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IRCE Affiliate Rant: Did I go too far?

On Monday, 6/9, I participated in a Panel at the Internet Retailer Conference in Chicago titled: “Affiliate Marketing — Why you can’t set it and forget it”. The panel description went on to talk about all the cool things people were doing to create incentives for affiliates to sell more. Talking with the panelists during the planning phase, it became clear that all of us saw that the real issues have to do with policing rogues who violate the Terms and Conditions and whether these programs are driving incremental business to begin with. We chose to focus on those issues.

Naturally, I didn’t make too many friends with the affiliates in the room. I stand by the content of my presentation, but I do regret some of the language I chose to use.

To the extent that I highlighted ways to catch folks who violate the Terms and Conditions of their affiliate agreements, I have no problem calling those folks thieves, rascals, criminals, skunks and any other epithet that might have popped into my head on Monday.

However, the other part of my talk, focusing on the extent to which retailers should rethink their terms and conditions, the use of coupons and discount codes, etc should have been spun differently. A number of coupon affiliates were rightly upset with me referring to them also as thieves, robbers and bad guys. If they’re complying with the terms and conditions of the retailer’s affiliate program they’re obviously doing nothing wrong.

My point was simply that retailers, on careful review of the source of affiliate traffic, should decide whether or not these types of affiliates add value, or if in fact they simply cannibalize sales and charge a commission for doing so. Here, instead of blaming the affiliates for taking advantage of retailers, I should have challenged retailers to take a more active role in defining what affiliates should and should not be allowed to do.

The coupon affiliates who comply with the Ts & Cs aren’t bad people and they’re not thieves. I do think that careful examination by retailers will reveal that these deals do more harm than good, but it’s not up to the affiliates to protect the retailer’s interests, that’s the retailer’s responsibility.

Finally, I implied in my talk that most affiliates were “bad guys”. That was wrong. I apologize to those I offended. However, I do believe that the vast majority of the $3 Billion in affiliate commissions that will be paid out this year will go to cheaters, and other programs that add no value for retailers.

There is a screaming need in the industry for someone to put together a network of clean affiliates, that will do the hard work necessary to drive incremental business, and that will police itself instead of requiring the retailers to play “cop”. The folks who can pull this off will eat the existing Network’s lunches.

Comments
31 Responses to “IRCE Affiliate Rant: Did I go too far?”
  1. Chris Middings says:

    Having been a heavy coupon user during the dot come bust (when websites gave their products away for very-nearly-free in exchange for growth in user numbers), and then much later having to oversee an affiliate program, I think your comments (and those of Alan in the past) merely reflect those of anyone who has access to more information than most.

    Yes, there are honest affiliates, but most will sell out your brand for a quick buck. And the consumers you gain through them will be of the lowest caliber regarding loyalty (and will probably be the ones to complain the loudest if anything goes wrong with their order). In most cases, just not worth the trouble.

  2. Matt L says:

    Vast majority of commissions goes to cheaters? Where do you come up with that considering in the previous sentence you apologize by saying most affiliate are “bad guys”. Are you saying there are a small amount reaaaalllly burning retailers?

  3. Yes, that’s exactly right. I’m willing to acknowledge that there may be a great many people trying to add value by social networking recommendations and other non-trademark-search channels, but while they may represent a majority of the individuals, the big money is going to the folks who piggy-back on the retailer’s brand name and other marketing efforts.

  4. Lorna says:

    Hi George,

    I attended the conference and would like to thank you for drawing attention to the very problems our affiliate program has dealt with since inception. We were starting to believe that affiliate programs were a waste of our time and energy due to these “poachers,” as I called them. Simply realizing that there are ways to police this kind of activity and to create a program that is NOT based around discounts, coupons and promotions was truly an eye opener.

    I think that your analysis of many of these “bad guys” is spot on. The affiliates who are doing legit work should be applauded and should work to clear the bad name created by the nasties that make me shudder whenever I get ready to pay out the bevy of coupon sites that are selling me my hard earned traffic.

