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WHO BEARS THE RISK ON THE MORPHING REVSHARE LANDSCAPE: Commission Junction weighs in with key metrics to provide publishers a guiding light
In the primordial day of affiliate marketing, all the risk was on the publisher and there was no way for a publisher to predict how an advertiser might perform. In other words, it was a leap of faith for publishers to even test a new advertiser. BeFree and LinkShare just threw up merchants and let publishers take all the risk.
When Commission Junction entered the affiliate marketing game, the company created the Open Marketplace. There are two key metrics in the Open Marketplace:
(1) Network Bars indicate total commissions an advertiser pay out to publishers relative to its peers in the CJ network
(2) Earnings-per-Click (EPC) give some indication of what a publisher can expect to earn for every 100 clicks.
This was a major step forward at the time. (As a note, this metric is a CJ invention. Everyone else in online marketing uses effectiveCPC (eCPC) which is for one click and an example might be a $20 EPC is a 20-cents eCPC. Go figure, CJ likes to be different.)
Between these two metrics, Network Bars and EPC, a publisher has a dim light in the dark room to determine the potential earnings from partnering with a specific advertiser. One CJ executive described the Open Marketplace to me was as “a bio and a photo before a blind date”.
Before the Open Marketplace, there was no indicator to see if an advertiser was even worth a blind date. LinkShare has no equalivilant metric to this day - I think this is unfair to the publishers. If I was a publisher, it would push me towards working with CJ merchants.
As an advertiser, I hated EPC when I first became a CJ merchant. I found the Audible program in shambles with an 82-cent EPC - that would be a .82-cent eCPC or in other words, publishers would earn less than a penny per click from the Audible program at the time. But in some ways, it was fair. Audible’s program had not been managed for three years, and the network metrics indicated this. The Open Marketplace was providing an accurate picture.
Well, one year later, with a major commitment from Audible to partner with our publishers, the house keeping is done, and the company’s EPC hovers around $22 with four network bars and five bars are just around the corner.
Now I appreciate EPC. I learned that publishers — no matter how much they might say EPC does not matter — use this metric to make decisions on whether to test marketing unbranded or smaller merchants. No one paid attention to the program when the EPC was below $10, but when it reached $15, it received some attention. Then, once it started hovering around $20, the program had traction.
And the smart publishers figured out how to read more into EPC when they look at Audible’s program. Insightful publishers understand Audible has two major initiatives in its program. The data feed program pulls down Audible’s EPC (because the user will click through to a product detail page, click back to the publisher’s site, click though, click back, and so forth), so even with large payouts for individual book downloads, the company’s EPC is artificially low. But, smart publishers know that the large bounties in the Audible program are earned from subscription sales. Publishers just need to see the EPC for certain links in the program.
For example, as of today, one banner in the program has a $132.02 EPC or $1.32 effectiveCPC. And the publishers who sell only subscription plans averaged a $83 EPC when I ran the numbers a few weeks ago. In this case, the publishers that understand how to integrate Audible subscription plans so the offers are contextually relevant are earning much more than the 20-cents to 40-cents a click they would earn with Google’s AdSense. With Audible’s offers, there is more risk for the publisher, but much greater rewards. It creates an interesting question for publishers, how much risk are they willing to bear to reap greater rewards?
(As a side note, last week, when I mentioned this link and EPC to a friend who is also a top publisher (who usually runs CPC, CPM or hybrid deals only outside of CJ), he was surprised I had an offer like that in CJ. Then he said, I would run offers like that from CJ, but they are buried and hard to find — hint, hint to the CJ team)
The magnifying glass on advertisers to keep their EPC high is significant. Publishers like the photo before the blind date…and don’t we all? The picture before the blind date is critical to the affiliate marketing game, but the photo needs to be clear. CJ might consider tackling the fact that performance incentives are also not included in EPC. A performance incentive is when a merchant tiers their commission structure, so the more sales a publisher has, the more money they earn per sale. A good example is Audible’s commission structure. Even experienced managers I’ve chat with have not figured this out these tiers on not calculated in EPC. I do have a solution that I use: any publisher that reaches a new tier with Audible receives a VIP commission which is fully calculated into the company’s EPC.
But even with this small flaw, the Open Marketplace proved to be a step in the right direction at a much needed time in the development of affiliate marketing. It helped change the affiliate marketing landscape for the better. LinkShare really does need to step up to the plate to develop a similar metric.
EPC helps publishers know the blind date is worth a try with certain merchants such as Audible and that they can earn more from a CPA deal, if they are willing to accept risk…and isn’t that the point of performance marketing? If publishers understands how to manage the risks and leverage the rewards of a CPA or revenue sharing deal, it can be more profitable than many CPC or CPM deals.
Next up: the CPA networks
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