Affiliates Beware - You may be next

The Affiliate Marketing Industry has long been an industry of positive friction. Traditionally, there have been three hands in the pie - the Affiliate, the Affiliate Network and the Merchant. Recent months have shown the Affiliate Networks beginning to go direct and cutting out the Affiliates. Many a Merchant, as well as the big 3 affiliate networks (Linkshare, Commission Junction and DoubleClick Performics) have built their businesses with the blood and sweat of the affiliate marketer. However, the Affiliate Networks insatiable need for more top line revenue is forcing them to look to, or around, their Affiliate "Partners". The networks as they exist today will be not be recognizable in the years to come as they own more and more of their distribution.

For sake of this discussion, I will use our company as the case study but you can begin to see the Affiliate Network wanting to own the affiliate distribution channel. In the "cutting out" scenario, those Affiliates that are particularly vulnerable are the small-to-medium ones. Big ones, will get bought and that is a great exit, but if you, the Affiliate, don't get big enough, fast enough - then look out.

Quick Case Study

Background - In November of 2006, Bargainbetty.com struck a deal to provide coupons to MSN Shopping. We were fortunate enough to win this relationship with our industry expertise and network. We undertook a compressed development timeline and were able to provide the fully functioning feed in time to capture the Christmas 2006 selling season.

Fast forward to Shawn Collin's July 27, 2007 post sharing the email from Linkshare announcing their "new" relationship with MSN for coupons. Ok, so Bargainbetty was cut out - big deal, we will have to find more distribution partners.

The negative impact to our business is not the point. What is more relevant to the Affiliate Marketing Industry is the dynamic of the traditionally three way relationship. This dynamic is changing and Affiliates and Merchants will have to choose their partners wisely. The former "three-way" pie is rapidly consolidating to just two hands - the Affiliate Network (soon to be renamed as simple a "Network") and the Merchant. I tell you what - if I were in charge of Business Development for Affiliate Network upstart Avantlink or Share-A-Sale, I would use this as a major selling point to further consolidate their position with the thousands of small to medium sized Affiliates. Where the Affiliates go, the Merchants will follow. This is a classic case where a fragmented market and some dilution of the power held by the "big 3" would be good for business - at least for the Affiliate and arguably for the Merchant.

Comments

[Gary M]

Great post guys. Very interesting read. It reminds me of all the discussion these days on branded (or direct tracking) links networks are offering merchants...and in fact selling them on! In a way, that's also cutting out the Affiliates. Or better yet, completely taking advantage of them.

[Roy[SAC]]

Oh, I didn't see that post of Shawn. Interesting... And I thought that is odd that Looksmart was a CJ publisher who charged per click (paid for inclusion) and used their affiliate link to get commission on top of it. Double Dipping is the word that describes this practice best.

Double dipping is always great for the dipper. Anybody remembers the Hilton Amex double dipping. Double airline miles per Dollar PLUS Hilton points on top of it? That was great for the consumer.. too great actually, they stopped it.

If the network acts "simply" as publisher, it might sounds simple, easy and convenient ("you only have to accept us as a publisher, just like any other affiliate.")... wait, I now pay you commission AND network fees on top of those commission as well? This sounds as bad as a Bank that charges its own customers ATM usage fees of $2-$3, including the customers home branch where he has the checking account with them.

Does the second example sound bad? Well, that is exactly what the merchants are doing, if they swallow the pill just like that.

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