|Why don't affilate programs pay for branding?|
They could pay a monthly charge to reviewed affiliates...
At the beginning of 2004, affiliate programs are still mostly skewed towards the merchants rather than affiliate publishers. Few merchants pay a small CPC rate in addition to commission, none - as far as I know - pay a CPM rate.
Being paid only on a CPA basis means that publishers with high quality sites who affiliate with a merchant may do a lot of work and get very little return.
Every so often a publisher partners with a merchant and the relationship results in lots of successful fireworks. Equally, the same publisher may partner with a similar, alternative merchant and the result is a damp fizzle. There are lots of demographic factors at work as to why two similar merchants may not be equally successful on the same publisher site or why one merchant may not be equally successful on two similar publisher sites.
Nevertheless, regardless of the amount of sales made (and consequently the amount of return the publisher receives for his or her efforts)... the value of the branding is essentially the same.
Obviously the heart of the affiliate model is the idea of efficient relationships. Publishers find merchants, deploy affiliate links and if the conversion rate is slim to none, the publishers move on to find a new merchant.
This makes it very easy for merchants to sit back and wait for sales. If they sign up 100,000 affiliates and only 99,000 affiliates make sales, it doesn't matter to them because it costs nothing extra in time or money... and it's a small price to pay to have branding across 100,000 outlets.
I think some of the responsibility should be on merchants to pay for branding where appropriate.
Thus, it would be a welcome innovation if affiliate managers reviewed the publisher sites which apply to their program (some do this anyway) and, if they thought the publisher site to be high enough quality and a good match, paid a monthly branding fee based on the publisher's unique monthly visitors.
Or they could choose to accept the publisher site but not pay the branding charge, in which case the publisher would immediately know that the merchant had less confidence in them as a sales outlet and might spend less time promoting the merchant's products.
If something like this were introduced, I might have more confidence myself to promote smaller, lesser known companies by affiliating with them. As it stands, I will only partner with well known companies whose brand is already well known, where I don't feel cheated for providing otherwise free branding.
And the advantage to merchants?
Well, arguably, the money spent in paying well-matched sites a monthly branding fee would be money saved from having to answer lots of help emails from thousands more ill-matched publisher sites.
Also, between two rival merchants, one offering a branding fee and one not, publishers might well feel that the former might take a greater interest in forming long-lasting, productive relationships than the latter.
Two words: free market. If you think your sites are worthy of a premium, ask for it. Many merchants will pay more than the standard affiliate rate.
If you think your site is worthy enough of taking CPM ads you should approach tribal fusion. But I can tell that tribalfusion subcontracts much of the space out to Google adsense. That means that despite having top sites, they are not getting enough merchants interested.
I have advertised on Tribal fusion before on top targeted sites for my business and the final CPC was between $1.5 to $2.5. Since the average profit per sale is less than $15, there is no way we can persist with that.
derekwong28> Hmmm... okay, but I'm not really talking about traditional advertising here - I'm talking about the affiliate model as a separate paradigm.
There is at present a very real cost of branding as created by the affiliate publisher which is largely unpaid for by the merchant.
sean> Yes, I take your point. You don't see many merchants bringing up the issue though, do you? I'm suggesting that it should be as much their responsibility to create higher quality relationships as it is that of the publishers. Yes, there will always be fly-by-night shysters who try to grab the maximum amount of free advertising, but there are also companies who take a longer term view.
Branding has nothing to do with sales or click throughs now or even in the next twelve months. It is much more subtle than that. And it has real value.
Well, if the option was there to pay a cpm or cpc for affiliate traffic, it may be more beneficial for the advertiser depending on how well the traffic is converting. We buy traffic at a low cpc rate from some websites, but most run us on regular affiliate relationship. If the offer converts well, then the publisher will make a good effective CPM. Depends on the offer and the traffic.