    Thanks again!

  5. Greg S. says:

    Hi George,
    I heard you speak and thought you were right on target. Looking through our affiliate program over the past year I was surprised what some people passed off as an affiliate site. There definitely are some good affiliates out there but they seem to be few and far between, however gaining them is now one of our focuses.

    I can personally say that since we started policing our affiliate network the only sales that have dropped have been from that channel. Overall they have risen, which lends weight to the cannibalization statement.

    Thanks

  6. Lorna and Greg, thanks so much for your thoughtful comments. Greg if there’s any way to share your data (normalized such that you’re giving nothing useful to competitors) I’d love to chat with you about putting together a case study.

    George

  7. peter bordes says:

    George
    We at MediaTrust are very familiar with and understand the issue at hand. Yes the affiliate industry has had issues with a percentage of affiliates who do not practice or adhere to ethical standards. But there is also the very large very legitimate side of affiliate marketing which has been referenced to in this interview with Patrick Byrne where he says how large and valuable Overstocks affiliate program is to there marketing and growth strategy http://www.relevantlyspeaking.com/2008/06/05/interview-with-overstocks-ceo-patrick-byrne

    Its a shame that the panel discussion turned into a affiliate bashing and that the panel was not rounded out with affiliate marketing representation. It does not sound like it was a very objective panel. As is your post here where you apologize and then summarily bash and belittle the substantial $3billion in affiliate commissions as being mostly fraudulently created revenue with out any back up data to prove your statement. Especially when you say it provides no value. Please read the Overstock post and lets also ask why they and Amazon are spending money defending their affiliate program and affiliate partners.

    There are many more good people in this marketing vertical than bad. The industry has now formed the PMA http://www.performancemarketingalliance.com to set standards and govern the industry.It is important that all sides of the business participate in the PMA so that we can learn from their insights and provide better accountable service and standards. Aff marketing is not going away. So lets all work together to bring it to a level of excellence. negativity breeds negativity and it seems that everyone wants to create a better affiliate marketing channel.

    There are other companies like ours who work extremely hard to ensure quality and empower of advertising and affiliate partners with the best tools and information to achieve success by collaborating and creating long term partnerships.

    It is important that thought leaders be responsible in giving well rounded and objective sides of the 3billion plus story and work together with the community to find solutions.That 3 billion number is only commission. So we are talking about enormous gross transactional number that is driving much value to many of the world largest retailers.

    I hope you will help create proactive solutions by participating in the PMA. Please excuse me for the length of this post.It is a very important subject for us and our performance marketing industry.

    all the best

    Peter Bordes
    CEO
    MediaTrust

  8. > I do believe that the vast majority of the $3 Billion in affiliate commissions that will be paid out this year will go to cheaters, and other programs that add no value for retailers.

    What is your basis for this statement? Just an inkling? A sixth sense?

  9. Peter, thanks for your comments. As I mentioned above, I do think a self-policing affiliate network could be promising, and perhaps PMA is a place to start.

    Do I have evidence to back up my belief that the vast majority of commissions are going to folks who are intercepting traffic driven by the retailers brand name? No, each retailer needs to look under the hood using the techniques mentioned at the conference and earlier posts to determine the extent to which affiliates are simply cannibalizing sales driven by other marketing programs. However, I’ve known many retailers who pulled the plug on their affiliates and saw no material drop off in sales as a result. Sales tracked to affiliates drop to zero, sales tracked to organic search, paid search, email, etc took their place.

    Affiliates could go along way towards proving their value by delineating the source of their traffic, down to the visitors that drove the sales. I’ve seen no effort to do that.

    If affiliates are driving incremental business, they should welcome the diagnostic scrutiny I suggested at the conference and on our blog previously. This would help persuade and increasingly skeptical retail community that they’re not wasting their money.

