Connexity Buys Skimlinks, Adding An Affiliate Network To Its Retail Marketing Toolkit

That’s one serious commission.

Retail performance marketing company Connexity has acquired Skimlinks, one of the larger (now formerly) independent affiliate networks.

Terms of the deal, announced on Thursday, were not disclosed. But Connexity is adding the roughly 80-person Skimlinks team, said CEO Sebastien Blanc, who took on the top job in 2018. That brings Connexity's total headcount to about 230.

Blanc realized early on that if Skimlinks wanted to create value for publishers, the company “couldn’t be all things to all people.”

In other words, Skimlinks focused on its publisher relationships while relying on other affiliate marketing or ecommerce companies to aggregate demand deals with retailers.

Connexity has some ecommerce properties of its own, namely Shopzilla and a few price comparison sites, but also brings direct relationships with retailers, Blanc said. Access to those direct deals means Skimlinks can trade on more kinds of ecommerce marketing budgets, instead of only offering affiliate fees.

Cost-per click campaigns are on the table, as well as ecommerce surge advertising, which is when retailers and merchants hold their own promotions or brands lower their profit margin to clear out product.

The Amazon effect

The past two months have been both the best of times and worst of times for affiliate network companies. On the one hand, online shopper traffic is abundant and ecommerce conversions have skyrocketed, a bit like Christmas in May. But by the same token large retailers, primarily Amazon, have throttled their affiliate partner programs.

Large brick-and-mortar companies, such as Walmart and Target, jammed the brakes on affiliate traffic after the COVID-19 outbreak to try and spare their strained supply chains were strained as products flew off the shelves and out of stock.

In early April, Amazon made a dramatic, permanent change when it removed third-party vendors from its affiliate partner network. Amazon still has direct affiliate partnerships with publishers and merchants, just not network aggregators). Amazon also cut its affiliate rates, which means grocery margins were slashed from 5% to 1%, while fees for pet products, furniture and home and garden went from 8% to 3%.

After 10 years of working with Amazon, it was clear that the online retail giant was only interested in securing direct publisher accounts, Blanc said.

Skimlinks has more than 60,000 online publishers in its network. Many are long-tail online sites, but it’s also got a lot of name-brand newspaper and digital media companies. As Amazon started trying to leapfrog Skimlinks and siphon away affiliate sales, Skimlinks reduced its reliance on Amazon.

In 2018, when Blanc started, Amazon accounted for 8% of Skimlinks’ revenue. By April, when Amazon officially cut out its affiliate network vendors, that was down to 0.5%.

“There’s always a point where Amazon decides they don’t need your business anymore,” he said.

Affiliate evolution

Other retailers have also made major changes to their affiliate programs. But in many cases it’s because companies are declaring bankruptcy or shutting down so many stores that their supply and fulfillment are in the air right now.

Blanc says that of the 48,000 merchants, and only 352 shut down their affiliate networks or reduced fees to zero, Blanc said. Those 352 sellers represented 5% of revenue.

The big headache for Skimlinks is creating software to adapt to those changes in real time, he said. If a retailer goes bankrupt or shuts down affiliate revenue, Skimlinks needs to be able to respond immediately by diverting traffic to another seller where the product is available. Otherwise, Skimlinks could drive sales without getting a cut for itself or for publishers.

One of the important synergies with Connexity is that it invests in machine learning to create dynamic bidding and customer valuation tools, Blanc said. Skimlinks wants its affiliate links to be “more like RTB” with more data and auction-based opportunities to reach shoppers, instead of publishers defaulting to one or just a few retail partners.

The other benefit Connexity brings is sheer scale.

“We live in an industry of giants now,” Blanc said.

Rakuten has snapped up a couple affiliate vendors. Publicis Groupe has Commission Junction, the 400 lb. gorilla in the category. And then there’s Amazon, of course.

Blanc said it’s prohibitive for a small, independent vendor to keep pace with ecommerce product development and the scale of other players in the market. Its competitors faciliate hundreds of millions or billions of dollars in sales per year.

“But if you put Connexity and Skimlinks together, we can properly compete on the product side and the commercial side,” he said.

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