Affiliate Marketing is Dead . . . Part Two
Published: August 28, 2007
Author: David Rodnitzky
Just as Spinal Tap was “big in Japan”, my recent blog post on the death of affiliate marketing was apparently “big in England,” as several respected bloggers across the Atlantic had some choice comments about the post.
The most comprehensive rebuttal to my argument came from Kieron Donoghue of Here.org.uk. Kieron had a lot of problems with my (admittedly) bombastic post. You can read his entire posting here. To save you some time, however, I’ve summarized his thoughts and the thoughts of some other bloggers below, and responded accordingly.
1. “I can only assume it was wrote as link bait.” – I wish I knew how to write good link bait articles but alas I don’t. I truly just write about whatever is on my mind at the moment. And it so happened that I had just returned from the Search Engine Strategies conference where I had had a very enlightening conversation with the former head of one of the largest affiliate programs in the US (more on that later).
2. “Brand name bidding isn’t really affiliate marketing, it used to be an easy way for affiliates to reap some low hanging fruit but that’s all.” Low hanging fruit that would otherwise go directly to the merchant. Thus, the merchant is not making a positive ROI on this affiliate traffic and this creates a negative feeling about affiliates. In my opinion, anything that creates “positive ROI” results in “positive results for the affiliate community.” Anything with “negative ROI” has the opposite effect.
Bottom line: if you want merchants to respect affiliates, you need to limit yourself to only driving merchants incremental and legitimate traffic. When you send a merchant traffic from his trademarked name, this is definitely not incremental and may or may not be legitimate based on the merchant’s terms and conditions.
3. “No self respecting affiliate has ever been involved in spyware. Yes maybe a very small handful of bad apples did once upon a time but again they are firmly in the minority.” So I sent my article to my friend the former head of a major affiliate program (and still a very prominent figure in a different capacity in the online marketing community), and here’s what he wrote: “Good post, although no doubt in my mind that those hijacking sites/programs
are still in affect – too many affiliate managers that are naïve and/or have
incentive to look the other way (the “top” affiliates are helping them make their
number – same conflict the networks have in policing, imo).”
Not that this proves anything, but he and I both agree that there are one or two major affiliates in the US that get users to download their software, then do an instant re-direct whenever the user goes to a merchant with an affiliate program to capture the commission. The user has no idea that he is getting redirected, but the affiliate gets money at the merchant’s expense. Again, we are talking about year-after-year top ‘performers’ in the US.
4.”Google’s quality score updates have pushed out the arbitrage sites and the poor quality landing page sites. Well David, we true affiliates welcome these changes. We don’t want crap landing pages and arby sites in the sponsored results either. Knocking them out of the way leaves more room for us and our high quality sites that have no problem with Google’s landing page algorithm.” Google does not differentiate between “crap affiliates” and “true affiliates.”
Trust me, over time Google will do everything it can to push out ALL affiliates. I sat down with Google last year and tried to persuade them that there were different types of affiliates (though I did not use the words “good” and “crap” ), and the message I basically got was “all affiliates” are not wanted on AdWords. So whether this impacts your site now or a year from now, I’m sorry to say that it will likely eventually happen. More on this concept here.
5. “David argues that as affiliate marketing becomes more popular it is less “novel” to merchants. Eh? So because it is more popular it isn’t as good? I just don’t follow this argument whatsoever.” The basic argument here is that the ‘coolness’ factor of affiliate marketing no longer exists, and it’s much easier to work with one or two major partners on a PPA basis than 5000 small affiliates. I suppose I would modify this to say that if you are a high-quality, high-volume affiliate, there’s a good chance a merchant would keep you on, but if you are generating $500 of revenue a month for a merchant, I believe most merchants will eventually decide that the risk of a ‘crap affiliate’ outweighs any benefit derived from dealing with many small affiliates.
6. “What about all of the very high quality affiliate sites out there that don’t fit into any of the above categories?” Of course there are good affiliates, my point was and is that the bad affiliates are ruining your reputation. Being a law school grad, I can assure you that there are many “good lawyers”, though it’s the bad lawyers that ruin it for everyone else.
7. “David’s views accurately reflect what man “outsiders” think of our industry.” For the record, I worked at Adteractive for two years heading up their paid search team. Adteractive does not have a presence in the UK, but when I was there we did over $100 million a year – all from affiliate marketing.
And in my current position, I am responsible for the affiliate program for a major US merchant. When I tightened the T&Cs on our program (no trademarked keyword buying, very few coupons, etc) the revenue from affiliate marketing went way down, but the revenue for the company was not impacted. It’s hard not to draw the conclusion from that data that our affiliates were not driving ‘positive ROI’ to our company.
In law school, I learned about a concept called “the tragedy of the commons.” As Wikipedia describes it:
The Tragedy of the Commons is a type of social trap, often economic, that involves a conflict over resources between individual interests and the common good. It is a structural relationship between free access to, and unrest
ricted demand for, a finite resource. Such situations have occurred in the context of fishing (eg, the overfishing and destruction of the Grand Banks, and the destruction of salmon runs on rivers on which dams have been installed for power production), and in terms of water supply (eg, limited water available in arid regions as in the area of the Aral Sea, the Los Angeles water system supply, especially at Mono Lake and Owens Lake).
There are many individual affiliates who will use any means necessary to grab as much money as possible from merchants. If this means operating in a grey area – or even a black area – of the law, there are plenty of affiliates willing to do this. Unfortunately, stretching or breaking the law is often very profitable for these affiliates.
When merchants discover that they’ve been duped by some bad apples, they often fail to differentiate between the good affiliates and the bad affiliates. Thus, even if you are doing everything you can do stay ‘on the level’, your compadres who do not adhere to your ethical standards can single-handedly destroy your business overnight.
Hence the tragedy of the commons. If everyone agreed to act in the name of the common good, everyone would benefit. When a few individuals act in their self-interest, they benefit at the expense of the community.
To save affiliate marketing, I believe it is up to the ‘good affiliates’ to act together to establish standards, police their industry, and re-establish trust with merchants. It can be done, but it takes organization, patience, and an absolute refusal to engage in any activity that has negative ROI consequences for merchants.
As a merchant, I’d love to make affiliate marketing the bulk of my marketing campaign. When it works, it’s magic – 0% risk, 100% guaranteed ROI. But I can’t police 100, 200, or 5000 affiliates. As a result, today I spend my money I thinks like Google AdWords, where I have a high degree of confidence that I’m getting what I pay for.
Believe me, someday I’d love to be proven wrong.