    Ultimately, businesses survive if and only if they provide value to their customers at a reasonable price. Online advertising is a relatively new channel, and retailers are still learning what actually works, and what just shuffles sales from one marketing channel to another without the CFO noticing.

    We’ll see what happens with the affiliate industry over the next few years.

  10. Ethical Affiliate (dirt poor) says:

    Well thanks for tarring everyone with such a broad brush. And for taking the easy way out.

    One thing I’ve discovered is that the affiliate managers and publishing networks don’t care about incremental or ethical affiliates. They care about their barn-storming huge earners only. They direct all their resources into helping the rich (cheating?) affiliates become richer because they become richer too.

    So before you make such all-encompassing statements, take a look at:
    google, commission junction, linkshare, etc etc — oh, and don’t forget to include yourself and your industry while you’re at it.

    Now I understand more about why new/ethical affiliates become very jaded very fast.

    Thanks for nothing.

  11. Ethical Affiliate (dirt poor) says:

    Be sure to include the new ebay partnership too — since they sanction cookie overwriting and commission stealing after ethical affiliates have driven buyers to the site.

    Their number One sanctioned commission stealer: Auctiva.

  12. Rexanne says:

    “There is a screaming need in the industry for someone to put together a network of clean affiliates, that will do the hard work necessary to drive incremental business, and that will police itself instead of requiring the retailers to play “cop”. The folks who can pull this off will eat the existing Network’s lunches.”

    ———–

    Amen!

    I agree that there is a very large percentage of cheaters in our industry and that networks should be the ones responsible for policing the waters. The networks make money no matter who is driving sales through the affiliate channel and need to be held responsible for the “guests” allowed in the community pool. Networks are supposed to be our TRUSTED THIRD PARTIES – since they are the ones who can see what’s really going on at all levels, they should assume responsibility for watching out for cheaters both on the affiliate and merchant ends and also the manager end. There are plenty of unscrupulous program managers (in house and out-sourced) taking advantage of their clients, allowing affiliates to run hog wild over the merchant’s brand or lack of understanding.

    A best practices edict and code of conduct for this industry is in order. The stakes are high and the cheaters will continue to flourish outside basic legal parameters. If the Internet marketing industry can do it without outside assistance, all the better. Bring it on. Ethical and honest marketers would love a chance to grow (under mutually beneficial terms), too.

  13. Hooray for you, Rexanne!

    This is the crux of the issue. Contrary to what our “dirt poor” friend above suggests, quality Paid Search agencies try to help retailers understand the channel and how paid search ads interact with other marketing efforts. We give clients audits showing exactly how each buyer got to their site, which engine, which ad, what the actual search string was, the ip the time, and any other paid search cookies on their browser.

    We take matchback data from clients to help them see which orders came from people who recently received a catalog before searching so that they can set efficiency targets that make sense for their business.

    And, we’re working on solutions that would allow clients to develop rules for credit allocations between, email, paid search, natural search, affiliates etc that will ensure that proper credit is given to each channel.

    We’re not interested in which channel gets credit. We provide well-defined services and auditable results, and we charge fair fees for those services.

    By its nature the work affiliates do is harder to define, but perhaps providing the kinds of audit trails that we provide would help clarify the issue. Perhaps that would be the mechanism by which the clean affiliate network makes its mark. “We’ll hand you the order numbers, the referrer string, referring domain, the ip address, and the time stamp from the buyers visit to the affiliate site, so the retailer knows where the order came from, whether it’s likely incremental, and the Network can expel any affiliates whose orders are pirated. You’ll never pay for an order from a dirty affiliate.”

    What say you?

  14. peter bordes says:

    George & Rexanne

    Our network division http://www.advaliant.com prides itself in holding to the highest standards and guidelines for our affiliate and advertising partners (no matter how big or small they are). We only accept 30 percent of the affiliates that apply and then go thru a testing period for traffic & transaction quality.We have built a culture and reputation that is known for being proactive, partner centric and ethical.We believed that the industry needed to shift and evolve from its past. That is why we created the brand MediaTrust.

