16 Comments

Refer.ly Raises Questions: A Call for Transparency, Not Gloss

May 23, 2012
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I already wrote a blog post on HasOffers about the challenges facing Refer.ly with regard to the affiliate community. Anyone who goes the route of working with sub-affiliates will face similar challenges. But something else isn’t sitting right with me about the service.

Refer.ly founder Danielle Morrill is quoted in multiple news outlets about how she’s bringing a greater level of transparency to affiliate marketing. This implies transparency is currently lacking.

On Pando Daily Morrill is quoted as saying, “People don’t traditionally like affiliates, because it’s kind of shady. We are going to blow that open entirely, because through this, we’ll learn who is really credible.”

I’m not sure which people she’s referring to, but at this point there’s a long history of building trust into the affiliate marketing ecosystem. It may not be perfect, but I dare someone to show me an industry that is.

A Transparent Contradiction

In terms of knowing how my affiliate marketing efforts are performing, the industry has never been more transparent than it is right now. If I have expired links still out in the wild, most affiliate programs provide some visibility into where those links are hiding. If I generate sales, some affiliate programs will tell me the page they originated from, even when I wasn’t smart enough to use a unique tracking link so I could deduce that myself. It’s going to be hard to provide that level of transparency inside Refer.ly, because each affiliate program shares data differently, which means a Refer.ly user would really need access to the affiliate program in order to see all the data.

While the system may not catch everyone who tries to break the rules, bad actors get caught with some regularity. People making wild claims about products are frequently shut down, just like they would be in other forms of marketing.

There are two sides to the transparency issue and affiliates have been burned at least as many times as the companies who pay them. Affiliates have survived technological hurdles when tracking technologies failed to properly credit sales. Affiliates also had to grow through scrubbing, with unscrupulous affiliate managers removing credit for some percentage of leads.

Based on my own conversations with people outside the online marketing community, the vast majority of the world has no clue affiliates even exist. The only people who seem to specifically dislike affiliates are journalists. Case in point, VentureBeat’s Jolie O’Dell, who is otherwise a fantastic writer, recently referred to affiliate marketing as part of the “seedy underbelly of online marketing.”

There’s also something a little shady about the way Refer.ly is approaching the idea of transparency.

TechCrunch writer Kim-Mai Cutler says, “[Morrill is] also giving up the entire affiliate fee to Refer.ly’s users for now. So the company’s not taking a cut.”

A Question of Commissions

And that’s where any discussion of transparency fails. Refer.ly may not be taking a cut, but they also fail to disclose that affiliate commissions don’t pass through 100 percent to the Refer.ly user. At the moment, Amazon and eBay commissions are passed through VigLink, which is itself an affiliate with sub-affiliates. I’m assuming VigLink is getting the same 25 percent cut for Refer.ly commissions, just like they do for other publishers. That means the Refer.ly user is really getting 75 percent percent of the commission, which may be 100 percent of the dollars received by Refer.ly, but is definitely not 100 percent.

I’m not suggesting the dollars don’t work out to a Refer.ly user’s advantage. If you look at the classic direct signup to Amazon’s Associates Program, the casual affiliate will likely fall in the 6 percent commission tier, which is for volume of 7-30 products per month. I’m going to assume that Viglink does a high enough volume of Amazon traffic to always be in the 8.5 percent range.

Using those numbers, for $100 in gross sales, an affiliate would generate $6.00 in affiliate commissions from Amazon (assuming they crossed the sales minimum into 7 or more products sold). With Viglink sitting between Amazon and Refer.ly, that same $100 in sales would be good for $6.38 after Viglink takes their cut. So for the little guy, Refer.ly might be a better deal.

For the sake of transparency Refer.ly should be disclosing those numbers, not gloss over the middleman while calling the rest of the affiliate marketing industry names.

About Jake Ludington

Jake Ludington blogs about performance marketing for HasOffers. Jake has over a decade of experience building content publishing teams, coupled with more years as an affiliate marketer than he cares to admit. He is currently working on a book on online video marketing.

