TradeDoubler is one of the larger affiliate networks in the world and has recently released a progress report for 2015 that shows their profit margins are shrinking. The most up to date information shows a gross margin of 20.5%, which is down from 22.1% during a similar time last year. The 20.5% margin is still fairly good overall and not something to be concerned about for the viability of the company, but this report does provide important insight into the affiliate marketing industry.
First, many marketers may actually see this as positive news overall. The shirnking margins for TradeDoubler are caused largely by increased price pressure throughout the industry. As more and more companies are using performance marketing, and additional agencies are focusing on offering this as an option it stands to reason that the competition will help to drive prices down.
This, of course, can cause the overall profit margins for individual firms like TradeDoubler to go down. These shrinking margins can also help to spur innovation within the industry because companies will need to find new and effective ways to grow..
CEO Matthias Stadelmeyer commented on their third quarter performance, which is included in this report, saying, “During the third quarter, gross profit in our core business, performance marketing – excluding the effects of the loss of one larger international customer – decreased roughly in line with the year-on-year trend of the previous quarter.” He went on to say, “However, the development within different markets varied considerably due to underlying market trends and our own performance.”
Whether you work with TradeDoubler or not, following some of the larger performance marketing firms can help you to learn a lot about the state of the industry. This profit squeeze is something that anyone using performance marketing should be aware of and analyze how it may be impacting their overall marketing strategy.
