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EDITORIAL:  The Future of Affiliate Marketing

The editorial below focuses upon affiliate marketing and pay-for-performance advertising.

REPRINT INFORMATION: This editorial may be reprinted electronically provided that it is reprinted in its entirety, it is not framed, your "robots" metatag does not specify "no follow", and the complete byline at the end of the editorial, including hyperlink and copyright notice, is included. For reprinting by non-electronic means, please contact the author.


On Affiliate Program Management

If a merchant chooses to launch an affiliate program (thereby becoming an affiliate sponsor), that merchant assumes the obligation to take care of its affiliate members (publishers). It is, after all, the publishers who assist the merchant by bringing traffic (visitors or leads) to the merchant's website. An affiliate program manager (such as Commission Junction, LinkShare™ or Google™ AdSense, responsible for managing multiple merchant and publisher accounts) has an additional obligation to its member merchants (advertisers). While, in theory, pay-for-performance is a sound and promising advertising method, in practice it often becomes more bother than it's worth from both merchant and publisher perspectives. For the aggressive merchant, significant time must be spent updating creative content. For the publisher, significant time must be spent adding and deleting content from web pages as well as in deciding what content to install and where to do it. IT IS THE DUTY OF THE AFFILIATE PROGRAM MANAGER TO MAKE THIS TASK EASIER FOR BOTH MERCHANT AND PUBLISHER.

MORE ....

I believe that large affiliate program managers have lost sight of their customer base. Instead of asking what merchants and publishers would like to see in their affiliate programs, they dictate terms. I rarely look at my LinkShare account because LinkShare has imposed so much security that I have to jump through hoops, completely disabling my antispyware program, just to log on to their website. (By the way, I am a strong advocate of PROPERLY IMPLEMENTED security measures.) Now it appears that Commission Junction may be about to shoot themselves in the foot by failing to listen to both merchants AND publishers, both of whom appear at least modestly opposed to an impending program change. Google AdSense is under fire from merchants convinced that Google is not doing its best to combat click fraud. Merchants, too, are often thoughtless when it comes to supporting their affiliate members. I have been in several affiliate programs that were simply dropped by the sponsoring merchants -- no warning, no payment for completed sales, no explanation or apology. In one case it became necessary for me to drop everything I was doing to repair thirty of my most popular web pages that were rendered partially inoperative because a merchant suddenly "went away," leaving disfunctional code on their server.

The heart of any pay-for-performance program (upon which most legitimate affiliate programs are based) is its publishers (sales reps) who agree to provide free advertising in the hope of receiving some reward "down the road" for their efforts now. Without publishers, pay-for-performance is nothing more than a concept. For pay-for-performance managers, who offer their services to both merchants and publishers, merchants are an equally important aspect of the business equation. I suggest that program managers take heed and listen to their constituents before pay-for-performance becomes a thing of the past.

On Pay-for-Performance and Internet Marketing

In theory, pay-for-performance is a fantastic business model. Merchants and sales reps (in internet marketing parlance, "publishers" or webmasters) collaborate to sell merchant product. When a sale occurs, the publisher receives a portion of the sale (a commission). The merchant only pays for "effective advertising", i.e., advertising that generates sales.

Profit motivation ruins the model. This may seem like a contradiction in terms, as the goal of running a business is typically thought of in terms of making a profit. A true merchant knows that the reason they are in business is to provide a product or service. If they do this well and utilize a proper business model, they will turn a profit.

I believe the high profit motivation and stiff competition fostered by the internet explosion ("Anyone can do business on the internet."), together with a cloak of anonymity afforded to sellers and a corresponding lack of trust on the part of customers (as a result of having been burned by unscrupulous sellers or hearing horror stories about internet scams) is slowly killing pay-for-performance marketing. When trust is lost in an advertising medium, only one methodology remains -- "brand name recognition." It is no longer about "being the best"; it is about "being the most." If I say my name enough times, people will remember me. It doesn't matter whether I am bad or good, naughty or nice, have a great product or one that falls apart upon first use. People will buy my product because they remember me. This is the heart of media advertising today.

