Jeff Molander wrote a post for the new blog of the Advaliant affiliate network that is pure dynamite.

I agree with Jeff on many points, including the lack of innovation in the industry during the past five years. Why was there not much innovation you might ask yourself? In my opinion networks and also many advertisers did shift their focus and priority towards affiliate publishers who are not traditional affiliates in the first place. Those publishers use the affiliate or CPA tracking platform to handle the technical details of their relationship with the advertiser, but that is all what they have to do in common with real affiliate marketers. Yes, I am referring to incentive and cash-back sites and to some degree coupon sites as well. There is not much innovation necessary to keep those publishers happy, the rest of the publisher base was neglected and their needs ignored.

Affiliate Marketing is Not
Now those publishers make up the largest chunk of revenue through the affiliate marketing channel for many advertisers. Add to that the payment of the top tier commission to raise the cost, lower the margin and leave the program without the needed profit figures to convince management to invest money for even more profit in the future. Investments into traditional affiliate marketing usually tend to pay off exponentially, but growth in business with the large incentive sites result in either a linear growth in profits, but in many cases even a linear decline in profits. The publishers probably demand more commission for the additional business that they bring you. The increase is usually accomplished by special placement and promotion of the advertiser within the publisher’s member base. The higher premium on the other hand will be paid for all business referred and not only for those extra business that comes from the special placement.

Compare it with paying more for the entire display advertising inventory, if you increase the order volume. You buy more impressions and the eCPM is going up as a result of it. But display advertising does not work this way.

That is my take on the whole innovation issue. I only would like to add that I see things improve slowly, which is a good thing. Much more is still needed though.

Burned by SEO and PPC?
Jeff also talks about SEO and PPC advertising and that advertisers have been burned by affiliates who were and are using SEO and PPC as well as by the search engines themselves. Okay, he says that this is what he believes what advertisers think, which is hard to refute. However, I can and do refute the statement that affiliates and search engines burned advertisers in the past.

Affiliates did PPC and SEO when there was not even anything that came even close to be called a search marketing industry. GoTo.com pioneered the PPC based bidding for ranking and placement model in 1998 and Google launched AdWords in 2000. Nobody had an idea back then how big this would become. There were also no stats and figures available widely that tell you about user behavior and how users interacted and experienced the search engines. Everybody knew as much or as little about the dynamics that make PPC work as the guy next to him.

I stumbled about the weird results that you get, if you happened to bid on an advertisers brand and trademark name in 2002 I believe. It was not just any brand term that caused the weird results, but brand names that are generally known brands with memorable names and owning the .COM domain for their brand name. Who in the world would type into a search engines search box the term “Dell Computers” or worse “Dell.com” and then click on the sponsored result on the SERP (Search Engine Results Page(s))? It was like a guy asking for the directions to city XYZ while standing directly before the welcome sign of that city. The dynamics to understand odd user behavior like this were not 100% understood from day one. The business overall was still too small and the marketing channel too new and uncertain to have any large advertiser care a bit and spend even one minute on it. Big brands had bigger fishes to fry, such as the large CPM inventories of those web-portals that grew more expensive every day until the bubble burst in 2000 and 2001. Search grew quickly after the crash, but advertisers were slow to see what happened. It was still new, unknown and risky. Affiliates took the risk, maybe burned themselves at first, but reaping in the rewards later.

There was a short period of grand payback for affiliates between 2003 and 2005, where business exploded, but advertisers still undecided. When search grew to a size that could not be ignored, even by big brands, advertisers learned that their affiliates were already there and have been there all along. For them was everything old stuff from yesterday, what was for the advertisers new and mint-fresh as if it just came into existence the day before.

Not Been Burned, Left Money on the Table
Advertisers today catch up to a large degree with where affiliates have already been for five or more years. Some advertisers still were not able to catch up to this day.

Advertisers have not been burned; they left money on the table for too long. That should not make them angry at their affiliates, but at themselves. Traditional affiliate marketers are risk takers and experiment at the frontier of technology and society. They went niche before advertisers even knew that there was one. They did and do local marketing before talk about local search came up only about 2 years ago. They worked the long-tail before Chris Anderson wrote a book about it and gave it a name.

Affiliates can go where no Advertiser has gone before!
This is what affiliates do. They go where the advertiser cannot go himself. But things change and the advertiser might be able to enter the space that his affiliates have entered long before him. Booting off those affiliates and punishing them for finding the pot of gold first is not the right practice. Affiliates are naturally the weaker link and will move way if the advertiser moves in. Channel conflicts should be accepted as part of business and they will only increase over time. Work them out, but don’t throw the baby out with the bath-water.

