Zero Clicks #36: Affiliate Marketing's Last Stand

Welcome back to Zero Clicks where we explore the interplay of AI, media and commerce. Here’s your TL;DR for what awaits this week: 

• The big picture: A generational career opportunity before OpenAI launches ads

• Job posts: The $300K thinkboi

• The meme is the message: Wake up babe, Lars is taking on the Reddit-industrial complex

• One final great read: The monks in the casino

Zero Clicks is back from paternity leave and holy hell, how the world has changed!  In early 2023, I took 14 weeks off with my daughter and came back to basically the exact same professional zeitgeist where nothing really changed. 

This go around, I only stepped away for six weeks but feel like I missed several existential developments in AI + commerce and am coming back to a totally different chessboard. “These are the weeks where decades happen” is a dorky cliche but you really feel it when you step away and log off for a bit. It’s good to be back in the digital saddle writing for you all

Finally, a quick welcome to my old United States of Amazon readers! I put that project on hiatus last year when this newsletter started to take off. Figured now is as good a time as ever bring you along for the ride. Let’s get down to it…..

But first a word from our sponsor, Button

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Affiliate’s last stand

Affiliate marketing is the original business model of the internet. Born – as most fundamental innovation in internet infrastructure is – out of a desire to monetize porn (and to a lesser extent, gambling), simple cost per action arrangements were the beating heart of web 1.0. Before it was a nation-state with 200M taxpayers whose outages take down half the internet, Amazon.com was a gaggle of Bohemians blasting In Utero and running a humble affiliate arbitrage business.

Then, a few things happened. A company called Overture introduced a cute little concept known as pay per click based search advertising. Next, another humble enterprise called Google copped the framework, dubbed it AdWords and turned it into the best business in the history of American capitalism. Then the entire regulatory apparatus of the United States snoozed at the wheel as Google bought DoubleClick, ensuring hegemony over the infrastructure of advertising. In a few short years, the affiliate partnerships model that built the internet became a rounding error in the budget, sacrificed at the abattoir of programmatic media buying.

Now OpenAI is set to upend the power structure of media, just as Google did 25 years ago. For two decades, marketers have effectively been able to simply buy scale when users search for products or information online, across all platforms search takes place. But until OpenAI builds an ad network, you can’t simply brute force buy your way into ChatGPT.

Brands who wish to control their destiny in zero-click search will have to play the game of doing all the esoteric, manual partnership marketing things that don’t scale. And therein lies the general opportunity for marketers, agencies and vendors with affiliate roots.

This creates a fascinating paradox– while the immediate future of many affiliate businesses is under existential threat from AI eating search, the underlying skills that professionals from this industry possess have not been this valuable since the turn of the millennium.

Leaders that understand the idiosyncratic nuance of product reviews, commerce media, and affiliate partnerships will be the stars of agentic commerce, much like cracked performance marketers were in the Meta/Google dominated era. Several thousand of you that read this newsletter fit that profile.

You all are the folks that right now should own your organization’s AEO / GEO strategy rooted in bespoke deals with high quality media partners, rather than churning out slop at scale and hoping it gets cited. You all are the folks that should be making sure your product feeds are set up to be accurately indexed by ChatGPT. You all should be the ones exploring ways to work with partners who can reach customers using LLMs in their shopping journey outside of just the centralized platforms.

Expect OpenAI to continue to keep the affiliate ecosystem at arm’s length for a while, empowering innovation that lives adjacent to ChatGPT. Imagine poaching an engineer from Meta or xAI at the cost of millions of dollars per year and promising them the chance to build AGI only to say, “lol, jk, you’re going to build affiliate marketing attribution tools.”

But this opportunity is a call option with a very clear expiration date. The jig is largely up for the moment that OpenAI launches its advertising offering and its media becomes “buyable” in one-shot. The chessboard of how they will do so is taking shape. Former Instacart CEO and Meta exec Fidji Simo is a couple of months into her post and a formal search for an ads leader is in full swing. Instant checkout and app distribution partnerships with entities such as Expedia are the easel for the mad men to eventually go to work.

Interestingly, OpenAI has hired an armada of ex-Meta employees, while mostly steering clear of bringing in leaders with Google lineage. This, combined with Sam Altman’s schmalzy waxing poetic about Instagram ads provides some clues to how OpenAI will crawl, walk run into their media ambitions.