For the pay-for-performance marketer (publisher), this presents a dilemma. I am not getting paid for promoting products -- only for selling them. Am I then supposed to pay to advertise myself in the hope that visitors will come to my website to buy someone else's product that I am promoting? While some publishers do this, I believe they are sorely misguided. Another dilemma: With so much distrust related to internet marketing and a high requirement for brand name recognition, how do new marketers and webmasters get noticed without a massive, costly ad campaign? Absent the ability to either cultivate significant visitor recognition and trust or to generate massive visitor traffic, a pay-for-performance marketer doesn't stand a chance.

This is indeed a shame, as pay-for-performance offers huge advantages to merchants over the "pay-per-click" model being so heavily touted by the major search engines. Pay-per-click is rife with click fraud -- by some estimates as high as 25%. With major search terms ("keywords") often being bid in dollars rather than in cents, pay-per-click is a "cash cow" for the search engines but can easily bankrupt a poorly-conceived merchant ad campaign -- especially if click fraud becomes a factor. By contrast, pay-for-performance offers no risk to merchants (although some risk of fraud being perpetrated against publishers does exist). The fact that merchants only pay advertising costs (commission) WHEN A SALE IS MADE insures that merchants will not pay needlessly for ineffective ad campaigns.

Pay-for-performance benefits consumers as well. Because merchants engaging in pay-for-performance marketing may pay less for or (if they operate or participate in a highly effective affiliate program) completely eliminate expensive advertising campaigns, they can pass the savings on to their customers. Most website visitors don't recognize this fact, primarily because they are not familiar with affiliate programs, pay-for-performance marketing or even the idea that most websites need to earn money to maintain an internet presence.

Website visitors must be familiarized with these concepts if pay-for-performance marketing is to survive. For reasons ranging from overzealous security fears to a misguided desire to deprive another human being of their livelihood, publishers are routinely "robbed" of their hard-earned commissions. Visitors are suspicious of funny-looking URLs, and quite often the URLs identifying affiliate publishers are among the "funniest" (oddest looking) out there. A natural response to this suspicion is to either log directly onto the merchant website, bypassing the affiliate link entirely, or to remove the affiliate tracking code from the URL before clicking. Cookies are often disabled in a visitor's browser, as is JavaScript; both actions can prevent an affiliate from receiving a commission. Affiliate sponsors (merchants), either intentionally or unintentionally, may enable visitors to deprive publishers of commissions by including an 800 number in a banner ad, permitting those visitors to place an order by phone without ever clicking through to the merchant's website. While this is a great idea for both merchant and customer, it leaves the publisher, who has done the work of connecting visitor with merchant, out in the cold.

While some publishers make a handsome living from affiliate commissions, the vast majority earn barely enough to pay for the cost of operating their websites. For the latter, even one lost commission can be significant. Many non-profit and volunteer organizations such as pet adoption agencies utilize affiliate programs to subsidize the services they provide. Loss of commissions for these agencies directly equates to reduction of services.

Marketing is an integral part of capitalism; it is the act of bringing consumer and producer together for the purpose of entering into a mutually beneficial transaction. Pay-for-performance marketing can be of great benefit to both merchants and consumers, but only if pay-for-performance marketers (publishers) are properly and adequately rewarded for their efforts. Lack of consumer knowledge relating to affiliate marketing and dishonest behaviors by a relative handful of internet scammers threaten the very existence of pay-for-performance marketing. Visitors who subscribe to the philosophy of a "free internet" should remember that, not unlike television, those freebies are paid for in large part by advertising and merchandising. If you visit your favorite website ad infinitum to obtain free information and services but consistently shop elsewhere, don't be surprised if one day you find that your favorite website has closed up shop.

Kenneth L. Anderson
President, Ten Spider Enterprises
Publish Date: 3 June 2006
Copyright 2006, Ten Spider Enterprises, All Rights Reserved Worldwide.

Posted by: The Spidermaster on Jun 03, 06 | 4:00 am | Profile


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