Affiliate Technology & Network Choice

By , November 4, 2007
  • There are dozens of “technology options” for a merchant to implement an affiliate program.
    1. In-House Affiliate Tracking: I generally recommend that my clients consider creating an “in-house” affiliate tracking solution (either customized, or using commercially available scripts or software), even if they will also use an affiliate network. Implementing an “in-house” tracking solution requires IT staff or contractor time.
      • An in-house solution can be used to track multiple sources of referrals, and to accurately compare different referral sources, and to “validate” or audit data from an affiliate network.
      • An in-house solution can treat other “paid advertising” as separate affiliate accounts, so that affiliates are not paid for traffic which you’ve paid to “recapture” after the affiliate referral but before the sale. (If you use your “affiliate network” links to track non-affiliate activity, this can reduce your network EPC, if you set these “in-house affiliate” IDs with a zero commission rate, or may inflate network fees and create some accounting headaches, if you allow affiliate earnings to accrue for these accounts.)
      • An in-house affiliate solution could eliminate network fees for non-network affiliates, allowing larger commissions to be paid to those affiliates – provided that the in-house solution insures that network affiliates aren’t also credited for the same sale.
      • An in-house affiliate solution using “direct links” to the merchant site may help boost “link popularity” measures (but probably will not).
      • In-house or direct links are less likely to be filtered by “ad blocking” software, which erases some CJ and LS links (including both image and text links).
      • An in-house affiliate solution retains “link ownership,” while “affiliate network” links only work so long as that relationship is maintained.
    2. Affiliate Network Benefits: From 1997 to 2001, I consistently recommended use of “in-house only” solutions, but I now strongly recommend the use of at least one affiliate network when launching a new affiliate program. My advice changed because most affiliates now prefer to work with network merchants, for several reasons:
      • Consolidated Payment: Affiliates also don’t like to deal with many small checks or many 1099 forms. In addition, nearly all affiliate programs have a “minimum payment threshold” (usually $25 to $100), and many affiliates worry that they may never accrue that minimum amount within a single merchant’s account – especially considering the short “lifespan” of many dot-com businesses. An affiliate network provides only a single “minimum payment threshold,” which can be met using earnings from several different merchant programs. The affiliate network also provides a single 1099 form to those affiliates who’ve earned $600 or more during the year.
        • (Merchants don’t like individual payments, either. The internal costs to generate each check may be $2 to $10 (including administrative and audit costs). In addition, merchants with in-house programs must obtain W-9 tax forms for affiliates paid more than $600, and must arrange for reporting those payments to the IRS and issuing 1099s to each affiliate. They must also deal with “returned mail,” lost checks and 1099s, and checks which might be cashed after many months or even years.
      • Common Reporting Interface: An affiliate network provides affiliates with more robust reporting than is usually provided by “in-house” affiliate solutions, and also provides a common interface that doesn’t require any “learning curve” for each new merchant.
      • Trust: The affiliate network is a “trusted third party” with a direct financial stake in the success of both merchants and affiliates. Many affiliates trust that “the network” will monitor its merchants to insure that tracking works properly and that all sales are properly attributed to the correct referral source. After all, the network’s fees are computed based on payments to affiliates, so their financial interest would seem to favor “full inclusion.” In fact, networks perform few “audit” functions and often strongly favor the interests of merchants over those of affiliates.
      • Dispute Intermediary: Many affiliates also mistakenly believe that in the event of a dispute between merchant and affiliate, the “network” will intervene to evaluate and “rule on” the dispute. In fact, the “networks” generally respond only to incredibly severe abuses by merchants or affiliates, and then “resolve” the dispute only by “terminating” the offending merchant or affiliate.
      • Networks Pre-Screen Affiliates: Most networks provide some “minimal” pre-screening of prospective affiliates, which blocks some idiots and some fraud attempts. However, network standards are extremely low, and this benefit is usually offset by an increase in “one-click” applications from dubious affiliates.
      • Merchant Deposit Account: Several affiliate networks also provide an informal “escrow” service, by requiring that merchants retain adequate funds on deposit to pay all accrued commissions and network fees. This assures affiliates that adequate funds are available to pay commissions, while also assuring merchants that they can reverse fraudulent or cancelled transactions before commissions are “gone.”
