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Affiliate 2.0: Fact, Fiction & New Innovators
When all is said and done, the so-called Amazon Tax that has everyone so concerned about old-style affiliate marketing’s future spells nothing but opportunity to those (like Brad) who think outside of the box. The old affiliate model’s walls are crumbling and have been for years now. Yes, many will fight this misguided tax — and I believe they SHOULD fight it — but the tax is just speeding up something inevitable: Change. It’s just another sign of the times.
So what’s next? I believe there are a bevy of options for CPA-lovin’ publishers that are being overlooked. Let’s have a look…
First, the facts:
- Affiliate networks are buying up publishers/affiliates, lead generation companies, advertisers (Valueclick+eBablyon) etc.
- Large publishers themselves (think Fatwallet and eBates) are working directly with advertisers to wrap value-added services (non-CPA media placements, creative support, etc.) around their valued communities of buyers — bypassing networks. I say again, bypassing networks. Hence, #1.
- Search Engines: Yahoo and Google are distributing deals & coupons (moving in on CPA affiliates and affiliate networks’ turf) and MSN is buying up performance-based innovators (publishers like Jellyfish.com). Are companies like Linkshare standing idly by? Hell no! They’re getting in bed with Redmond. But wait… MSN is stepping up the pace on competing dead-on with traditional affiliates and networks. I find this to be of more danger to networks, NOT affiliates who maintain user loyalty.
- Advertisers (note: Amazon is not one of them) are cutting and running from affiliate programs… rather than face a more complicated tax scheme. This is reflective of their overall mood/attitude and value perceptions of their affiliates. Write or wrong, knee-jerk or not, some marketers who have pre-conceived notions and/or legitimate concerns about affiliate programs are bailing. Bad in every way for “affiliate marketing” — once again.
Regarding this new “Amazon tax” law…
“The law also states that a merchant needs to have $10,000 a year in affiliate sales from NYS affiliates to NYS customers,” says Deborah Carney of Team Loxley.
“Networks can’t provide this information without breaking privacy rules, so how will this be enforced? Plus networks don’t collect location information from the sales themselves. ”
It’s enough to make your head spin and these are just a few examples! What’s going on here? What’s next? Where’s the good news? A sense of stability?
We’ve been hearing about mobile and video for years now. I’ve been scouring the globe for good examples of innovation in this space — BEYOND NEW TOOLS (ie. ROI experienced by marketers). Where’s the beef on that front?
Affiliate 1.0
Despite what Michael Singer and a good number of my colleagues say (and they make some seriously unsubstantiated claims) about how Web 2.0 is super-charging affiliate marketing there is virtually no evidence that CPA affiliates are monetizing social spaces. It’s a lot of fun to talk about but it’s flatly not happening to the degree that it registers a revenue blip rivaling the status quo.
“Affiliate marketing has evolved and it’s difficult for newcomers to jump in without any capital and start making money,” says Chris Finken, of affiliate marketer OrangeSoda.com.
“Blogs remain a popular tool for affiliate marketing ‘on the cheap,’ but successful affiliates are still making great money without experimenting with video and mobile.”
Humph. ‘Nuf said perhaps. Finken also believes many marketers are turning backs on affiliates, viewing them as expendable. He warns that this practice may bite them in the rump. He believes some marketers will be back when they miss risk-averse affiliates who tend to pioneer (as they did in paid/PPC search).
“It’s hard to go back to the affiliates you’ve dismissed and say ‘Please be innovative and if it works I promise we’ll pay you’,” he says.
So what’s next?
Drop Shipping
Although the sector also (like affiliate marketing) suffers from an image problem, drop-shipping models are beginning to come back. Remember NexChange, ePods and the like of the dot-bomb days? Drop shipping (where the “affiliate” is actually a “retailer”) is a great idea but was a premature one. It was too early and affiliate marketing was just too easy for publishers and advertisers to implement back in the late ’90s. Aaah, yes… the Golden Age of media arbitrage.
Specifically, affiliates didn’t want or need “storefronts” or stores to succeed. They also didn’t need the headaches that go along with being the retailer (”merchant of record”). They didn’t need or want to facilitate the transaction nor handle customer service or shipping.
More importantly, the middle-men involved didn’t have the reputation piece figured out… that is, the reliability of drop-ship product suppliers. Would they actually ship? On time? Handle back-orders and returned items well enough to satisfy customers? The answer was no — but that was then. Today, companies like Shopster.com have emerged as leaders in the field of full service drop-ship solutions for advertisers.