    Trust and our standards of ethics applies to our advertising , affiliate partners and and everyone that works at MediaTrust.We have also been building a new innovative performance marketing platform (moving away from the network model)which we will roll out this year and addresses all the issues you bring up above. We built it by working closely with focus groups made up of our business partners so it was built with the needs of every type of advertiser and affiliate.

    There are many others like us who are part of this large and now maturing vertical in the industry. Who want to work together and in partnership with the PMA to create standards and guidelines to ensure the highest quality of service,tools,transparency and ethics. Thoughts, feed back and insights are welcome so that affiliate performance marketing can grow to a new level of excellence thru proactive community collaboration and participation.

    This video talks about the level of trust and the value we created in a partnership thru affiliate marketing.Please watch the video in the lower right hand side http://www.mediatrust.com/ or you can watch it in HD here http://www.relevantlyspeaking.com/2007/11/30/rs-1-jay-moore-of-playphone/

  15. Evan W. says:

    My company manages several large scale affiliate programs on CJ alone and we very rarely ever have a trademark violation or Ts & Cs violations. We monitor this on a monthly basis. Coupon sites are some of the best acquisition producers and an incredibly valuable part of affiliate marketing. I only suggest to my clients that they operate on large networks like CJ, Linkshare Shareasale and Performics where you know who your affiliates are and can manage them directly. Vast majority going to cheaters? You couldn’t be more incorrect. In fact, running a robust, successful affiliate program should be the goal of all online retailers…one of the largest parts of your overall revenue should be the affiliate channel…and nay-sayers like yourself do nothing but bring unwarrented paranoia to the industry. Retailers should be willing to police their affiliate programs as part of affiliate manager’s job duties. I would venture to say from my experience managing large affiliate programs for 7+ years that more than 99% of affiliate marketers are providing good quality traffic by legitimate means. Better Ask someone!

  16. Peter, I think the notion of a clean network holds promise, but protestations to the effect: “We’re clean, We’re clean” aren’t going to cut it. Indeed Haiko de Poel Jr, raise some questions about the integrity of the folks on the PMA to wit:


    ” Wow, isn’t it great that so many of the EX-CJ people who not only lied to but also marginalized small affs, and steered / help steer merchants to the parasites are now heading up the new iteration of the industry association?

    There isn’t one person in that group who hasn’t supported or directly dealt with a parasite in one way or another, besides our very own Rexanne.

    But fear not, now we have them to save affiliate marketing, oh sorry they can’t since it’s the performance marketing association … AM is only a small portion of performance marketing so attention has to be directed to protecting the greater profit centers of the industry like loyaltyware (their nice word for parasiteware) and email marketing. Don’t believe it, look at what’s been happening and who has been winning CJ horizon and LS awards, it’s only going to get worse. ” — http://forum.abestweb.com/showthread.php?t=106451

    Trust will come from audit data, not associations and promises.

    I wish you the best of luck in cleaning up the industry. I’d love to have a network to recommend to our clients.

  17. Brook Schaaf says:

    It is worth pointing out that search management agencies, which I understand Rimm Kaufmann to be, often regard affiliates as competitors. This is because affiliates can do the exact same thing except that they front the money. Working with lower margins they still often show up internal teams and outside agencies. However sincere Mr. Michie is, his business stands to benefit directly if his arguments are generally accepted.

  18. “There is a screaming need in the industry for someone to put together a network of clean affiliates, that will do the hard work necessary to drive incremental business, and that will police itself instead of requiring the retailers to play “cop”.”