      • ShareASale’s “deposit requirement” actually disables merchant links when the available deposit balance reaches zero. In contrast, although CJ boasts a similar “deposit” requirement, CJ frequently allows merchants to continue operating with “negative deposit balances,” and when a merchant defaults on payment promises, the affiliates are unpaid.
      • Some merchants actually choose “in-house” affiliate programs in order to improve cash flow – and may default on payment promises because of cash-flow problems unrelated to the affiliate program.
    3. Affiliate Network Drawbacks:
      • Data Security: Several affiliate networks have hired consultants who stole and later “sold” proprietary data (including the affiliate lists of member merchants).
      • Control: An affiliate network imposes its own technical and policy restrictions; individual merchants have very limited control over the technology.
      • Outages: Every affiliate network, like every merchant, experiences occasional service interruptions. By relying on both the network’s and the merchant’s servers to respond to each http request, overall “down time” for the affiliate program will increase, compared to an in-house solution.
      • Risk of Business Failure: If the affiliate network ceases operation, this would have a huge impact on the merchant.
      • Transition Issues: If the affiliate network is acquired, the merchant will be forced to make a transition.
    4. Evaluating The Affiliate Networks: When evaluating “affiliate networks,” most merchants consider the following vendors:
      • Top-Tier: I have long disliked the oppressive contract terms and unethical behavior by staff at both LinkShare (LS) and Commission Junction (CJ). I also recently moved Kowabunga from my “recommended” to my “not recommended” list.
        • Here are some reasons why I don’t think you should use these “top-tier” networks:
          1. LinkShare’s primary focus is on national-brand “consumer retail” products, including huge e-retailers like Wal-Mart and Target. It is certainly the most “sales-driven” affiliate network, by which I mean that the company’s sales force is the dominant department, leaving merchant support secondary and affiliate support virtually non-existent. It also charges the highest setup fees and the highest minimum-monthly fees, and is famous for poor post-sale service to merchants.
          2. Kowabunga was recently acquired and is now descending through what I consider to be a “death spiral,” which has included horrible mistreatment of its long-term merchant partners and successful affiliates.
          3. CJ and LS consistently give poor advice to merchants, such as encouraging merchants to remove inactive and low-performing affiliates, and allowing datafeed access only to a limited group of affiliates. CJ also has a fee schedule that creates “perverse incentives” for merchants to remove affiliates from their networks.
          4. All three firms have relatively high “minimum monthly fees,” with both CJ and Kowabunga commanding a minimum of $250 or $500 per month, and LS generally seeking a larger monthly fee. Based on the “30% of affiliate earnings” model used by CJ and Kowabunga, a $500 minimum monthly fee would only be “earned out” when affiliates earned $1,666 in commissions every month.
          5. Historically, technical implementation is more complex (and often creates additional delays and expenses) for CJ, LS, and Kowabunga than for most other affiliate networks.
          6. CJ and LinkShare are frequently criticized for failing to enforce their policies against “parasites” and other unethical affiliates, who seek to “poach” commissions from other affiliates and from transactions where no genuine affiliate referral occurred.
          7. I personally refuse to work with CJ, LS, or Kowabunga (both as an affiliate, and as a consultant for merchants).
        • Here are some reasons you may decide to use CJ or LinkShare, against my advice:
          1. A merchant’s decision to pay the large “startup” fees for CJ or LS demonstrates that the merchant is “serious” about affiliate marketing.
          2. The “investment community” recognizes that each of these firms is a subsidiary of a large, publicly-traded company, and that each is well established in their industry. These “outsiders” don’t perceive the issues and problems that industry insiders see, and yet the outsiders have much more impact on investment decisions. If is seriously considering “going public,” a major investment, or acquisition by a publicly-traded company, a relationship with CJ, LinkShare, or Performics would probably be valued more highly by investment analysts than a relationship with other firms.
          3. Some larger merchants claim that they receive “more or better” service and support, including affiliate-management advice, from CJ, Performics, or Kowabunga. (Many more merchants complain about poor service and support, and I assign a negative value to much of the “affiliate management advice” given by CJ and LinkShare.)