These providers give publishers everything from storefront creation to managing suppliers, returns/cancels, back orders, etc. They do the heavy lifting involved in retailing so publisher’s can focus on what they do best — acquire traffic/visitors. More importantly these companies are negotiating product discounts on behalf of retailers (many of whom are old-style “affiliates”) and allowing them to set their own profit margins. Not at all like affiliate marketing of old days. Yes, supplier reputation is still a sticky subject and is difficult to manage — just ask eBay. That stated, drop shipping is catching on and is a viable option for publishers with valuable traffic.
Widgets, 2.0 Media, Affiliate Education & Subsidies!
Now before you roll your eyes, please hear me out. There IS progress being made on monetizing via widgets. As I said, it’s no way rivaling traditional CPA affiliate revenue generation and it isn’t worth the hype it’s getting at conferences. BUT… pay close attention to Facebook’s Radical Buy program. The program turns Facebook-ers into eBay style affiliates.
“… I think the Radical Buy application on Facebook is one of the most sophisticated application online. It also serves a very practical purpose — helping people sell their unwanted stuff and make a few bucks along the way.” says Rodney Rumford of FaceReviews.com.
“The one radical concept worth mentioning again here is that users can make a ‘commission’ by selling other peoples stuff simply by listing it on their profile page.”
Radical! What’s more, this isn’t just about one area of potential monetization. Facebook is expanding the program — with hopes of growing it outside of Facebook.com proper. Now THAT’S radical for sure.
Also… I’ve discovered serious investments being made both here in the States and overseas that aim to super-charge traditional (ie. search marketing) — and other innovative, 2.0 type monetization — by publishers:
- Investments are being made by marketers themselves. Companies like Insurance.com are subsidizing affiliate /publisher education and even their search marketing costs. That’s right — marketers are funding affiliates’ marketing efforts and successfully so!
- European networks and advertisers are banding together to invest in affiliate/publisher education (I’ll be traveling to London next month to participate in one such University for a large media company)
- Overseas affiliate marketing networks like Zanox are making tremendous investments in “going open” (read more about Zanox GAP Campus) — what about U.S. based networks?!
I’ve given the community quite a bit to chew on here… so what say you?!
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“The old affiliate model’s walls are crumbling and have been for years now.”
You’ve also been saying this for years now and there only seems to be more affiliate marketing activity.
With Affiliate Marketing, change has never been “radical” but there has been change. e.g. Just look at traffic acquisition techniques used by affiliates in 2000, then in 2004 and in 2008. The difference between used to be considered spam in 2002 and in 2007. As the web evolves, so does affiliate marketing. It is simply impossible make money the 2000 way in 2008. all the talk about the attention economy and all is humbug, it’s still a money economy and will always be, but it’s how - and how much - affiliates interact with their traffic - their customers - is changing, slower than some people expect, but for sure.
RadicalBuy IS NOT part of facebook. It is funded by Mark Cuban and its presence on facebook is as a regular 3rd party application.
Look to http://www.radicalbuy.com for future developments in this exciting space!
Please define the “walls that are crumbling”. I agree certain walls are crumbling (and not just “affiliates”), yet new walls are coming…perhaps a better analogy is needed.
How about we agree that social networks are starting to mature and selling items is a natural outgrowth- I am sure this is what Google is going to be doing with the Performics arm. Tons of real estate (interaction) that will not merit CPC or CPM. Affiliate or CPA/CPS deal structures will be used.
Rocket science. Radical. I think I saw this ten years ago…ok, ok Jeff so perhaps it is a bit different…I will test it and see…time to sell some bits and bytes…let me see if I can find something really radical to sell.
regards,
Wayne
The whole “walls are crumbling” just sounds like the usual stuff posted over the years. The stuff with social networks and any new changes are new opportunities and that’s a great thing.
The tax situation is something that needs to be addressed but to this point, not as bad as I thought it would be since it looks like only about 1% - 2% have actually dropped NY affiliates. There are still a couple of lawsuits that can handle it. There are plenty of the bigger brands who have had a physical presence in NY for years and then other merchants are just adjusting their terms, not terminating.
I found what you said about drop shipping a little ridiculous. Don’t see anybody going that way at all. But there is a little bias on your part because of that, should be made more clear in your posts in the future.
Thanks for the comments, all. Yes, I sit on the Board of the drop-ship model company mentioned above. I am bullish overall on the model which is not limited to the single company mentioned. There are others like Doba which provide somewhat similar services. Others, anyone? I’d enjoy learning of them. Somewhat ironically, drop-shipping has a bit of a “dark side” / reputation problem too
Do a search at Revenews under “The Revolution Will be Drop Shipped”. I can totally see this, especially with custom JIT inventory. Why piggyback on someone’s brand (parasitic) when you can develop your own micro brand?