I would guess the amount of affiliates who add significant branding value is as small as the amount of affiliates who push significant sales, and in many cases they are one and the same. Plus, sales are black and white, branding is gray. If some brand-conscious merchants were told to 'settle up' with affiliates on branding, they might issues invoices, not checks.
Practically, how much would a merchant pay a branding bonus? CPM? If it reaches above a certain $.xx level, the merchant could get flooded with bulk traffic of the lowest possible branding value. Yet it would need to be high enough to mean something to affiliates who are making $20, $50, even $100+ cumulative CPM. I don't see how it would work.
If it ain't broke...
Ronin, you're right; I think they should. Right now they are getting a free ride, lots of free advertising.
Amazon, in fact, gave up purchasing other forms of advertising to focus on its affiliate program. Everywhere people go online, they see the Amazon banner and they are reminded of Amazon, just like we see Coke ads everywhere we go offline, even though we don't automatically buy a Coke each time we see an ad. But Coke pays for those ads and Amazon doesn't.
Shouldn't internet companies have to pay for advertising, just as offline companies do? Yes, but as long as they can get away with not paying, they won't pay.
If you drive significant traffic and sales to an affiliate program, you're in a position of power. If you drive significant sales (say in the top 1-2% of the program, work with the merchant to increase the bounty, particularly if there are other sites you can easily point links to. Your trafic is often worth more than you think or the merchant is paying you.
Not only is there a branding value associted with a top notch affiliate site but if you are sending them NEW customers, the merchant is in most cases getting a heck of deal if they are paying out 7-10% on a 30 day cookie.
Frankly I think merchants would be better advised to spend the extra money on incentivizing the sites that are actually making sales, not throwing more money at those that don't.
I agree absolutely and this is why I suggested that paying for branding or not should be the merchant's choice and subject to a review of the publisher's site.
This comes back to Sean's point: the merchant need not pay for branding to those affiliates which he doesn't think are providing any. That helps those affiliates to either work harder or drop out of the program. Even if they drop out, it's not going to make much odds to the merchant because in any case they may only be making one or two sales a month and probably costing as much in administration.
In the long run I feel that by separating sales commission and reward for positive branding the merchant would do a lot to streamline the affiliate network to a group of consistently high performers rather than a huge mass of low performers with a few medium and high performers at the top end.
Of course, some merchants will say, we're not going to pay for branding, let commission be its own reward and put up the situation. But if a direct rival merchant sets up an affiliate program and separates branding and sales and makes the payments transparent, how many publishers are going to jump ship?
The sites offering the affiliate programs know they are getting the free branding. As others have pointed out, as long as they can get it for free, they are never going to offer to pay for it.
What is (sort of) funny about this, is that there have been rumblings about advertisers wanting other ad venues such as magazines, tv, etc. to move toward similar performance based models.
I have never thought it would go too far for the simple reasons that valid models are already in place in these traditional outlets AND the people that sell the space definitely know the value of branding.
The WWW performance model started with advertisers taking advantage of ameteur website owners. i.e. people that had no idea about branding value and how traditional advertising worked.
Because of the web's simultaneous CPM and CPC/CPA/etc. models, there is another interesting twist you will sometimes see. Web advertisers will sometimes push out very clickable ads under a CPM rate and very un-clickable ads (for branding) under a CPC rate.
Well as Sean pointed out at the beginning of the thread, it's a free and very liquid market, not a giant conspiracy. Merchants are free to offer CPM payments for branding, and if it gives them a competitive advantage they certainly will.
Conversely, sites are free to demand CPM or not. I won't, because I can make far more with CPA and CPC than with any CPM options that exist.
Prove that you can send lots of traffic to an affiliate program, and then negotiate an ongoing monthly fee for a certain amount of space on your website on top of the affiliate commissions. For example, if you make $100 a month in affiliate fees, request another few hundred in advertising as well. If the merchant doesn't like it, find another merchant. You'll find someone who'll bite.
The affiliate relationship is generally unbalanced, but you can suggest deals which make it more balanced.