Why Affiliate Marketing will die.

10 01 2013

For ten years or more I have been involved in what can be loosely called affiliate marketing. I have been entirely focused on PPC, xml and contextual search. I have worked for big companies like Findwhat.com/ Miva before they became AdKnowledge and have run my own networks. It has been a great experience and when the times were good they were awesome! Most recently though that has not been the case.

I have been pretty good at spotting trends and avoiding trouble. Sometimes by getting burned and tracking down the culprits and sometimes by listening to industry chatter. There are always the very painful pre-holiday chargebacks where affiliates are not paid because advertisers clawback budgets claiming fraud, either because they got more bad traffic because of the bigger budget, or because they found out they had over spent.

Then there are then newbies. Those who enter the industry as one man operations striking out on their own. Some you recognize and some you don’t. Some use experience from networks you recognize to gain trust. All you need to watch out for. The lure of big money suddenly is a strong one. Payments sometimes get later and later until they quit coming. Once a payment is late you can usually expect to not see it. In most cases where there are rumors of late pays and issues you can expect there to be problems. Most of these networks if they are smart will rebrand and learn from their mistakes and try again. Most of the time these networks will do much better the second time. Others will simply commit the same mistakes and mis-steps again. 

This is where the problems in the industry begin. Not everyone who is late falls in this category either. Some are victims of …..lets call it “competition”. Not everyone who is late or doesn’t pay is bad with money management. Some are victims or their own success. They start small and the relationships with the larger networks is cordial and good. Slowly they begin to grow and make more money. The payments get larger and the stakes for them get higher if they are not banking every extra dime…….most do not. They spend the money to hire, or build the business or to enjoy life for a change. After a few months of this (the cycle is typically 90 days) the larger networks start to stretch payments. This causes the affiliates to pay later and later. They start to loose a few partners and traffic here and there (typically the smaller ones go first) and the profits drop. Soon the larger partners take notice and apply pressure. They begin to shuffle payments to keep the larger networks happy and string the smaller partners along as long as possible. Then the fun begins with what we will call the payment hiccup. A large partner will miss a large payment claiming not to have a W-9 or correct address or something missing on file. So payment is not sent and will not be caught up until the following month or until the paperwork is resent. At this point the network is playing catch up, but it never really does. Because soon after scrapes begin and payments become smaller, traffic is run to partners who don’t pay claiming chargebacks and slowly they are run out of business by their feeds and the larger networks either directly or indirectly. Meanwhile the network is slowly loosing traffic and partners and getting further in debt until they close their doors. 

Some at this point will rebrand, most will be so frustrated they will either go to work for the larger networks or get out of the industry all together. THIS is why affiliate marketing will fail. It will limp along finding new people wanting to chase the dream until word gets out the dream is a mirage sold by the platforms and other networks (misery loves company). Soon only the large networks and agencies will have only each other to play the game with. This is where the biggest players will win and competition will thin the industry to one or two players.

It may sound like sour grapes and mis management. I hope I am wrong. But after going through the process to where I was only trusting the partners I knew I could trust and then seeing it happen to them as well I have lost hope I guess.

Thoughts?

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One response

10 01 2013
Why Affiliate Marketing will die. « bryangiss

[…] Why Affiliate Marketing will die.. […]

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