complimented in saying, well, let's not fire on these cases, let's fire on these cases. So therefore you're getting what we estimate to be is more accretive value. And so you're obviously not going to be able to have that conversation with Google. I'm not saying that, you know, Google isn't required as part of your mix, but I think it continues to call validate the model, validate the channel, validate affiliate. To your point of what? You know, obviously I'm doing the same thing. But your book really calls out in a way that I think captures a lot of your great experiences over the years, which has been tremendous.
[25:02]
B
Yeah. So in addition to that information sharing, I would think that something the merchants should move toward would be kind of like a neutral arbitration platform which you know, a lot of people don't have. Like, because you have your, you know, your wall garden silos over here, that's where they grade their own homework. And then maybe you know, you got like a container or something over kind of like here and everything else lives there, you know, so affiliate reconciles against itself. That doesn't happen with the other channels and you don't really have like that full picture. So you should take as much of that picture as you can kind of get for internal purposes which frankly speaking it's going to be more work. Don't be afraid of doing that work well.
[25:37]
A
And I think that's probably where that's where people get stuck. Goes back to the friction piece. Right. It's like to do this well, it's, it's not as easy as plugging into a Facebook or Google. And yes, there's challenges to setting up Google and Facebook rights so you don't lose your shirt as we discussed, but it's, it's sort of a, that catch 22 of. There's insane value here. But it's the, the, the hurdle to get there is, is high. Is that kind of what we're saying? Is that what you're saying, not just
[26:08]
B
the hurdle but the, frankly I, I think the ongoing work too.
[26:10]
A
Yes.
[26:11]
B
So yeah, the hurdle is high, but you want to, you want to leap over that hurdle to be excellent.
[26:15]
A
Yeah, no, absolutely, absolutely. It. Do you, do you feel like the publisher from the publisher's perspective? And that's really interesting with regard to the open Web. How much do you cover that in the book and what are your thoughts there?
[26:31]
B
One of the things I cover in the book that's pretty interesting is this disillusionment a lot of the publishers have. And this kind of gets away from affiliate into the more open web stuff because the big news sites, they depend on open web advertising. And in the zero click era, from what I can tell, they're hurting more than affiliates because there's, there's still more incentive to click through which still gets tracked in affiliate. In fact, very recently, like literally in the last couple weeks, there have been a couple news articles actually Mike McDerney posted this one on Ad Week mentioning that some affiliates are thinking of going nuclear and blocking Google's crawler.
[27:05]
A
Right.
[27:06]
B
Because Google's AI and crawler and their search crawler are conjoined, which you know, seems very deliberate and they've been called out on this for, from, you know, from, by the CEO of people and many other players in the space. And so I, you know, on a, if you can call it a positive note, like at some point, if you have nothing left to lose, like I inbound search traffic, then like maybe it'll, it'll force creativity which apparently a lot of these guys have found and maybe think it'll be better on the far side. But there is some short term pain that we're going for that I think in a lot of respects is undue because basically the deal was you get a lottery ticket for traffic in exchange for creating the desired content. And now that content is extracted, even coupons, product feed information, all the review stuff, unless it's behind the paywall and then you can't get any money for it. So it's just not fair. Right. And so something's got to give on that. And the good news is I think there's a lot of ways that we can kind of approach this. The bad news is that there's, you know, there's a lot of work and then There's a lot of resistance to it too, of course.
[28:13]
A
Yeah. I mean, yeah, it seems like a call to arms to operate more fairly with regard to the invest the heavy dollars going into, you know, certain key incumbents, if you will, platforms. You know, that's a big part of this. And it seems like a more fairer distribution is sort of what you're calling out as well. Like there's no reason why it needs to be. We need to be like one tenth of what Google's getting right now based on the value that's there. Is that kind of the direction you're going in with the book?
[28:45]
B
Yes. And may I bore you with some statistics?
[28:47]
A
We love data. We love statistics.
[28:49]
B
You love data.
[28:50]
A
Yeah.
[28:52]
B
Okay, so here's. These are some IB 2024 numbers you want to remember. The numbers are largely what kind of estimates from the different channels and they're defined differently.
[29:00]
A
Yep.
[29:01]
B
So this one tracks 259 billion in U.S. digital ad spend goes from search at 103 per year. Per year, yeah. Then social media at 89, display 74, digital video at 62, commerce retail media at 53. So remember, that's not commerce content so much as like Amazon ads and then podcast at 2.4. So a few things here. So one that actually have a disclaimer note, channels overlap. A social media video ad accounts both in social and video categories. So in the book I focus on the walled gardens and then open web programmatic advertising and then affiliate. Which brings us to the second point, which is you'll note, affiliate is missing from this list. So by the PMA's numbers, which I think are pretty good, you know, affiliate probably being around 12, 13 billion for the 2012 number. That sounds right to you? Way bigger than the podcast. But we're not mentioned on the list. That's we overlook this a lot. But like people don't. People overlook affiliate. They're confused by affiliate, you know, and we need to really kind of push through to have our seat at the table. And I think people often kind of get confounded by the definition, but we have an opportunity to kind of make that definition more flexible. It kind of already is. Right. You do a hybrid deal, it's still basically an affiliate deal. It's done by the affiliate agency. It has a performance attention and so forth. And then the other piece of the picture here is, you know, we need to work on the attribution in a big way. And so last week, hello partner published a piece, an opinion piece by me arguing and I called it like Affiliate marketing needs to get ratioed in the sense that you have like the deterministic say, click, you know, this sale associated with this, click. And then you have like the, the probabilistic estimates. So, and this is where Partner Eyes is arguing