by Jeff Molander
November 19, 2006
Not surprisingly, my candid audio interview with a frustrated affiliate manager who, upon my invitation, spilled her intellectual guts set off a firestorm. At the heart of the discussion seems to be offer delivery infrastructure. Specifically, the “how” behind affiliate networks like Commission Junction as compared to the likes of Hydra Network, neverblueAds, etc. As Sam Harrelson pointed out recently,
“There are tectonic shifts occurring, today, beneath our feet and driven by advertisers. Specifically, systems flexibility will drive change. Are you a vendor to advertisers who doesn’t provide flexible delivery and payment options for advertisers? You will lose.”
I agree. What Sam’s getting at here is exactly what Ms. X is underscoring in my interview with her—CPA Networks are an attractive alternative that offer “Google-like” scale to advertisers who find themselves frustrated with affiliate networks. Perhaps “worn out” is a better term. They’re tired of all the work involved in maintaining relationships—those pesky little things that the industry can’t seem to stop talking about in its own defense. Why in defense? Well… because there’s a Cold War going on that, from what I can tell, nobody likes to suggest is actually occurring (hence, the state of denial reflected in arguments over traditional affiliate networks competing with CPA networks and anonymous people calling me names).
Scale, Profits & Speed
Affiliate networks like Commission Junction, Performics and Linkshare DO compete for the very same lucrative lead/subscription/new customer advertisers (more so than retail). Suggesting that they don’t is like suggesting American Airlines would rather sell airline tickets (high volume, low margin) than travel packages (low volume, high margin) and that they don’t compete with Apple Vacations because they sell relatively fewer travel packages.
Here is a summary of key points raised by Ms. X.
Myth: Affiliate networks work hard to keep your program “clean” and fraud-free—it’s in their best interest
Truth: Affiliate networks make less money keeping your program clean and need a new fee model (a fixed one) that ties to the value they deliver (see next item)
Myth: Affiliate networks bring you affiliates
Truth: You bring you affiliates and it’s a time consuming, often times burdensome, process based on a premise of “knowing your affiliate” (transparency)
Myth: Affiliate networks help advertisers scale by providing one point of contact for many affiliates
Truth: Managing affiliates requires significant time investment and relationships don’t scale well; witness the explosion and growth of outsourced affiliate program management companies in the last 5 years.
Increasingly, since Valueclick’s failed Link Management Initiative, we have heard a kind of tribal kumbayah as the industry rebels against the rather corporate-minded need to scale… increase profits with less friction. It has risen to the point where those invested in the success of companies like Commission Junction have called for Jeff Pullen to rescue them from the evil clutches of those who “don’t get that this is about relationships.” (less about making a lot of money without friction)
The Whole World is Watching
Rather than throw insults from behind thin veils (we all know who the champions of the “grass roots affiliate marketing” crowd are) can’t we have civil discussion about a rather simple cost/benefit phenomenon? It seems, so far, that the answer is no here in the U.S. but in Europe the answer is yes.
Domestically, our industry seems torn. There seems to be a choice being forced: between management by emotion versus management by the numbers—another theme that Ms. X tackled in her comments and one that seems impossible to stomach by the grass roots crowd.
Words That Haunt
Ms. X suggests that affiliate mangers owe it to themselves to remove the emotion. Why? Simply stated, so that they can focus on affiliates’ numbers (productivity) and not how they feel which, in the end, doesn’t help the manager pull a paycheck. Indeed, she suggests affiliate managers don’t work for affiliates—they work for the company that pays them. She points at the manipulative power emanating from forums such as Abestweb.com (among others) and questions its authority… in its reliance on emotion rather than rationalization. Most importantly Ms. X shares these thoughts as she has made these realizations “the hard way.” Curiously, her comments are held as in-valid by anonymous commenters in the editor’s original story.
If traditional affiliate marketing networks and advertisers using them are to thrive (I suggest survive) they must do three things:
1) Get Perspective: Come to grips with the facts. The model currently doesn’t scale well and has been slanted toward advertisers… resulting in a Cold War between publishers and advertisers (witness adware, spyware and advertisers taking back commissions without notifying affiliates).
As Like.com’s Beth Kirsch put it in 2005, “Most merchants, and everyone I know for sure, have programed (sic) their back end so the affiliate only gets the credit IF and ONLY IF the customer returns straight to the merchant’s domain directly. If the customer returns through Biz Rate, Google or some other channel, the affiliate does not get the credit.”
2) Learn to Scale: It’s not impossible but may require pain. Specifically, throw out the old and replace with new, better, flexible technology that allows advertisers to use preset business rules to drive better ROI (in most cases, return on ad spend). Advertisers beg for a better means to meet, qualify and get liked up with quality affiliates. There must be a better way (and there is but I’m going to resist plugging my new venture).
Tracking, reporting and payment/settlement solutions built in the late 1990’s have proven useful but are outdated and inflexible. They do not take into account advertisers KPI’s (key performance indicators) and facilitate flexible relationships with publishers. Business rules rule and advertisers want to scale here too—they don’t want to be fooling around with batch uploads and manually matching-back customer order tables to arrive at proper payment schemes. Just ask Mercent and ChannelAdvisor, companies who stand to eat the “multi-channel marketing lunch” of traditional Web affiliate marketing companies.
3) Get a New Cost / Fee Model: Since traditional affiliate networks don’t bring affiliates to the table (so much as they bring a sea of mostly fraudulant or low quality affiliate applicants to weed through, most of which are worthless) they should be paid accordingly—a flat fee, not a percentage of sale or piece of the bounty.
On a personal note thanks to editor, Sam Harrelson, for not only bringing us together so as to share various perspectives but for also offering the world CostPerNews.com -- a haven for critical thinking. May it continue to thrive and may productive dialog flourish here.