Elegantly serving ads in multifaceted, anthropomorphic experiences like ChatGPT is the hardest design problem of this era and will require true first principles thinking. With trillions at stake, OpenAI is not just going to YOLO this. Perplexity backtracking on their in-line sponsored follow-up ad widget is a cautionary tale. A highly erudite company that has publicly stated that it will burn $115B between now and 2029 isn’t in any rush to risk even slight enshittification in their core product.

In the short-term, expect OpenAI to treat the core experience in ChatGPT as sacrosanct and test ads on other surfaces such as Pulse and Sora. With Atlas, OpenAI holds a massive intent collection machine that it can use to personalize ads outside of its core product, a TAM that will only increase as OpenAI builds more consumer applications. That should keep them busy for a while.

But eventually, ads will permeate the core of ChatGPT and any other mass-scale LLM That said, there’s already clear precedent that truly native ads in LLMs can scale without alienating users. OpenEvidence raised $200M at a $6B valuation to build a specialized LLM that is free for all medical professionals, supported by CPM ads that often fetch >$100 CPMs. Eric Seufert’s first rule of the internet again applies.  

Tick, tick tick.

Author’s Note with recommended supplemental reading: Between the time I loaded this draft into the ESP yesterday to publish this morning, two of the best writers in the space front ran me an wrote what are essentially spiritual siblings to this piece. I recommend reading both:

-Affiliate links, personalized ads, and chatbot revenue optimization: Eric Seufert
- OpenAI’s ad model will be feeds, not leads: Andrew Lipsman

Editorial, Economics and Policy Lead, Anthropic
Anthropic shelling out up to $320K (+ likely hundreds of thousands of dollars per year in equity) to thinkbois is fascinating on a number of levels but most notable is their head of brand’s quip about the role.

She says to “think of these roles as being a Substacker within Anthropic with access to real time data, insider knowledge of what’s happening at the frontier of AI + independence to write about the topics that matter most to you. These roles are for big thinkers and domain experts, not content marketers (emphasis mine).

I really wonder how far they will push the bounds of independence here. I suspect if I wanted to write about the dead weight loss of brains atrophying due to over-reliance on LLMs, that probably doesn’t get the green light?

Director AI Partnerships & IP Management, New York Times
Fresh off another dynamite quarter in which the Times added another 460,000 subscribers, The Grey Lady has transcended any conventional conception of what a newspaper is. As Brian Morrissey writes, the Times has a “plausible shot at escaping the news category altogether and competing with the likes of Netflix.”

As they do so, the company is staffing up across its strategic partnerships team, with several roles open that focus on negotiations with major LLMs.

There’s a fun wrinkle here— Open AI’s VP of Media Partnerships Varun Shetty was once the executive director of the Times, responsible for negotiating their platform deals with Google and….he too is staffing up his operation considerably. 

All told, many of the leaders who will negotiate some of the most existentially important deals in tech and media next year…..are not even in seat yet.

It’s been more than a month since SEO consultant turned digital investigative journalist supreme Lars Lofgren dropped this incredible piece on the unchecked power of Reddit moderators in shaping online discourse.

The piece rocketed up the Hacker News charts but received shockingly little follow up coverage and seemed to fade gently into that good night.

However, I wonder if it is having a bigger impact behind the scenes. OpenAI employees are ultra-online and I’d bet hundreds were exposed to the piece and grappled with it quite a bit as they weigh Reddit’s incredible power in ChatGPT. I’d venture Lars is shaping the internet far more than even he could imagine.

The Monks in the Casino: Derek Thompson 

While I’m not necessarily an unabashed abundance boi, I think Derek Thompson is a generational rhetorical talent.

This is his best work in a long time and easily the most “what the hell are we even doing here” piece written in a long time. Amidst a litany of paragraphs that will stay with you for a long time, this one stands out.

“To open a daycare, build an apartment, or start a factory requires lawyers, permits, and years of compliance. To open a casino app or launch a speculative token requires a credit card and a few clicks. We made it hard to build physical-world communities and easy to build online casinos. The state that once poured concrete for public parks now licenses gambling platforms. The country that regulates a lemonade stand will let an 18-year-old day-trade options on his phone.”