Somebody alerted me to an article for the May 2008 Issue of SmartMoney Magazine that was written by Anne Kadet and titled “A Penny For Your Clicks?” (Hence the title for my post, which I believe to be a bit more accurate than hers).

The article is short and bashing affiliate marketing as a whole based on incomplete facts, taking things out of content, lack of understanding of the subject matter, poorly chosen examples, I assume for convenience purposes and the misinterpretation of statements made by some individuals, due to the lack of knowledge of the context and background that were are crucial to avoid exactly those misinterpretations.

Okay, that was my bash. Now I want to be a bit more serious and specific. Like Jason Calacanis’ keynote at Affiliate Summit West 2008, this article proof once more the conception that people have of the affiliate marketing industry. I partially excuse Jason for his lack of knowledge of the industry. Okay, I expected him to spend at least a little bit of time on background research as preparation for his Keynote speech at an Industry conference, not only to avoid looking stupid, but just to show some respect to the folks who choose to make affiliate marketing the livelihood. I guess he thought that the reputation that preceded him and his natural instincts and personal experiences are enough to cover this subject good enough.

To his credit I have to say that Jason realized after his Keynote speech stirred up some heated debate and created negative yet constructive and factual correct comments, that looking at things a bit more closely and checking it out to see for himself is may be not such a bad thing after all. He created an affiliate account at the Commission Junction affiliate network and discussed in March at one of the GeekCast podcast episodes, together with Lisa Picarille, Jim Kukral, Shawn Collins and Sam Harrelson, his first impressions and thought about how to utilize affiliate marketing as an additional and/or alternative means to monetize his human powered search engine “Mahalo“.

Jason was not all wrong in what he said. He spelled out in plain words some of the old and still existing problems within the affiliate marketing space that were not solved to this day and in some cases not even talked about very much. He gave credits and showed respect for the intelligence and diligence of many affiliate marketers. But he also pointed out that these good resources should not be wasted on short scams to make a quick buck, but on something that creates lasting value for people.

He also warned that ignoring those issues will eventually cause harm and damage to everybody, including the affiliate marketers who play by the rules and provide extra value to users of the Internet.

In contradiction to Jason, Anne Kadet is a journalist of a respected publication where I cannot forgive the lack of doing due diligence and proper research of facts. Looking at her list of publications for SmartMoney Magazine, it seems that Anne specializes in writing short and blunt columns about issues in business and society with the goal to provoke or shock. Those are tabloid press type of methods and added to the more serious editorial content of the Magazine on purpose. The column name “Tough Customer” implies that the reader can expect some more biased and unfiltered content based on the personal opinion of its author.

The previous articles were harsh and most of the time not very friendly (you could call it a rant), but at least did the facts seem to be somewhat okay and correct. Her post about affiliate marketing was not. It was going from one false premise to the next, building piece by piece a picture of the industry that is a distortion of reality at best.

Let’s address each of those errors one by one.

When Jason Calacanis started his keynote at Affiliate Summit West 2008 on February 25, 2008 with the sentence “Affiliate Marketing is bull****!” he made a joke and did not actually mean it. To understand this joke, you have to look back a little bit, specifically December 7, 2006 when Jason said during his keynote interview at SES Chicago 2006 with Danny Sullivan that “SEO (Search Engine Optimization) is bull****!“. That stirred up the search marketing community afterwards and caused some extensive debates and more.

When it was announced by Affiliate Summit in September 2007, that Jason Calacanis will be the Keynote speaker at the next Affiliate Summit, speculations were made what he might say, including whether or not “Affiliate Marketing is Bull!” and other things. His comment to the speculations was:

“Hmmm…. I’m not sure what I’m going to talk about just yet. I think the pollution of the internet is a key issue so maybe I’ll work on that angle over the next couple of months. I can tell you that many, many people will shocked, offended, and disturbed after my presentation.”

He did not call the attendees of the conference “the bottom of the food chain”. This is taken out of context and not directed towards the audience specifically. You can listen and/or watch for yourself what he actually said to whom and why. His keynote speech at Affiliate Summit West 2008 on Monday, February 25, 2008 at the Rio All-Suites Hotel and Casino in Las Vegas, Nevada is publicly available in audio format and video recording.

Anne talks about how easy it is to become an affiliate and makes it sound like a bad thing. Many think that it is still too hard and complicated and should be made easier even more. What is not implied in “easy” is the notion of “irresponsible” or “insecure”. Becoming an affiliate during your lunch hour should not be a problem or you should revisit your application process. It should in fact only take a little bit of your lunch break that you still have enough time left to eat lunch as you are supposed to do.