          4. Each firm offers affiliate-management services, at additional cost, which can offload this work from a merchant’s in-house staff. (In my experience, LinkShare’s and CJ’s in-house affiliate management teams are much more expensive and much less effective than almost any other option.)
          5. In addition, some “outsourced program management” agencies (which “outsource” affiliate management duties) have considerable experience and good relationships with CJ, which may resolve some issues if you elect to hire an OPM firm.
          6. Sales staff from top-tier affiliate networks can provide considerable assistance in internally “selling the idea of an affiliate program” to management. (Most purchase decisions are made by a CEO or VP Marketing based on sales promises, but implementation is then delegated to a subordinate, who must then deal with the realities.)
          7. In the past, I’ve been told that LinkShare’s sales staff sometimes offers to reduce or even waive setup fees and minimum monthly fees to close a sale near the end of a fiscal quarter.
          8. Perhaps most important: if you consult with “prospective affiliates” and find that one of your “top prospects” refuses to work with whatever network you’ve chosen, then you must seriously consider whether the potential lost sales from that affiliate justify the selection of a different affiliate solution. (I believe that you’re much more more likely to find affiliates who would refuse to work with CJ or LinkShare than affiliates who refuse to work with ShareASale.)
      • Second-Tier: ShareASale, DoubleClick-Performics, AvantLink
        • In the past few years, Performics and ShareASale have moved from the “lower tier” to the top of the “second tier” of affiliate networks.
        • ShareASale has earned “rave reviews” from affiliates and merchants (winning even the most lopsided surveys posted in online discussion forums). It is absolutely not a “sales-driven” organization when compared to any other affiliate network; it is quite clearly “service-driven,” both for merchants and affiliates. In one important area (pro-active exclusion of “parasites” and some other unethical affiliates), ShareASale stands far above all of its competitors.
        • DoubleClick-Performics is also at the top of the “second tier,” but provides a much smaller network of affiliates; like LinkShare, it has a larger concentration of “national brand consumer retail” merchants. In my limited experience with Performics, I was dissatisfied with their merchant and affiliate support, and don’t believe their higher fee structure confers any benefit. Google’s long-pending acquisition of DoubleClick creates an uncertain (but potentially very positive) future for Performics.
        • I have had no meaningful experience working with AvantLink; it has a much smaller network of affiliates, and a slightly higher fee structure than ShareASale, but its base fees may include a somewhat higher service level than is promised by ShareASale.
      • LowerTier: ClickXchange, ShareResults, ClixGalore, and ClickBank: These firms provide very-low-cost service, with skeleton-crew staffing that frequently fail to respond to issues raised by merchants or affiliates. ClickBank appears to be the largest of these, but serves more “sleazy-sounding” merchants and affiliates than most networks; ClickXchange has the worst reputation of the firms I’ve listed (but is more respectable than many that I haven’t listed). ShareResults and ClixGalore each appear to “work” but have not achieved even a tiny fraction of the reputation or respect that ShareASale commands. There are also a number of smaller, “scammier” affiliate networks, one of which actually promises completely free services, with quite predictable service and reputation levels.
      • Never Judge any Network by One Member: Every affiliate network includes a number of “sleazy-sounding” merchants and affiliates. In fact, I can safely say that a majority of merchants and a majority of affiliates in every network are “undesirable” as partners. But each network also has many reputable, successful merchants and affiliates.
    5. Specific Affiliate-Network Issues to Consider:
      1. Costs: Every affiliate network has a unique schedule of fees and charges. LinkShare is infamous for large setup fees, high monthly minimum fees, and many “additional charges.” CommissionJunction is somewhat more “up-front” about its major fees, but not about all fees. Some networks, including CJ, impose additional merchant fees on such standard activities as sending email to affiliates (which creates pressure to limit the number of affiliates and/or the number of communications with affiliates). Some networks, including both LinkShare and CJ, impose limits or extra charges for affiliates to access datafeeds.
        • My “rough estimate” is that you’d spend $5,000 to $10,000 in fees to launch a program through LinkShare; you’d spend $3,500 to $6,000 to launch a program through Commission Junction or Performics, and you’d spend less than $500 to launch a program through ShareASale. On an ongoing basis, CJ would charge fees based on 30% of the payouts to affiliates; SAS charges 20%.
