High Payment Threshholds for Affiliate Programs
I’ve recently noticed several merchants who’ve created in-house affiliate programs with alarmingly high payment thresholds. Here’s why it’s a bad idea.
I’ll start by sharing today’s example (quoting directly from the merchant’s description of its affiliate program):
“…. Payments are made once the affiliate [publisher] has earned more than $100. If an affiliate fails to earn more than $100, they are never paid. Subsequently, payments of the balance are made roughly every 45 days as long as the balance is over $100. Payments are made only via PayPal. …”
This merchant sells a “web service” priced from $24 to $199 per month, and promises to share 50% of the first month’s payment plus 5% for each additional month, for the life of the account. For the $24 monthly package, the publisher (affiliate) would earn $12 the first month plus $1.20 for each additional month.
To meet the $100 payment threshold quickly, the merchant’s advertising on the publisher’s web site would need to drive at least eight new customers. (Even assuming a 100% renewal rate, the $100 payment threshold would be met after five months from six new customers, or after 12 months from four new customers, or after 19 months from three new customers.)
Why this is a Bad Idea:
First, most experienced web publishers (affiliates) have experienced payment defaults from one or more merchants (they’ve been “burned”). Most publishers have also seen merchants shut down before the payment threshold could be met. These publishers are reluctant to carry any new performance-based advertising, especially for merchants with “in-house” affiliate programs.
An absurdly high payment threshold is a big “warning sign” for these skeptical publishers. Some publishers will even view this as a sign of hostility or distrust by the merchant, or as a sign that the merchant doesn’t consider the affiliate program to be important. It can also be perceived as a signal that the merchant isn’t confident about its own ability to convert or retain new customers.
Most “in-house” affiliate programs set a payment threshold of $50 or less (often $25). Even those amounts can be perceived as unreasonable, if a publisher isn’t sure how successfully the merchant can convert traffic drawn from performance-based advertising. That’s a huge reason why most publishers prefer to work with “affiliate networks,” which usually combine advertising fees from multiple advertisers to meet their payment threshold.
I agree with you 100%. I feel the “Affiliate Marketing” industry needs to be regulated the way “Network Marketing” is fianlly being policed. High Pay Thresholds are a scam! What if the product being sold pays a few dollars per sale? Are these already broke affiliates supposed to make over 20 sales just to get a check for $100.00 ? Great Blog!
while i’m sure they would prefer you to make huge amounts of sales, the merchants surely don’t mind if you stop promoting them and leave money on the table because you didnt hit the minimum.
btw it’s not just affiliates- adsense has a $100 minimum payout too.
I won’t even join a company that doesn’t offer paypal for payment processing or if they have a high pay threshold. I’ve come across merchants that still try to get away with payment thresholds as high as $250.
Jeff wrote: “btw it’s not just affiliates- adsense has a $100 minimum payout too”
That certainly is an annoying threshold (which is probably never met by 90% of publishers who participate in the AdSense program), but at least we have some reasonable confidence that Google (like Amazon) will honor its payment promises. Also significant: Google Affiliate Network earnings are paid through the AdSense program, so it’s actually a consolidated payment.
A related note, which illustrates another huge problem with AdSense ads: Last week, I added AdSense to one of my sites, and in the first five days I’ve seen a clickthrough rate of just 0.09% (not even 1 click per 1,000 adviews). That’s quite similar to the dismal results I saw when I experimented with AdSense last winter. (Many web sites would need a million adviews, to accrue $100 in AdSense earnings.) I’ll probably remove the AdSense ads again with my next update cycle.
Someone tried to post a spammy comment promoting ClickBank, asserting that their minimum payment threshold is only $10. That’s not true (although it’s technically “accurate,” after publishers meet a complex set of absurd initial requirements).
First, ClickBank’s absurd “Customer Distribution Requirement” delays any payments until a publisher accrues earnings from transactions that fulfill an absurd matrix of completed transactions using different payment methods. I didn’t meet this requirement until 3 months after accruing my first earnings — after I’d accrued earnings from 18 transactions (with an average transaction size of about $15, and an average advertising fee of about $4.40 per transaction).
Even then, ClickBank withholds a portion of accrued earnings for an additional three months (that’s three months after you’ve reached a payment threshold, or a total of at least 4 or 5 months after the transaction date).
ClickBank also charges $2.50 for each payment it makes to publishers (by check or direct deposit), so after meeting the initial requirements, you’d sacrifice 25% of each additional payment if you set the payment threshold at $10. ClickBank also requires that publishers accept its first two payments by mailed check (and the first check I received was oddly damaged, so I had to wait another 2 weeks for a replacement check).
In short, ClickBank’s payment policies and threshold are among the very worst in the industry.
Yes you are right mark i have been a clickbank affiliate since 2009 and it was very difficult for me to get some good amount initially. Most of my commission was taken by the company for some processing charge.
Now its been a long time since then and i have made some good commissions after crossing my threshold.