Affiliate marketing can generate a lot of revenue for your business, but you may be asking yourself this question: is it better to partner with an agency or create an in-house team? The optimal decision hinges on your objectives, spending capacity, and future aspirations. We will start by examining the advantages and disadvantages of each option, then analyze the cost accompanying each option, and finish with prospective middle ground solutions.
Why Businesses Choose Affiliate Marketing Agencies
For many businesses, joining an agency allows them to have immediate access to their relevant skills, connections, and tried-and-true techniques. Instead of managing affiliate work on their own, companies can use the resources and expertise of an agency. Instead of targeting one field, the agency brings a whole unit that specializes in onboarding affiliates and campaign optimization while also ensuring industry standards are met.
With time management, the agency saves the business owner time. Onboarding is only one of the many tasks that come with managing affiliates alongside tracking engagement, managing payouts, settling disagreements, and offer setting. An agency takes these duties, which allows marketing teams to have time to focus on other parts of the business.
In e-commerce, agency driven growth can be seen scaling operations. One online fashion retail store partnered with an affiliate marketing agency and increased their revenue by 40% in 6 months. The agency was already connected to high-converting affiliates which is why they were able to spend money on complex fraud detection systems which the retailer could not.
The Challenges of Working with an Agency
Agencies are beneficial in many aspects, however, they have their downsides too. The primary one is cost. Agencies charge either a monthly retainer, performance-based fee, or a combination of both. For newly started businesses or smaller firms that do not yet earn significant income through affiliate marketing, these fees can be overwhelming.
Another challenge is control. For the sake of efficiency, you are outsourcing the management of your affiliates which also means that an external firm participates in the management of your brand’s reputation. This automatically slows communication and reduces direct oversight. For example, a SaaS firm that worked with an agency to manage its affiliate program was surprised with the response times affiliate respondents were promised to follow. Many prospective affiliate partners were lost due to the delays surrounding most responses. There was a lack of interface between the brand and the affiliates, which with a team put in-house would not have resulted in friction.
Another risk is conflicts of interest. Because agencies have several clients, their priorities may not necessarily align with your business’s interests. A fitness brand that partnered with one of the agencies later found out that some of their affiliates were also using competing products with the same agency. This reduced the brand’s competitors and forced the brand to take their affiliates program in-house.
Building an In-House Affiliate Marketing Team
An in house team is often the preferred choice for brands which would like to have complete control over their affiliate programs. This gives businesses the ability to ensure that their affiliate marketing programs are consistent with their internal processes. They also tend to get a lot of direct contact with the affiliates which improves collaboration and extends loyalty.
One fintech startup that used an agency and later transitioned to using their own in-house team is a perfect example of in-house success. They managed to build a dedicated affiliate department which led to a 25% cost reduction, all while maintaining revenue growth. Relying on training from internet platforms and hiring experienced affiliate managers helped them create a sustainable overpowering system which outperformed the agency based model.
Setting up an inhouse team does have its challenges, especially when it comes to recruiting the right talent. Without prior experience in affiliate marketing, the hiring process can be costly and lengthy. After the hiring, keeping up with industry trends requires constant financial commitment.
An additional challenge is technology. In contrast, in-house teams either have to buy or create their own tracking and fraud detection systems. A direct-to-consumer skincare brand that transitioned from using an agency to an in-house model struggled with fraud detection in the initial months. They needed to purchase particularly tailored tools and come up with effective ways to use the data before seeing any positive change.
Comparing Costs and ROI
“I also want to touch on the cost consideration with both models. Hiring an agency often means paying a monthly retainer, which ranges from $3,000 to $15,000 depending on the agency, not including additional performance-based fees. On the contrary, an in-house team needs to be provided with salaries, training, and an array of software tools they have to use.”
A subscription box business went through this very scenario. They started with an agency that charged $7,000 per month, but with affiliate revenue scaling, they realized that paying an internal affiliate manager $80,000 a year would be more economical. They slowly started building a team, shifting their reliance from third-party services to boosting ROI.
Some companies find that the division between agency and in-house employees is less clear. Most often, the most effective solution lies in a mix of both strategies blended together for the best hybrid model.
The Hybrid Model – Best of Both Worlds
More and more companies are integrating freestanding software solutions into their workflows while consolidating staff. Companies like Hypernet provide automation for managing affiliates through monitoring, fraud detection, and reporting, which enables companies to control affiliates without needing to hire a full-scale internal team.
Hypernet helps automate tasks like reporting and monitoring, which lessens the workload on agencies. A gaming company that Hypernet partnered with shifted from using an agency to a hybrid model that leveraged automation and small in-house teams. This reduced their agency budget by 50% while sustaining affiliate growth.
Affiliate management software also allows for improved scalability without significant increases in operating expenses. Take, for example, a financial services company dealing with an overabundance of fraudulent traffic. After adopting Hypernet’s AI-driven fraud prevention tools, fraudulent transactions were cut by 30% within months, improving the leads’ quality without met staff increases.
Making the Right Choice
Every business works with different models and approaches because an agency, in-house team, or hybrid model are not one size fits all solutions.
With minimal workload and effort needed from your side, agencies might fit your needs if scale is your primary goal. This type of model is great for companies who do not have the relevant skills to hire someone in-house or are looking for quick access to a large affiliate network. If you prefer having long-term cost-effectiveness and control over your program with direct oversight, then an in-house team is what you need.
For the level of flexibility some companies seek with an outside vendor, having an internal department is a big commitment. In that sense, affiliate management software like Hypernet provide a powerful option. With less effort from the user, it enables automation and high affiliate program performance through greater processes.
Whatever path you decide to take, automataion and data driven decisions will always remain key to success alongside efficiency. With the right strategy and tools, affiliate marketing becomes cost-effective and efficient.