      2. Support: LinkShare is “infamous” for providing poor support to both merchants and affiliates, although there are certainly many individual merchants and affiliates who are satisfied. CJ is almost as famous for providing poor support for affiliates, but receives fewer complaints about merchant support. ShareASale is often lauded for its policies and responsiveness, but has a limited staff compared to LS or CJ. Most of the “lower-tier” networks provide little or no support to affiliates or merchants (even those who pay extra for premium service levels or per-incident support).
      3. Network Reputation: Each of the major affiliate networks has a loyal audience of merchants and affiliates who believe that it is the “best” network; each also has a substantial number of dissatisfied merchants and affiliates. ShareASale certainly appears to have the best “reputation” among affiliates, and arguably has the best reputation among merchants. CJ might be next, among the major networks, although Performics and AvantLink might be favored over CJ among “professional affiliates” and midsize merchants. LinkShare is well-loved by some “super-affiliates” who generate substantial transaction volumes for some of LinkShare’s huge merchants, but LS is disliked by most other affiliates and by smaller merchants. “Lower-Tier” networks like ClickBank, ClickXchange, ClixGalore, and ShareResults generally have very poor reputations.
      4. Network Size: Probably the single greatest misconception about “affiliate networks” is the notion that by joining an affiliate network, the merchant will have instant access to many thousands (or hundreds of thousands) of “existing affiliates.”
        • In fact, nearly all affiliate “networks” include many hundreds or even thousands of merchants, all competing for the attention of prospective affiliates with each other and with tens of thousands of other merchants outside the network.
        • The vast majority of affiliates within each network are either “not yet active” or “unproductive” for any merchants.
        • Among those affiliates who are “active and productive,” most are productive only for a single merchant, and ignore offers from other merchants.
        • Commission Junction almost certainly has the largest number of “enrolled affiliates” in its network; ShareASale, LinkShare, and Kowabunga/Kolimbo also have huge numbers of enrolled affiliates across their “networks.” Smaller networks like Performics and AvantLink have much smaller numbers of affiliates, but have a better “quality” on average, and probably have a higher “activation rate.” Lower-tier networks may have tens of thousands of enrolled affiliates, but very few are “successful” by any reasonable measure.
      5. Access to Data: Once a merchant joins any affiliate “network,” some data about the merchant’s affiliate program will be published as part of the information available to current and prospective affiliates. As noted above, affiliates will rely on some of this information when deciding whether to join a program and how to promote a merchant. However, among the “current and prospective affiliates” will be some of the merchant’s direct competitors, who may exploit any data for their own advantage.
      6. Tracking: Most affiliate networks track customers in essentially the same way, utilizing “cookies.” In general, when the consumer clicks on an affiliate link, the “network” sets a cookie with the affiliate ID before redirecting to the merchant site. Later, if the consumer makes a purchase, the merchant includes a tracking code (usually a 1×1-pixel image request which includes parameters that report data about the sale to the network, which then checks for the presence of the tracking cookie. If the cookie is found, the transaction data is stored and the sale is credited to the referring affiliate.
        • There are many potential issues with “tracking” that can be a serious concern, including issues about how each “technology solution” deals with “multiple referrers” (e.g. multiple affiliate sources). In addition, if a merchant works with “multiple paid referral sources” (including multiple affiliate networks or a network plus other sources such as an independent affiliate program or PPC search), the merchant may need to add special tracking to prevent sales from being credited to multiple sources which may cause “overpayment.”
      7. Reporting: Both affiliates and merchants seek robust reporting of impressions, clicks, and transactions, and some networks provide much more “in-depth” reporting, including effective ways to compare performance of different link types (including different banners and buttons). However, a significant portion of affiliates will disable any “impression tracking,” and therefore reports are often incomplete or even misleading. CJ and LS provide more reporting options and capabilities than other networks, adding complexity, and some reports use different metrics than others, leading to confusing inconsistencies.
      8. Technical Implementation: Each network has its own implementation requirements, which can be relatively simple (installation of a simple script on the “order confirmation” or “thank you” page) or complex (formatting and transferring transaction data in “batch mode”). LinkShare is particularly “infamous” for the complexity and cost of technical implementation.
