Executive Summary
This Work Product explores how AI platforms like Perplexity are disrupting affiliate marketing. It provides an overview of the implications for Publishers, Affiliate Platforms, and Marketers alike, as well as a simple SWOT analysis, value propositions, and strategies.
The Affiliate Market Playing Field Today
Affiliate marketing rewards partners (affiliates) for driving sales or traffic to a business’s website. If you’ve clicked on a product link on Instagram or Facebook, you’ve seen affiliate marketing in action. Another example is a YouTuber promoting a product or brand during their video, even if you’ve already paid for YouTube Premium (No, Abroad in Japan, I’m not buying your VPN service!).
The industry has obviously grown rapidly, overtaking traditional marketing like print and TV ads. It’s even spurned a new economy: the influencer economy.
By 2024, global affiliate marketing spending is expected to hit $15.7 billion, growing 10% annually (ahrefs, 2024).
For businesses, it’s a low-risk, high-reward strategy. The way the model works is that businesses only pay for results, with an average ROI of 13:1 (BixGrow, 2023). Equally, it’s great for targeting niche audiences, which allows for more precise targeting as a result of individualised social media feeds.
Personally, I’m a long-time fan of Wirecutter and I often rely on the magazine for product recommendations and ideas. Back when I was active on social media, spotting affiliate marketing was easy as well. But things are potentially changing.
Market Insights: Upcoming Disruptor from Generative AI?
Perplexity, an AI-powered search engine, recently launched sponsored ads in the United States, allowing brands to place affiliate links with follow-up questions. Admittedly, it’s still an experiment and the company is wary of destroying the search engine’s value proposition to users (Perplexity, 2024). As a regular user of Perplexity, though, this naturally piqued my interest.
Example of a sponsored ad from Perplexity
What I think is interesting is that user interaction is completely different with an AI search engine or chatbots, compared to your typical digital apps or websites. The outcomes are not set from the beginning and there is no pre-defined pattern; it all depends on your input as a user. As such, there’s no single predictable path for users to take, creating what’s known as a non-deterministic system. This contrasts sharply with today’s affiliate marketing, which often pushes pre-defined journeys.
Whilst the full impact of AI search engines and chatbots on user behaviour is still emerging, I’ve already observed some notable changes among users. For example, my wife and several friends and colleagues now ask ChatGPT for product recommendations instead of relying on traditional sources. Is this perhaps the signal that there’s a shift in how people engage with product consumption? And what does it mean for affiliate marketing?
Well,
- Publishers may shift their focus from content creation and editorial testing to Perplexity’s aggregated data
- Affiliate Platforms may see their links move away from social media or blogs and into Perplexity
- Marketers may face a system where affiliate revenue flows directly to AI platforms like Perplexity, skipping the publisher and creator step completely
In other words, there is an untapped opportunity for AI platforms like Perplexity to disrupt the affiliate marketing ecosystem and how users receive product recommendations.
Competitive Analysis: SWOT for AI in Affiliate Marketing
Strengths:
- Lowers the barrier to entry and allows anyone to create monetised content by asking a chatbot for product ideas (note to self: try this more!)
- Scales personalised content, thereby increasing relevance for users
- Captures user attention through precise targeting
Weaknesses:
- Non-deterministic systems are unfamiliar to many users
- AI recommendations risk falling short of expectations (e.g., ChatGPT is known to hallucinate)
- Lack of transparency in or unclear why AI selects certain products as the best in its category, which could erode trust
Opportunities:
- Leverage user input data to identify unmet user needs and emerging niches
- Enables hyper-personalisation at scale
Threats:
- Disruption to existing affiliate pipelines
- Increased competition as the entry barrier lowers, possibly leading to market saturation
- Potential regulatory requirements, like the EU’s AI Act, that focus on transparency and targeting restrictions
To navigate these strengths, weaknesses, opportunities, and threats, publishers, affiliate platforms, and marketers alike must adapt their strategies to leverage AI’s potential while addressing its challenges. Let’s explore how each key player can position themselves effectively through tailored value propositions.