The mentioning that only one of 9 advertisers who accepted her, called her is probably factually correct, but she did not mention

  1. how many advertisers did not approve her,
  2. how many advertisers auto-approved her application
  3. how many of the advertisers who auto approved her did reject her later, at least once activities started for the advertiser (click troughs, image impressions etc.).

Not mentioned was the fact that there are plenty of other methods and ways to verify the existence and correctness of an affiliate application. Verification by phone is actually not one of the best methods to screen affiliates, because a phone call does not let you determine, if the affiliate might be an illegitimate business or engages in unethical or worse, illegal business practices.

It is true that this area within affiliate marketing has still plenty of room for improvement and is by far not where most people would like it to be, but it is also true that this is an area where many improvements were made during the past 5+ years. One example as demonstration is the change in percentage of advertisers who automatically approved anybody who applied to their program versus manual approval and/or doing at least some background checks of the affiliates who applied to the program.

While most programs auto approved and never or rarely checked any of their affiliate applications 7-8 years ago, did based on the AffStat reports, by 2006 over 80% and by 2007 over 90% of advertisers approve their affiliates manually.

There was a decrease to 75% in 2008, which seems to indicate a step backwards, but it must be said that the question for the statistic was very specific and in my opinion a little bit too specific. It asked “Do you approve affiliates automatically or manually?” More appropriate and important is the question “Do you check the background and correctness of affiliate applications within a reasonable amount of time after you received the application?” Then you could ask about the details of those checks and how much percent of applications are typically rejected as a direct result of those checks. There are no figures available for those things, but from talks with advertisers via email, phone or in person at conferences like Affiliate Summit do those numbers seem to have a positive tendency. Getting some hard figures does not hurt though, maybe for AffStat 2009?!

Then did Anne started to rant and moved away from facts and specific to generalized stuff that is mostly based on personal experience and conception and in many cases not even related to affiliate marketing at all. She referred to the large auto generated websites that are in essence a mash up of other websites content to some meaningless mumbo jumbo that is worthless to anybody and was created for the sole purpose of spamming the crawler based search engines like Google and Yahoo! To get traffic to those junk pages and diverting them via paid links from contextual ads embedded in those junk pages to earn a few cents on every click on those ads by the unfortunate visitor who ends up on one of those pages in his search for useful information at the search engine.

Those sites are called MFA sites or “Made for AdSense” sites, if they were created for the purpose that I mentioned in the previous paragraph. There are other purposes as well, but that would take us too much off topic and I won’t discuss it further here. The technical term used for MFA and sites that have similar characteristics is “Scraper Site“. The name comes from the word “scraping”, which is the replication of somebody else’s website content for your own purposes. Scrapers are working similar to search engine spiders, also called crawlers and bots, but do not follow any rules (such as the Robots.txt exclusion protocol or Robots specific HTML Meta tags) and serve a different purpose that in almost any case violates copyrights of content publishers of the scraped websites.

This is not Affiliate Marketing! You could call it “Black Hat SEO“, “Click Fraud” or “Abuse of Contextual Advertising“, but those things have little in common with performance marketing. The compensation method is different, Pay per Click (CPC) versus Pay per Action (CPA) or Pay per Sale (Revenue Share), which are used in affiliate marketing. Some folks argue that contextual advertising (Google AdSense, Yahoo! Publisher Network etc.) is part of affiliate marketing, but that is a far stretch due to the lack of other boxes where contextual advertising might fit in better.

Looking at the technical details, display advertising is probably more related to contextual advertising than affiliate marketing is, but publishers who use contextual advertising are more often affiliate marketers rather than the publishers that you would usually associate with traditional display advertising. This subject is also worth its own and separate discussion and I will stop here to avoid getting further off topic than I already did.

I was chuckling when Anne wrote that her attempts to make money by simply taking some affiliate ads and slam them on her personal blog did not yield any commission within a few days of testing.

I guess she believes those scammers who promote their products with the promise to make you fortunes quickly, with little work and requiring zero creativity, time and money by using affiliate programs. I hope she did not buy one of those products though. Serious affiliate marketing takes work, time, resources and most of all creativity.