      9. Flexibility: Most networks provide a variety of “options” for merchants to select.
        • For example, one issue that every merchant must decide is the duration (persistence) of the network’s tracking cookie, which determines whether an affiliate will be credited for referrals if a transaction occurs several days, weeks, or months after the referral. Some merchants set absurdly short durations (15 minutes to 2 hours -which block a majority of commissions on “considered purchases”) while most provide 30- to 60-day limits; a few provide 120-day, 180-day, or 360-day cookies, and some have “no-expiration” cookies. To some extent, cookie duration represents an “attitude” or “philosophy” about the value of affiliate referrals, and each merchant seems to promote a somewhat different philosophy (many LinkShare merchants set very short cookie durations; CJ merchants are more moderate; and ShareASale merchants often have very long cookie durations).
      10. Contingent and Recurring Commissions: Most affiliate networks were designed with an “single-transaction immediate commission” in mind. Most networks cannot handle more complex types of compensation arrangements.
        • A “contingent” commission, for example, presents special concerns because it requires not only a current transaction, but some condition on a future date (for example, a customer must “renew” or be retained for 30, 60, or 90 days). No affiliate solution provides automation for “contingent” commissions; every reversal will always require manual intervention. Many web-service firms post all orders, and then manually “reverse” or “cancel” transactions that don’t meet the contingency. (A LinkShare, ShareASale, or ShareResults merchant might opt to defer reporting transactions until the contingency were met, using these vendors’ transaction-submission abilities on the date the contingency were met – but this would require substantial extra programming on the merchant’s system, and would cause “reporting issues,” since affiliates would see no transactions posted until some time after the contingency were met. On CJ, no “batch mode” is offered, so a contingent commission would always require manual posting.)
        • A “recurring” commission adds complexity by requiring a re-test of the condition every single month, but allows affiliates to share in the long-term value of a customer relationship. None of the major affiliate networks support “recurring” commissions at all, although LinkShare, ShareASale, and ShareResults all permit “upload” of transactions, which can be used to accomplish this – but with substantial programming or manual file-preparation costs for the merchant. One lower-tier affiliate network, ClickBank, can handle recurring commissions if they also process the payments; a number of payment-processing firms can also handle this (usually for “downloadable purchase software” or “web subscriptions,” the latter often for porn).
      11. Consolidated Payment: Nearly all “affiliate networks” provide consolidated reporting and payment to affiliates, who can thus combine earnings from several different merchants in a single payment (whether by check, through PayPal or BidPay [for lower-tier networks], or via direct deposit [for top-tier networks]), and can combine earnings from multiple merchants to meet the networks “minimum payment threshold.” However, LinkShare and and CJ make this somewhat more complex because of “hold periods” and “extended transactions” – so that affiliates may not be paid for some transactions for several months; in some cases, LinkShare affiliates claim that they cannot determine what they’ve been paid for and what is still “pending,” which can create serious “customer service” issues for the affiliate manager (made more difficult by the lack of competent affiliate support from LinkShare and CJ).
      12. Cash flow: Some “affiliate networks” require that merchants “pre-pay” affiliate commissions by maintaining a deposit account with the merchant sufficient to cover current commissions. ShareASale is the most extreme, by warning affiliates when a merchant has “low funds” on deposit, and actually disabling a merchant’s affiliate links if the merchant’s deposit account is depleted. CJ is less strict, often allowing merchants to owe money for many months, but thereby creating affiliate dissatisfaction when merchants later default on payment promises.

  1. Issues That Might Lead a Merchant to NOT Offer a Public Affiliate Program (Negatives)
  2. Public vs. Private Affiliate Programs
  3. What Factors Do Publishers (Affiliates) Consider When Selecting Advertisers (Merchants)?
  4. Affiliate Technology & Network Choice
  5. My Usual Recommendations (for Merchants planning an affiliate program)
  6. Affiliate Recruitment Strategies and Practices
  7. Captive and Stealth Affiliates
  8. Affiliate Program Policies
  9. Outsourced Program Management (OPM) for Affiliate Programs
  10. Selling the Affiliate Program
  11. Types of Affiliates (Web Publishers)

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