Are aggregator platforms right for your brand?
By Hannah Kimuyu, MD – Performance, Brave Bison
Aggregator platforms like Compare the Market, Money Supermarket and Confused.com have long been a divisive topic. Direct Line quite literally turned the threat of the aggregators into its greatest selling point, claiming aggregators may not be what they appear. Its ‘aggregator attack’ explained that while they imply they cover the whole market, they may only cover a select range. And, of course, those who pay for it.
On that note, it’s worth remembering that the aggregator business model is lucrative. McKinsey reports that many aggregator platforms enjoy high profit margins of up to 40% of earnings before interest, taxes, depreciation, and amortisation (EBITDA). It’s clear why these platforms would want to get a brand listed. But how clear are the advantages of being listed from a brand perspective?
The overwhelming perspective from aggregators around whether brands should be worried about this distribution channel is ‘no!’. But then, they would say that, wouldn’t they? In truth, there are advantages and disadvantages, and knowing whether the benefits outweigh the drawbacks can be difficult for a brand.
There are four main factors to consider:
Aggregators may provide broad exposure to those considering a purchase in a brand’s category. However, without a steep price drop, conversion becomes challenging on these platforms due to the volume of competition.
Further, on average, brands are ranked higher when deals are cheaper. As a matter of fact, a report by the CMA suggested that suppliers often acquire new customers at a loss when the commission is added. As aggregator channels become more important for a brand, discounting prices increasingly impacts the overall margins, resulting in a vicious cycle. Challenger brands are particularly affected by this problem. A large company may be able to swallow a loss leader, but a small brand usually cannot.
Realistically, it will be more beneficial to understand the specific audiences you want to engage with and divert more budget towards the precision targeting offered by paid social, search and display. In doing so, a brand doesn’t need to focus on the price comparison list. It can defend its price premium by reaching those with the highest purchase intent in the right place and at the right time.
2. Cost per acquisition
While aggregators may offer performance-based partnership models, the competition on their platforms can be pretty volatile, significantly driving up cost per acquisition. Performance channels offer greater control over a brand’s budgets, allowing for an optimised approach toward maintaining a more predictable and lower initial cost per acquisition.
3. Brand Equity
Digital marketing isn’t just about driving immediate results; it can also deliver brand-building outcomes in a way that solely relying on aggregator platforms can’t. It’s a universally acknowledged marketing truth that investing in long-term brand equity alongside short-term acquisition is what propels businesses to success.
It’s also a misconception that this can only be achieved through more costly broadcast media channels. This is certainly the strategy aggregators take to drive direct traffic, with many investing heavily in traditional advertising channels, such as TV (think Meerkats, opera singers, twerking men in high heels).
However, paid and organic social media, SEO, and display advertising can contribute to brand outcomes if employed as part of a holistic strategy. A brand can also have more control over it. With limited control over messaging, for example, typically used aggregator adjectives like ‘cheap’ or ‘discount’ may become accidentally associated. If that’s the USP, great. If not, it’s less great.
The trick is to think about the long-term goals. Funnelling too much of the marketing budget into the short-term reward of aggregator platforms will stifle the future growth that comes from strong brand equity and identity.
4. Customer Ownership
Google is officially set to phase out third-party cookies in Chrome by 2024. In today’s world, data may be some of the most valuable information a brand can own – and to be effective, they must learn how to collect and operationalise it.
In a performance-based model, aggregators will do everything they can to safeguard their commission and increasingly, this means designing and building their own sign-up processes rather than handing over leads and risking losing customers to a bad experience.
This model effectively means that the aggregator “owns” the customer relationship—improving their chances of cross-selling and generating recurring revenue from the individual but reducing your brand’s chances of growing that customer relationship or nurturing future brand loyalty. It also means sacrificing valuable data that helps profile the customers and audience who will likely buy your brand.
The advantages of aggregators include access to a broad audience and performance-based acquisition models – but at what cost? Limited control, potentially resulting in higher initial acquisition costs, shorter customer lifecycles and diminished brand equity and identity. If you’re unsure whether to list, consider these four factors but in reality, for most brands, the drawbacks are likely too much of a burden to bear. It’s possible to take the power back. And it starts with saying, see you later, aggregator.