Filed under: Affiliate Marketing
  • http://www.daniellemorrill.com Danielle Morrill

    While we are in beta we are passing through 100% of purchase commissions from all our partners, even on VigLink links (they are not taking 25%).  We are a very early stage startup and have not yet determined the pricing model we want to use for the service, so for now this keeps things very simple.  Most of our users are not professional affiliates, and we find this is the most straightforward way to show them the value they are creating.  I appreciate your desire to do a bit of investigative journalism and you should feel free to reach out for a bit of fact checking next time – I’m danielle (at) refer (dot) ly and happy to answer any questions you have.

    • http://www.jakeludington.com Jake Ludington

      How much of a cut VigLink gets from Referly transactions dodges the issue of transparency. You don’t disclose your relationship with them. The Referly website makes it appear you have relationships with some of the biggest affiliate programs on the planet, while in fact most of those use VigLink as an intermediary. And as I already pointed out, that might be a good thing because VigLink is bigger than most affiliates, but it should be disclosed for the sake of making Referly seem less “shady”.

      While you are increasing your transparency, you might also clarify that if a user adds a URL from Amazon that already contains an affiliate code, Referly will rewrite that code with a Referly affiliate code. I’m basing this on existing functionality, so that could be a bug in the Referly code. Regardless, you should disclose how you plan to handle URLs containing an existing affiliate ID going forward so the process is more transparent.

      It might also be useful to disclose more about what users will get as a “reward” for using Referly. I’ll use standard functionality of Living Social as a fairly common example that people who aren’t professional affiliates would understand. If I buy a deal from Living Social, I have the ability to get that deal for free if I refer three more buyers. That’s not technically an affiliate transaction, but it’s the same concept of a reward for “influence”. With Living Social, I know exactly what my potential benefit is for participation.

      Additionally, for the sake of transparency, it would be smart to disclose how commission reversals will be handled. If the affiliate program retracts the money, does the Referly user get to keep their reward or will you be charging it back to the Referly user. Is there a difference in how reversals are handled if something the user did caused the issue vs. something Referly did? I don’t see the answer to this disclosed anywhere. Here’s a classic example from the Walmart.com affiliate program: Their terms of service state that [an affiliate may not] make any representations, either express or implied, or create an appearance that a visitor to your website is visiting our Site, e.g., “framing” or “wrapping” the Site in any manner without first obtaining in advance our express written permission. It’s possible you already have that in writing and you are covered, but if not, that Referly frame could get you booted from the Walmart affiliate program, get commissions frozen and/or reversed, and make your users mad. Here again, I bring this up because it’s an issue you should be transparent with your users about.

      As a direct affiliate with various companies, I always have a clear understanding of what the rules are, what success looks like, and what happens if I don’t play by the rules. That’s about as transparent as you can get. Referly still has some work to do in achieving the same kind of transparency.

    • http://blog.affiliatetip.com Shawn Collins

      Hi Danielle -

      What is your basis for this statement? 

      “People don’t traditionally like affiliates, because it’s kind of shady.”

      • http://www.qaqn.com/ Daniel M. Clark

        I’m curious about this, too. Who are these “people”, and in what way is affiliate marketing shady? Her statement seems to indicate that she thinks the business model itself is inherently shady.

        • http://www.daniellemorrill.com Danielle Morrill

           Yeah this deserves a whole blog post – to be clear, I’m not arguing that affiliates *are* shady, only that they are perceived that way.  We want to change that.

          • http://blog.affiliatetip.com Shawn Collins

            Perceived that way by whom? 
            Given that virtually every major online retailer has an affiliate program, certainly all of those companies are not painting with that same broad brush.

          • Max

            When I visit a sites with lots of affiliate links, I would feel that the site is recommending products (at least in part) based on how much commission they can get, not the quality of the product or price.

          • http://twitter.com/YoungWebBuilder YoungWebBuilder

            No less shady then a lot of marketers online.