Successful affiliates are where mainstream advertising is not (yet). Things that work today turn main stream tomorrow and will be done by the advertisers themselves. The successful affiliate did move on by then already into areas many advertisers didn’t even heart of yet. You want an example? You know that pay per click advertising on major and small search engines is big business today, right? Google, the largest search engine in the world and ranked 150th place within the list of largest U.S. corporations sorted by revenue, generated most of their $16+ billion revenue in 2007 from this form of advertising.

Pay per click started to take off in 1998 when Goto.com launched their service (later became Overture.com, which was sold to Yahoo! In 2003) and really excelled when Google introduced AdWords in 2000 and became “mainstream” around 2003 when they introduced Google AdSense, their contextual advertising product. Not many companies can say that they did PPC advertising prior 2005 or 2006. Guess who was doing and using paid search effectively since 1998 to this date? Affiliate marketers!

Advertisers still did not catch up entirely with their advertisers, but who should be surprised about this, considering that affiliates have many more years experience with the medium than any mainstream advertiser could have. There were and are issues and debates now and territories in the paid search landscape are newly staked out, with fresh borders drawn and new rules being established.

The own test conducted by Anne showed her how hard it is to make it work and what it must take to make a living of it. The mentioned

“promotional-text links buried in sham product “reviews,” blog posts”

are good examples of bad affiliate marketing that is not only annoying, but also does not work. Not only the user loses, but the guy who put up this junk as well, because people don’t click on the links and buy the stuff to make the guy some commission as return for his ill efforts.

Affiliate Marketing is PERFORMANCE marketing. You ONLY get paid IF IT WORKS!

The risk is almost entirely shifted to the affiliate marketer and publisher, in contradiction to PPC, which shifts the risk just about to the middle between publisher and advertiser and to CPM, display advertising paid for based on impressions, or eyeballs, which shifts the risk almost entirely away from the publisher to the advertisers.

With CPM the publisher does not care WHO the ad is seeing, but only that SOMEBODY is seeing it.

With PPC/CPC the publisher only cares that the user clicks on the link, nothing more. He does everything to get the CLICK, even if it is done by deceptive or straight forward fraudulent means. He could care less if the user who is sent to the advertiser’s website is actually buying anything or subscribing to something or not.

With CPA and Revenue Share the publisher has a common interest with the advertiser. The interest that the traffic sent to a page or site is traffic that actually converts and for whom the page or site was actually set-up in the first place. With email spam remaining to be one of the few things where the sheer amount of volume and the virtually zero cost regardless of the volume makes it still worthwhile, because it does only require a handful idiots who actually respond to the spam and buy something, to make it profitable. Luckily this is not the case for most other promotional methods, which are more costly and thus require a higher and higher conversion rate = relevance in order to be profitable.

There are still some left and I totally agree that a house cleaning is necessary, but reducing a multi-billion dollar industry with tens of thousands of people making a living from it in a clean and ethical manner to a bunch of thugs, scammers and thieves was really uncalled for and does injustice to all the people who are working hard to improve the affiliate industry, set ethical rules for themselves and encourage others to do the same.

I encourage Anne to spend some more time on the subject to learn the facts and rant about the real issues this industry has. The good thing is that affiliate marketing was meant to be marketing on a small scale and personal level and anybody can become an affiliate.

Most people who use affiliate marketing are not able to make a living of it and only supplement their monthly income with it. There is nothing wrong with it and shouldn’t be any different. Doing it full-time takes a lot of work and not many people are willing to work as much and as hard as necessary to accomplish that goal. Hey, who knows, you might learn about all the good stuff that comes from affiliate marketing and you will embrace it and encourage others to try it out themselves. Nothing is impossible, except Impossibility.

Updates (Responses by Other Affiliate Marketers):

  • Mike Allen did also write a post about this article here at ReveNews.com. He must have worked on it while I was writing mine.
  • Shawn Collins from AffiliateTip.com and Co-Founder of Affiliate Summit had also something to say about this and provided proof of some of the incorrect statements made by Anne in Video and Audio format.
  • Video response by Missy Ward (the second Co-Founder of Affiliate Summit), debunking the statement “Affiliate marketing: so easy, even our dog could do it” and more.

References and Resources

Cheers!

Carsten Cumbrowski
Performance Marketer and Entrepreneur

p.s. It has been over two weeks since my last posts. Sorry for that. Well, this one is long and maybe compensating a little bit. I have actually several other posts in the making. I just have to find the time to finish them. I hope that it will not be another 2-3 weeks until the next post though. :)

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