from a probabilistic perspective. You know, affiliates contributing four times more, which I find totally plausible, by the way. And so if you look at these other channels, they're kind of getting credit for basically the probabilistic part of things. And so we should push forward with this kind of universal attribution concept is to say, look, we're confident in our channel, we're not afraid to take the challenge. We're going to put ourselves out there and then we'll come up with two numbers for every channel. One is the deterministic thing where there's something very specific and then you track it through to the user, anonymized, of course. And then two is the probabilistic and we'll compare. So not just to say, like, hey, affiliate got credited for one, but it contributed four. But we'll look at the ratio of affiliate versus the other channels. I believe affiliate will compare favorably in multiple respects. And I think it's up to us, up to us in the channel to really push for that. I think that's going to be very healthy for our channel, deservedly so.
[31:44]
A
Yeah, I can almost see it's almost sounding like a, a universal attribution standard is the direction you're going in.
[31:54]
B
100%.
[31:54]
A
Yeah. And I think that's needed so badly for whatever close approximation to a governing body there is. It's needed from the network, agency, publisher, brand side of things. And I would even, and this is part of some of our recent conversation and conversations with others where I think looking ahead to the importance of incrementality, which is really the, you know, from the brand's perspective, as, you know, how they're really looking at value here. And so you've got to have that attribution question standardized a little bit better, I think. I think similarly, I think you have to have the, the impression exposure data and the, and start to speak the language of the MMMs more effectively. Something we've been talking about too, because that's the, I think that's the next step. We're not even at second base yet in baseball and I think that to be able to get that standard would be amazing. And then hopefully as part of that, we can get some standards around. Hey, you're going to benefit by showing transparency or referring URL you're going to benefit by showing exposure and impression data because then the brands that are cutting the checks can say, I have so much more trust in this. I have so much more transparency in this process. I'm going to give it the more attention that it deserves. That, I think is a great thesis of your book. Yeah.
[33:21]
B
And that trust should really go both ways. I hate to say a lot of merchants, we were talking about this at lunch. Yeah. Like a lot of merchants get away with, you know, broken tracking and problems on their websites. They can't get their data out.
[33:34]
A
You know, they're not incentivized to fix it either.
[33:36]
B
No. And it's crazy. I mean, that's actually why I think as a business is like so much the coupon data that comes out is bad on a landing page. The code doesn't work, it's mislabeled. The same thing with product feeds. And so, you know, it's great that we have a business cleaning, cleaning that up, but it would be, you know, it'd be better if it weren't an issue to begin with because there's always going to be more data to process. And so, yeah, no, it definitely goes both ways. And you can, you know, realize that as best possible if, you know, you believe in the value of the channel. Right. So you get more resources to the channel because we're often. Yeah, you got to get the developer's hours and it's got to go in the queue and stuff. As well as the dollar budgets. There's a very good case to be made for expanding that affiliate. It's happening right now too, which is awesome. Right? This vast expanse of the creator economy, along with all the other existing, the coupon, the cash back, some of the arbitrage guys, all the emailers, just tons and tons of affiliate models we really offer. I mean, it's very diverse.
[34:35]
A
Right.
[34:36]
B
There's, there's just so much interesting stuff and so many ways to engage with affiliate as advertiser.
[34:40]
A
Yeah, absolutely. And I, and I think like, there is a bit of that race to like develop that trust and improve. I mean, even with metas rolling out of their incremental attribution solution, I'm seeing some early data come through on that. And I think, again, it's not going to answer your concerns, but I think there, there's going to be that, that battle for wallet from the marketer, it's not going to end. And I think if you can, we have an opportunity, I think, to rip that band aid off a little bit. You know, follow some of the suggestions from your book and keep moving this thing forward in a positive direction. I think that's. That's brilliant. I think that's what we're all trying to do and solve for the greater good. Really. I mean, if you're. If you want to. I would rather to say we all want to compete on a level playing field to some extent and to have enough information so people can make an informed decision to say, yeah, if we don't perform as well as video ads or podcast ads, it's fantastic. That's the way it breaks. It doesn't mean you necessarily don't have an affiliate offering or you don't de invest, but maybe it just changes that balance for that particular situation. You'd rather win in a fair game than one that's rigged. Yeah.
[35:54]
B
And in theory, that could be remedied with, you know, for example, adjustments in the tracking methodology, adjustments in the commission rate, you know, changing over to new advertisers, changing over to new publishers.
[36:04]
A
Yep.
[36:04]
B
You know, a really important thing not to lose sight of is in affiliate. We are very focused on the intra channel competition and conflicts. We lose sight of the inter channel competition and conflicts.
[36:15]
A
Yep.
[36:15]
B
And I don't think the other channels do that.
[36:17]
A
Absolutely. Absolutely. That's a. That's a huge one. This is awesome. I can't wait to read the book. Where can people find it and how can we people buy it?
[36:27]
B
Well, thank you so much for your support.
[36:28]
A
We're plugging it. We're plugging it hard.
[36:30]
B
Yes. I appreciate it. I appreciate everybody who's.
[36:33]
A
Who's.
[36:33]
B
Who's. Let me know they bought copies so far. I think it will be very much worth reading. It's available on Amazon, of course, Barnes
[36:39]
A
and Noble and Remove the friction. It's not an issue.
[36:43]
B
You gotta face reality.
[36:44]
A
Good. All three. I'll see how many Barnes and Nobles orders come through. Hopefully some. They're making a bit of a comeback. I hope so. I'm cheering for Brooke. You're the man. You came on right before your big trip to Japan, and we thank you for that. And it's always a pleasure to see you in Austin.
[37:04]
B
Pleasure to see you. Thank you for having me.
[37:05]
A
Thank you, man. See you, buddy.

