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.

http://www.youtube.com/watch?v=crv3ZyDl0FU

“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?!