-wayne
I would add that I believe quantum computing will have a far greater impact than any walls with loose mortar. THAT is around the corner.
-wayne
Well damn Wayne, why don’t all just make the jump to hyperspace right now - that’s the real future
Not Found on the search.
“Why piggyback on someone’s brand (parasitic) when you can develop your own micro brand?”
Can’t tell if you’re being serious or not right now calling affiliates parasitic. Doesn’t really make much sense.
Some affiliates have made their own brand, there is no need for drop shipping. Jeff just gave some examples above of people who relied on that and they went out of business. With affiliate marketing, that doesn’t happen.
So long as there exists a greater opportunity to shuttle traffic, there will be a lesser opportunity (need for) a drop-ship scenario within the realm of what we traditionally call “online marketing” which, if you ask me, has little to do with marketing and more to do with getting in between supply and demand — then finding ways to monetize that (ie. search arbitrage, coupons, cash-back, unique content, shopping comparison, etc.).
Affiliates ARE parasitic. Look up the definition of a parasitic relationship. Some are beneficial.
All I am saying is that advanced affiliates have the skills to incubate their own micro brands…I have always felt they should. Nothing wrong with revenue sharing, but there is a certain amount of stability in controlling your own destiny don’t you think?
Again don’t confuse the nomenclature for “parasites” as adware entities. All affiliates are parasitic in nature.
See : http://www.revenews.com/wayneporter/parasites-ecosystems-diversity-ecology/ (also note the comments from Roman Godzich and others in this post). THink about what REAL parasites do. They keep super-competitors at bay…..
I quote—–
“Positive Role of Parasites?
This leads me to my current state of thought on e-commerce…
What are the real roles of parasites in the system?
Who are these parasites?
From who do they feed?
If all were eliminated what would be the long and short term effects?
How could we apply theories in ecosystems to marketing, SEO, affiliate marketing, “social media” (misnomer in my opinion), text ads, etc?
I think the negative connotations of parasites sit on the surface, but perhaps, as marketers, as people, a species in evolution- we need to pause…and Think Big. What if Google ceased to be Google as we know (knew) it? The press and pundits are having a field day with CIA and Google theories. See this speculative video…and we think is it just about the Web? I want to believe in Google and I deeply value democracy.
Dangers of Playing in Ecosystems
I wonder what the recently departed, (02.2008): Josh Lederberg, whose pioneering work laid foundation stones for modern genetics and biotechnology, disarmament, genetic engineering, space biology, and artificial intelligence would say? Would he think genetic engineering is great or would he have the foresight to see the dangers of genetic engineering gone wrong?
I really don’t have the answers, but I think there are parallels and I don’t want to be trapped in a Tragedy of the Commons- a social trap where we think short-term for immediate gain rather than long term for the good of all. I believe in “Don’t be Evil”, but it almost rings like Chomsky’s critique of the slogan-”Support the Troops”. What does it mean? I prefer “Support the Troops- Bring them Home” or to others “Support the Troops- Equip Them Properly, or “Don’t Be Evil and let Diversity Thrive.”
Thing Big said Sam Harrelson in a previous post…I searched on those two words to help me Think Big, I read about it Wikipedia. In the end I picked up a book and began reading: When The Sleeper Wakes, by H.G. Wells. First Edition, first run 1899. You won’t find many of those around…and I am still reading.
Let’s think beyond ourselves for a moment and how we can balance a world, technology, population, food, the web, and our role- no matter how small it may seem and come up with either viable debate or solutions.
*Keystone Species: A keystone species is one that has a disproportionate effect on its environment relative to its abundance, affecting many other organisms in an ecosystem and help in determine the types and numbers of various others species in a community- Paine, R.T. (1995). “A Conversation on Refining the Concept of Keystone Species”. Conservation Biology 9 (4): 962-964″
So parasites serve a USEFUL function. Much like those birds that pick the teeth of alligators…
See also:
http://www.revenews.com/brianclark/defining-micro-manufacturing/
http://www.revenews.com/brianclark/build-your-own-superhero/
Again do not get me wrong, I am no fan of spyware or malicious adware (I do believe people have the right to download and use adware and that right is more important- choice, as long as it does not infringe on the business rules).
I am a very die-hard fan of affiliate marketing. I have been doing it for a decade. More than anything I want to see the “affiliate” rise above the parasitic nature of the relationship and take their rightful space as micro-brand incubators. They have the skills…they can take the profits. The revolution is coming. Not in the collapse of affiliate marketing, it will come as affiliate marketing is transformed. e.g. JIT delivery systems, etc.
best,
Wayne
“Well damn Wayne, why don’t all just make the jump to hyperspace right now - that’s the real future”
Time is an artificial construct e.g. an arbitrary (linear) measurement by humankind. Hyperspace, I think we will one day find, has more pragmatic functions.