Value Proposition (If You Are a Publisher)
Link to SWOT Analysis:
- AI platforms may bypass traditional affiliate pipelines by aggregating data directly, possibly posing a threat to publishers
- Publishers should play to their strengths and use their brand trust and curated content that AI-platforms can’t replicate to stay relevant
- Publishers should continue to drive personalisation at scale
- Publishers should seek to transition to a subscription-based model instead of relying wholly on ads
Example:
By embedding Wirecutter’s trusted reviews into a personalised product feed on their website, The New York Times can provide users with curated recommendations. For example, a user searching for “best kitchen appliances” might see Wirecutter’s recommendations for top-rated rice cookers or the Swedish dish cloth (which I recently purchased thanks to Wirecutter), all complete with affiliate links. This approach keeps users engaged within The New York Times’ ecosystem while generating affiliate revenue without compromising brand trust.
Equally, to enhance their relevance, The New York Times should scale personalisation by tailoring news feeds to individual user preferences and behaviours. This improved user experience will result in a product offering that incentivises users to subscribe and remain engaged with The New York Times. So far, Google ads hasn’t disrupted the ad market for publishers, and AI platforms like Perplexity are unlikely to do so either. Ultimately, it’s about building awesome user experiences and a value proposition that retains users in the long-run (retention 101).
Key Benefits:
- Users stay on the publishers platform, rather than moving to AI search engines like Perplexity
- Whilst affiliate links tied to Wire cutter’s recommendations continue to provide a reliable revenue stream, the transition to a subscription-based model ensures a more stable income in the long-run
Value Proposition Canvas (If You Are an Affiliate Platform)
Link to SWOT Analysis:
- Affiliate platforms may be the biggest losers unless drastic steps are taken if AI platforms embed links directly into their interfaces
- Enhance personalisation by offering unique, tailored feeds to target specific customers
- Overlook the revenue sharing models to provide greater incentives for marketers to remain on the platform
Example:
A user interested in home office decor on Pinterest (like my wife) sees a personalised feed with curated boards that feature specific styles and products linked to affiliates. For example, the feed might display a “Modern Minimalist Workspace” board with unique items from selected brands. Unlike AI search engines like Perplexity, which provide broad search results, Pinterest’s feed offers an engaging user experience, with continuously tailored experience, which in turn drives user engagement. Additionally, by improving revenue sharing with marketers by offering higher Pay-Per-Sale (PPS) or Pay-Per-Lead (PPL), Pinterest can continue to attract and retain top marketers.
Key Benefits:
- Affiliate links remain visible and drive revenue through affiliate platforms
- Personalised feeds increase customer interaction and satisfaction
- An improved revenue sharing helps attract and keep top marketers on the platform
Value Proposition Canvas (If You Are a Marketer)
Link to SWOT Analysis:
- Marketers face loss of control over product message due to AI aggregates recommendations
- By embracing AI platforms, marketers can leverage hyper-personalisation and precise targeting for better impact
Example:
Nike can team up with AI platforms like Perplexity to deliver hyper-targeted product recommendations. For example, when a user search for “best trail running shoes”, Perplexity could display a Nike-sponsored recommendation for Pegasus Trail 4, complete with a direct link to purchase on Nike’s website.
Key Benefits:
- Hyper-personalised ads tailored to individual user searches
- Increased conversions through personalised recommendations
- Direct links mean that there’s clear attribution and measurable ROI, similar to what affiliate marketing offers today
Strategic Moves (What to Do Next)
What’s the strategy then if you’re a Publisher, Affiliate Platform, or Marketer then?
- Interview executives to align on the product vision, strategic priorities, and success metrics for near- and long-term business goals
- Collaborate with engineering to map technical complexities and ensure alignment with the roadmap
- Talk to customer-facing staff, like support and sales teams, to prioritise top affiliate issues and feature requests
- Understand and track how AI is reshaping market dynamics and user behaviours to identify relevance to users
The last point is perhaps the most critical. I believe that AI in affiliate marketing is just beginning, and it will be really interesting to see how it plays out and what the long-term impact will be.
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