Instead of using the torch is it more productive and mutual beneficial, if borders are staked clearly and taken away pieces from the affiliates will be compensated by giving them some leeway that they can venture off and explore the new unknown and small niche that is too small, too new, too uncertain and too risky for the big advertiser who has to worry about his brand and spend his day in internal political battles and overcoming power struggles rather than exploring the unknown.

There are Black Sheep in the Whitest of Families
There are always folks who break the rules that were clearly set. There always have been and will be thugs and thieves, who are in it for the quick buck. Not only affiliates, but also from the advertiser’s side. You have to watch out for them and try to keep their fingers out of your valet. Assuming that your affiliates are guilty until proven innocent is an unhealthy method of handling these matters. Doing so has proven itself wrong in the society and social life time and again. Not much good can come out of it.

Putting a stack of money on the table that can be publicly seen through the window and then keeping the doors unlocked and you distracted is also not the smartest thing to do. You don’t want to tempt the ones who are usually honest people by inviting theft; at least would you do so in a capitalist society.

Affiliate Marketing is not, Part II
Affiliate marketing is not display advertising and also not traditional off-line marketing, not even off-line direct marketing. Affiliate marketing allows businesses to reach into markets that are too small, too diverse and disperse, too new, too unknown or too risky in order to try them out and be active there itself. Affiliates take the risk and are also the ones who act faster to new developments because the traditional affiliates of yours are not big and huge businesses. Affiliate marketing is the realm of individuals and small to mid-size businesses. If an affiliate grows beyond that, it becomes a publishing or distribution partner and compensation should be done as it is common for such kind of relationship.

Flexibility, not Card Blanche
What you have to offer your affiliates in the field is flexibility. Flexibility does not mean Card Blanche and giving up your brand message and control entirely. You should care about your brand message remaining intact, by being flexible when it comes to the specific ways this message is being transmit to prospects by your affiliates. Affiliates will take things into their own hands, if a program shows potential, but lacks the needed flexibility and that is when it gets dangerous and the risk high, that your brand message gets deluded or changed in an unfavorable way.

Affiliates rather have the advertiser provide the exact message and media (creative or whatever is used) than the affiliate spending time to create something on their own. They will have tons of ideas that require different designs and slight change of focus of the marketing message. Providing affiliates with what they need here is what I referred to when I talked about flexibility.

Brand is good for Everybody
A brand is a marketing tool affiliates can, should and will leverage and it is stupid if an affiliate tries to reinvent a big brand by itself and by doing so effectively damage the brand and is most likely also not generate much commission for the affiliate. But some advertisers have a different idea of what their brand is than it is in reality and seem by their customers and ordinary people. Some advertisers wish that their brand is seen a certain way, but this wish is only a fantasy that has nothing to do with the real world. Affiliates usually know the real world and are confused about the unrealistic way how advertisers see their brands and would like to be represented to the people.

Friends when you need them most
What affiliate marketing was doing on a small scale is now happening en large without any active two-way business relationships in place. Something much tougher to control, the outspoken and self-aware customer who becomes an unpaid evangelist for the brand or a product or the equally unpaid disgruntled ex-customer who made it his quest to take your business down with his last breath, if he has to. Look at the evangelists and pass ideas and message along to your affiliate partners and work together with them to address the anti-evangelist. You should address the valid complaints made by your companies’ personal enemy and surround what is left with positive examples for similar cases that show that you are willing and able to deal with those issues, but that it always requires the commitment of both parties to solve a problem once and for all.

Conclusion
Does all this sound not easy scalable and labor intensive to you? Good, because it is, but the payback is exponential if done right. Leverage the strength of affiliate marketing even more by integrating it into your overall marketing mix. Work together with your affiliates and not against them. Most affiliates also prefer to work together with an advertiser than snitching on him and watching their back that they will not be back-stabled either.

What I wrote might sounds nice and good, but here is where Jeff is absolutely right and hitting the nail on the head. At the end of the day does it only matter what the advertisers thing, believe and feel. It is irrelevant if that believe or feeling is wrong or correct, because the advertiser will act on it as if it is right, in either case. The education of advertisers to understand the dynamics, issues, hot-spots, potentials and approach that should be taken to run a successful affiliate program is the most important thing to do.

Call to Action
This education needs to be done not just by the affiliate publishers, but all parties involved, including networks and any third party service vendors and services. Pointing fingers at each other does not solve any of the problems and it does not make advertisers better educated about the reality they operate within. It only confuses them even more and mistrusts the industry as a whole. The loser will be all of us. The winner would be the thieves and thugs who were forgotten over all this and were able to take advantage of the situation undetected.

What is your take on this? Feel free to provide your comments below. Thank you.

Cheers!
Carsten Cumbrowski
Marketer, Affiliate, Entrepreneur, Blogger
Find No BS Internet Marketing Resources here

Lack of Innovation and the Rejection of the unwanted Child called Affiliate Marketing