    As a publishing affiliate I agree there is a screaming need but gave up on it ever happening. The anonymous and multi-layered nature of the industry means that it is very time consuming to police. Our answer was to set up a network platform where the only “affiliates” are sites we directly control and are accountable for. Not the answer for everything, but it works for small retailers who haven’t got the time or resources to keep up with all the tricks.

    Ethical Affiliate might be less poor if those other affiliates weren’t overwriting their cookies.

  19. I only recently become interested in affiliate marketing.
    It seem that I’ve walked in the door at a confusing time though.
    From everything I’ve read so far, there seem to be “good guys”,and “bad guys” in this type of marketing.
    It leads me to ask, “is there any sure fire way to know which side of the ladder you are getting ready to climb up on?
    Tom

  20. Hi Tom,

    Ultimately, affiliates need to regard themselves as employees of the advertisers who pay their commissions. In that context, the question is: Am I adding value for my employer? Am I bringing them sales that they wouldn’t have gotten without me?

    If the answer is no then regardless of your intent, you’re getting paid without adding value. If the answer is “yes, I’m being paid fair commissions and driving incremental business to my employer” then you should have a clear conscience.

  21. Jeff Cress says:

    Ok, I’m late to this thread, but shocked that George was throwing stones from his own glass house.

    George said:
    “Peter, I think the notion of a clean network holds promise, but protestations to the effect: “We’re clean, We’re clean” aren’t going to cut it.”

    … but George offered no real proof himself. So to George I say: “protestations to the effect: “their dirty, their dirty” aren’t going to cut it.”

    Of course there are unethical people who try to exploit any source of revenue. There are now tools that allow ethical affiliate program managers to actively and effectively police against the type of trademark violation marketing that George is up in arms about. One of the big problems, in my opinion, is that there are too many folks out there telling merchants that it is easy to manage an affiliate program.

    IT ISN’T.

    Sure, any merchant can sign up with a network and open a program, but that isn’t affiliate program management. At best, I call that Affiliate Technology Management. Real Affiliate marketing experts have the tools and experience needed to protect the integrity of their programs, while driving true incremental sales for their clients.

    Affiliate marketing isn’t rocket science, but it isn’t necessarily easy or intuitive either. From what I’ve witnessed, most merchants that attempt to start and run their own programs make various mistakes that limit the ability of the program to drive real incremental sales, and invite the few opportunistic, unethical affiliates to leach off of their program. That isn’t the fault of the affiliate channel in general. It is the fault of 1) the merchants who don’t understand the channel, but insist on setting up affiliate programs themselves 2) the few slimy affiliates out there that cheat the system.

    You wouldn’t take me seriously if I showed up at your job and said that I could do everything you do and produce the results that you produce, given that I’ve never done what you do. So why do some merchants think that they can run affiliate programs when they don’t have experience or expertise… then blame the channel when THEIR poor choices result in poor results?

    One more thing: all marketing programs cannibalize some sales from other channels! This isn’t a unique trait of affiliate marketing. Well managed programs limit the cannibalization. Poorly managed programs don’t.

  22. Thanks for your comment, Jeff.

    “All programs cannibalize sales.” True, but to WILDLY different degrees.

    Those at the talk and who’ve read my posts carefully will see that what I’m really calling for is measurement and scrutiny. I called for advertisers to measure the conversion rates, click-to-order intervals, multichannel behavior (likelihood of more than one channel and ordering of those touches) and new customer percentages of their affiliates and compare those to other channels. Use those metrics to evaluate the degree of cannibalism.

    Apparently the affiliate community was hostile to the idea of measurement and scrutiny.

    I don’t doubt that with good tools, and hard work a clean affiliate program is possible. I’d be surprised if a retail program would be very large when tightly controlled.
    Other industries maybe, but in retail I’m doubtful.

    RKG welcomes the stones of scrutiny in our house. In fact we both engage in this scrutiny and encourage our clients to dig into the details of paid search, of multichannel interactions, new customer percentages, return rates, etc. The data bears out the value of paid search.

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