We can go off on quantum mechanics if you wish…I have found some stimulating conversations at http://quizaxehatrack.com/ for those who want to defy Dunbar’s number.
best,
Wayne
damn dude, here’s a nickel - go buy yourself a sense of humor.
too dry man, too dry
Dude Overture has a .10 minimum and I refuse to slum it on those .01 PPCSEs .
So I guess it is a 3rd from the top ad with a 33.33% conversion rate. If I don’t laugh you have my permission to egg Molander.
better?
-wayne
“All I am saying is that advanced affiliates have the skills to incubate their own micro brands…”
Wayne, you’ve revealed the underpinning of my 2008 strategic direction additions. For my biz’s diversity sake, and because I am able, and because I can remove so many blocks that retard my current online marketing efforts (and rewards), I am moving now to grow my business to also include some micro brands.
Once marketers figure things out somewhat, the Internet reveals itself to be teaming with opportunity! It really is crazy mad chock full of it. I can now see things clearly enough where I’m able to leisurely pick and choose where I want to play in my work. And fish more than I ever dreamed.
Thanks Al Gore.
So, Pat, you’re saying that (in essence) “becoming a retailer” yourself (a former “affiliate”) is not only viable but attractive — financially and from the lifestyle side too? You make it sound easy. I’m curious as to what’s behind that (if you’re interested in sharing… that’s not expected, of course).
Wayne, it seems as if ALL successful affiliates and Living Legends fish — Pat, I think Connie, Scott Hazard, etc. I foresee a day where pundits, consultants, OPMs, affiliate managers and parasites of all colors come together to FISH. A tourney perhaps? Aaaah… how I long for that Sunday afternoon of walleye beer-battered fish-and-chips we once shared with your family.
Jeff, we just had a big fishing outing here, with some great folks from our industry:
http://missyward.com/?p=36
http://therealtimjones.com/2008/05/22/affiliate-fishing-trip/
Angel D and Missy W along, so did quite a few others. 16 total I think.
Was a blast! We’ll send you an invite next time.
“So, Pat, you’re saying that (in essence) “becoming a retailer” yourself (a former “affiliate”) is not only viable but attractive — financially and from the lifestyle side too?”
Ahhh, Jeff, “retailer” is such an all encompassing, inadequate word for the stratification you yourself have witnessed along your walk. But if it’s a yes or no question, then yes. But like all things Internet, it isn’t quite that simple.
“You make it sound easy.”
I said I can “leisurely” make choices, not leisurely implement, execute and maintain. Leisure implies fun and some degree of simplicity (or at least the antithesis of complex-ness). So indeed, I deeply enjoy picking and shaping each of my next new projects. The high degree of freedom and autonomy that I have in choosing, and the myriad choices I can pluck from, does yield a mild and lasting euphoria for me. And I strive for simplicity in them as well. Because I believe that the simpler a business idea (not its implementation, but its concept), the more likely it is to succeed, to serve the consumer, and to be well liked by the serps (fits keywords well).
“Easy”, in business, has both effort and reward built into it’s meaning - so it’s not just the “doing” something easily that is characterized, but what comes of it, as well. It’s easy to build a website, but from a biz perspective, if it’s got no traffic or similarly no monetization / financial rewards, then who cares? If you think I’m saying it’s easy to be a typical retailer or to compete with one as a solo dude or dudette, I’m not. Their scale typically forces complexity and what I call dorkitudanality (too many chefs kind of thing) that not only removes much of the fun, but kills many of the rewards and the easy-ness too.
But, and this is what we should really be discussing, what the Internet has brought to individuals today is magnificent beyond yesteryear’s imagination - the people I’ve met and the stories I’ve heard about how they are making more than just earning a living, makes me smile for the future. I could list 1,000’s of examples for you Jeff, but here’s just one that makes me proud to be in early on this revolution:
http://potw.news.yahoo.com/s/potw/55334/rolling-in-cash
Pat,
Glad you are upping the game.
Jeff,
The pond is teeming with small mouth bass and walleye….
Jonathan,
There are practical applications for Time once you get over the hurdle of it being a linear construct that is man-made to put some sort of things in order. Personally I put my bets on entropy.
Wayne
Jeff,
You might explore places like etsy.com
For example, I have zero desire to run a multi-millionaire business. Been there- done that. For me it is about niche, freedom, passion and self-fullfillment. Plus I enjoy working with people of like minds.