    • http://www.jakeludington.com Jake Ludington

      Since the first sentence of my other reply no longer makes sense, I’m including a screen cap of Danielle’s original comment. Her first sentence originally stated, ”While we are in beta we are passing through 100% of purchase commissions from all our partners, even on VigLink links (they are not taking 25%).”

      Hopefully she can respond and clear up why that last part about VigLink was removed.

      • http://www.daniellemorrill.com Danielle Morrill

        Hey Jake, I feel I have to change it – the biz dev deals we do are a competitive advantage, and I don’t think trying offer transparency between referrers and buyers requires us to disclose how all our internal dealings work or who our partners are – obviously with VigLink you can figure it out by looking at the URL.

        I think you are a bit confused about what we are trying to make transparent – we use the Referly bar (which shows up across the top of any page shared with a refer.ly link) to tell the potential buyer who will receive a reward if a purchase is made.  That is the kind of transparent buying decision process we want to provide to consumers.  We’re not trying to make a more transparent experience for professional affiliates – as you point out there already have powerful tools.  This is a product for consumers.

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  • http://www.millionairepropertymakers.com.au/ Perth investment

    Nice post! Thanks for the share.

  • http://twitter.com/BrianCrouch Brian Crouch

    Hi Jake, “Using those numbers, for $100 in gross sales, an affiliate would generate $6.00 in affiliate commissions from Amazon (assuming they crossed the sales minimum into 7 or more products sold). With Viglink sitting between Amazon and Refer.ly, that same $100 in sales would be good for $6.38 after Viglink takes their cut. So for the little guy, Refer.ly might be a better deal.” I think this is an essential point when considering what refer.ly is trying to accomplish. Most social media users don’t have affiliate accounts, sharing products with no ulterior motives. I think the average user who gets any revenue whatsoever for sharing some product (which they might have shared anyway) will be surprised. And perhaps that will lead to a growth in people researching affiliate marketing in greater depth. 

    • http://www.jakeludington.com Jake Ludington

      It may be exactly what Refer.ly hopes to accomplish, but without illustrating the point (as I did for them), no one who uses the service knows what the potential benefit is or how it might be differentiated from the competition.

      I think you also outline a key business challenge of a business like Refer.ly. Putting the “average user” into the mindset that they could make money every time they share a link is an uphill battle because most people don’t think that way. I make a substantial portion of my income from affiliate revenue and I don’t try to monetize every link I share (in part because the pennies involved most of the time aren’t worth the hassle).

      For the same average users, it’s far easier to do something similar to FatWallet and show a user how they can benefit every time they make a purchase themselves. Virtually everyone is attracted to the idea of a discount for their own purchases.

  • TedNista

    Hi Jake,

    I founded a startup called Hyaqu, last July, we’re probably 6-9 months from having our service available, but we’ve been talking about this topic as a service we hoped to include among many others:

    “How to reward the referrers of products in a social sense.”

    What is funny really is that it’s already being done on FatWallet and Extrabux.Their versions are obviously more pro-consumer and less “social”, but the service is sort of the same, ie:”we know our referral rate, so if we know we earn 15% from Joe’s Marketplace we can offer consumers an 8% cash back on their purchase.”We think rewarding the consumer is a much more viable option, but we agree with refer.ly that the referrer’s need credit too.We were were thinking more of a HyaquCharityReferrerBuyer system and some kind of percentage breakdown, but probably as a launch service we can take ourselves out of the picture and just make no money, since we actually plan to make money other ways :) I did read their Terms of Service, About Us, and any information I could online, and still can’t figure out what the “commission” rate is, so it’s kind of strange that they’re all trying to advocate “transparency”. I’m proud to say that this notion of transparency is a major component of our business plan and hope that writers like yourself can continue to be critical of these hypocrites.

    -Edward
    @hyaqu:twitter 

  • http://www.keyhousemedia.com/ Ryan Key

    Affiliates referral sites are very spammy, but if they are used to create jobs for people, then why not?  I believe that services like Refer.ly are going to be around for a long time. Â