#131 Can Affiliate Marketing Save the Open Web? | Brook Schaaf & Tye DeGrange

#131 Can Affiliate Marketing Save the Open Web? | Brook Schaaf & Tye DeGrange

Podcast Summary: Always Be Testing – Episode #131

Main Theme & Purpose

Key Discussion Points & Insights

1. Introduction & Industry Context

2. Why the Open Web Needs Saving

3. Barriers to Affiliate’s Growth

4. Affiliate’s Strengths & Missed Opportunity

5. Counterarguments & Affiliate Elasticity

6. Affiliate, AI, & the Zero-Click Era

7. Structural & Attribution Challenges

8. The Publisher View & The Coming Reckoning

9. Call to Arms: Fair Distribution & Building Trust

Notable Quotes & Memorable Moments

Timestamps for Key Segments

Conclusion & Where to Find the Book

Podcast Summary: Always Be Testing – Episode #131

Main Theme & Purpose

Key Discussion Points & Insights

1. Introduction & Industry Context

2. Why the Open Web Needs Saving

3. Barriers to Affiliate’s Growth

4. Affiliate’s Strengths & Missed Opportunity

5. Counterarguments & Affiliate Elasticity

6. Affiliate, AI, & the Zero-Click Era

7. Structural & Attribution Challenges

8. The Publisher View & The Coming Reckoning

9. Call to Arms: Fair Distribution & Building Trust

Notable Quotes & Memorable Moments

Timestamps for Key Segments

Conclusion & Where to Find the Book