Opinion: Solving the payment model crisis of Affiliate Marketing

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Opinion: Solving the payment model crisis of Affiliate Marketing

Tensions have been beginning to rise in recent times as Advertisers crunch spend to their affiliate channel even further, in a wave of adjustments meaning publishers lose out on commission to sales via social code, existing customer, among a whole host of other advertiser terms.

Previously covered, the channel’s 0% debate, saw some advertisers pay 0% commission to sales from existing customers. Some may say that makes sense, but refusing to pay for a click through paid search or display for an existing customer is unthinkable, so should the methodology for the payment model of affiliate be re-thought?

The issue stems from attribution; as spend grows cross-channel, advertisers from all verticals are frantically studying their Analytics or attribution tools searching for an answer to slash spending on digital. Traditional ad spend on paid search has remained largely unchanged, however affiliate spend is beginning to take a battering. Why? Because it’s the only channel where an advertiser can choose to pay for the sale or not.

Whilst there’s pages of terms and conditions from networks, best practice guides from the IAB; there’s nothing to realistically stop advertisers from refusing to pay out on sales, and simply declining the commission.

From an advertisers point of view, because it’s performance based (they only pay when an action has been made) then they shouldn’t pay out, for example when a customer returns their order. However, now, advertisers across the board are de-duplicating against other marketing channels, declining depending on the use of vouchers, or whether they’re an existing customer. Some advertisers have decided only to pay out if affiliate was the only referrer in the user journey.

When you take all of this into account, publishers are losing out, and big time. The result? Publishers will simply change their model to tenancy-only, or CPC. Indeed, it’s seen as the norm for ad placements on publisher sites to have a tenancy spend alongside any CPA investment.

There is a solution – and it’s so simple

Solving the crisis for all parties is simple – stop the ability to decline commissions altogether. With a program delivering between 10-20% of an advertisers entire online revenue, it’s by no means an insignificant channel, nor an insignificant spend. But when you take a step back, the effective cost-per-click for the average program is just over 26 pence – much lower when compared to paid search or display.

Whilst advertisers reading this may well argue that they’re “not paying for returns” it stems back from the ability (or lack of) to decline spend based on these types of transactions. Whilst they may have returned an item, the advertiser still has a new, opted-in user of their marketing material. Is that worth 26p? The only exception to the rule would be fraudulent orders.

Of course, it’s not as simple as suggesting that all sales should be honoured. For a strategy like this to work, the industry would need a cross-peer group and unilateral agreement from all active partners in the channel. Advertisers, networks, agencies and publishers would need to be involved to steer the channel back to it’s grass routes – driving traffic but only being paid on results.

Networks have the casting vote – they’re the ones who have the power to invoice for commissions, and allow the approval or decline of sales. There’s been argument at the recent Performance Marketing Insights where it was suggested that Voucher Code publishers should be a soft-click publisher. But this simply doesn’t solve the publisher. Yes it allows smaller publishers to be in with the chance of winning, but scuppering the earnings of the channel’s leading revenue-generators would be a suicidal move.

Publishers can also incentivise by going back to their routes. If they’re assured of securing commissions on all delivered sales, they can lower the barrier to exposure for advertisers by reducing tenancy spend on their sites and working on the traditional route of an increased CPA for exposure.

Advertisers can still look at attribution; but as with any other channel, they can look to reduce their investments in the channel on a scaled basis, similar to reducing spend on a keyword in Adwords.

Together, the industry can benefit from:

  • Publishers having transparency over their earnings, and getting back to grass-routes performance marketing
  • Advertisers reduce tenancy spend and return to purely performance-based activity
  • Networks have less compliance issues and retailers acting against their own network terms

Predictably, this debate, among the many others will be ongoing for quite some time, but only a full change in direction from all companies involved will truly shape the future of affiliate marketing.