Of course I am not really good at making things, and having shipped books (how I cut my e-commerce teeth) at ebay years ago- it is damn hard work.
However, I am quite good at hitting the right ideas at the right time and finding the right people to work with. I love the Pat Gradys of the world. I can open up doors that others cannot. Just a lucky talent.
Pat my skype is wporter. Let’s talk sometime. At the very least I guess I could throw an Affiliate Fishing Tournament…
-wayne
Throw a fishing tourney and I’m in! Hope you’re coming to Boston Aff Summit - of so, see you there.
Jeff, did you read the story at the link I posted? That woman is picking up tumbleweed for free, out in Kansas where she lives, and selling it on the Internet making about $40k / year. Blows my mind! This biz of hers would not have been possible before the Internet - I can think of so many like it (and unlike it), it’s really a great time to be here at Revenews. If you are here, your interests tell me, you’re drowning in opportunity (sometimes literally).
Molander has fished at Casa de Porter…Boston. I think I might go there if I can find a room mate.
-wayne
The more I think about your assertion that the walls are crumbling Jeff, the more I think you are wrong. The walls are not crumbling, the areas in which we march around are getting tighter. The hosts no longer what the smaller parasite. (E.G. imagine the alligators suddenly eating all those helpful birds that clean their teeth)
Affiliate marketing is ancient. Old as the hills. We have just been using relatively new constructs in which to execute this age-old yet *beneficially parasitic* relationship.
Web 2.0 and dare I say web 3.0 we will see a resurgence in the affiliate. Where micro matters and the niche is as a fine as a razor blade.
-wayne
The term “Affiliate” has Latin roots in the word for son. In renaissance Europe, where merchants (from the French “Marchands” for those who walk as they were the first to carry goods from one place or another) the notion of godfather and godson was often the concept by which a trade or representation of a good has been around for a long time. The only new thing that affiliate marketing brought was technology that made it simple to set up in an environment that was very experimental and quite immature. Maturity in this market will not crumble the walls, but will exert pressures on thsoe who cannot adapt or will not make th to do so. Affiliate marketing will likely shape out as being stronger for being better codified.
Oh, one of the signs will be affiliates becoming politically active and influencing the decision makers in the DC 9and other cpaital) limos.
Which essentially means if you think that you can just sit at a machine and continue toi live off of crumbs that come to you in a vacuum, then you are headed for extinction.
Everything I have seen online in the last 22 years (when I made my first online sale) has been moving toward more integration and less isolation. So if you are looking to live an isolated business life, well, it probably is the tar pits for you.
Roman you are a fossil… LOL.
Technology = New Construct.
I am preparing to accept a board position on a group for virtual worlds. In less then 100 days we have over 2000 members, many professionals (most are) and dozens of new platforms. They realize it is a brave new world and working together on some levels is the only way to move it into legitimacy. (It is already legitimate when companies like CISCO and MSFT, IBM, etc are embracing the offerings).
That is why I think a trade organization for affiliate marketers or performance marketers is really needed.
“imagine the alligators suddenly eating all those helpful birds that clean their teeth”
or…
imagine the gators eating the birds that appear helpful at first glance, looking so much like their counterparts, but are determined (through proper and thorough observation) to just be eating scraps and never doing any teeth cleaning…
or…
imagine some of those birds opening up their own dentistry office…
or…
imagine some of those birds maturing into pterodactyls and beginning to eat the gators…
point is, crumbling ain’t happening, maturation and expected natural complexity and sophistication are.
to me, from that perspective, Jeff has a partially valid point in saying “old affiliate model’s walls are crumbling”, but he left off that decay isn’t the only thing he’s witnessed in the evolution.
transmogrification describes it better than crumbling, the latter making Jeff sound like a gloom and doomer. i’ll leave it to him to clarify which he is, as classifications of the observers of those transmorgrifying isn’t of much interest to me - label thyself, that’s what the blog centric psyche is all about and i’m not here to wreck that fun for anyone… too busy plying my way out of my cocoon.
rock on with your bad self.
First time I saw transmogrification in a reply.
“point is, crumbling ain’t happening, maturation and expected natural complexity and sophistication are.”
Maturation…I think Sam Harrelson said it best- it is evolving. My biggest concern is the ecosystem. Marketers (most of them) DO pollute. Once the pollution gets too high we will see stewards (Google, etc) attempt to clean the pond. They will start by clearing out the bluegill to use a fishing analogy. e.g. removing the financial incentive in the system. That is what I think *may* happen.
Excellent points Pat, as usual.
-wayne