Stop Being So Selfish II

Posted by Ad Hustler | Posted in Affiliate Marketing, Doing Business | Posted on 02-11-2010

If you didn’t read Part I read it.  The following is a continuation on that thought:

Affiliates are far from the ONLY problem in affiliate marketing.  Advertisers are a big problem which perpetuates a lot of the selfishness on the affiliate side.  Let’s go through a quick list of common affiliate complaints about advertisers:

  • Advertiser doesn’t like my quality so they are kicking me off the offer
  • Advertiser is refusing to pay for the leads
  • Advertiser is shaving leads
  • Advertisers pixel isn’t firing
  • Advertiser changed the landing page without telling me and caused my conversions to drop
  • Advertiser stole my landing page
  • Advertiser stole my ads
  • etc etc

Affiliates don’t feel like advertisers are on their side hence  they take an adversarial position with the advertiser.  This adversarial position causes affiliates to take on the mindset of the salesperson working the kiosk in my part I example.  Advertisers rarely want to work with affiliates to make an offer work for both parties.  They are usually more concerned with their own bottom line then letting an affiliate work toward a higher quality lead so that everyone makes money.  Instead the advertiser will just shave, cut payouts and refuse to pay until they make it profitable for themselves.  There needs to be realistic expectations on both sides of the equation aka a partnership and synergistic relationship.  Unfortunately I don’t see this happening anytime soon.  For the time being I think that greed on both sides will continue an endless circle of poor quality affiliates and poor quality advertisers.

Another thing has been heavy on my mind lately: payouts.

I think that payouts/commissions are a huge issue facing this industry (particularly lead gen).  Let’s take the example of a new car lead.  At a quick glance, the highest street payout I can find is $8 for a new car lead.  I guess that on first thought that doesn’t sound too bad since no credit card is required but let’s look at some inside info:

  • All new car leads are sold to auto dealers
  • Auto dealers pay on average $20-$25 per lead that comes from a lead provider
  • The lead provider sells the same lead to on average a minimum of 4 auto dealers – At $25 that makes 1 valid lead worth $100 or more.
  • The affiliate that generated that lead was paid $6-$8
  • The lead providers average CPA when marketing themselves through paid advertising equals more then $6-$8

So what’s happening here?  To me it seems that lead providers are trying to pick up leads for way cheaper then they can possibly acquire them themselves by using affiliates to do the dirty work.  Don’t get me wrong.  The advertiser deserves to make a profit and if the affiliate can make a profit too it’s good for everyone.  The problem becomes that when the affiliate determines that the CPC for car quote related keywords on search engines are $2+ and media on automotive related sites is expensive, they come up with shadier plans which produce low quality leads.  You can’t blame them.  They are in it to make a buck and if they can’t make it with high quality traffic, they’ll turn to low quality traffic, incentivizing or misrepresenting the offer.

The bottom line is that if you want high quality traffic you need to provide a high payout.  You need to give affiliates the wiggle room to make something work using legitimate high quality advertising.  The less you pay for a lead, the lower quality your going to get.  If an advertiser is reading this I guarantee I know what their argument is.  “Well we need a lower payout to account for all the crap leads we get that we can’t actually sell.”  It’s a great point and we end up in another vicious cycle of selfishness on both sides.  The only possible way I can see of breaking the cycle is if an advertiser was willing to pony up a much better payout with higher quality controls such as you get x amount of leads and if you can prove quality we can work out a payout that works for both parties.  A probationary period if you will.  This does currently happen but not as often as it should and not with an increased payout to start in order to provide quality leads.  This type of setup requires a lot more hand-holding and communication which doesn’t currently exist in most affiliate relationships.

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Comments

  1. Well done. There are many great points here.

    It really boils down to having realistic expectations with respect to the niche, the offer, building long term business relationships, and having the self-control not to become greedy! (Affiliates, Advertisers, Resellers, etc.)

    As an advertiser, I have certain expectations when it comes to controlling the quality of leads that are generated. In a situation where I’m reselling the data (agency reseller model) to a client exclusively or more than one buyer (non-exclusively), the quality of the leads are the most important thing to me.

    Happy advertisers that maintain consistency with respect to their ROI (as “quality” leads are generated) will continue to do business long term.

    Most data buyers that rely on leads generated on a CPA basis to grow their business do not understand the mechanics of how leads are generated (online) and who’s on the front line doing the “heavy lifting”. (Affiliates)

    When those buyers step into the role of an advertiser they sometimes have no idea how “targeted leads” are generated in “real time”. However, they all seem to know the buzz words and want to pay as little as possible per lead…

    Buyers who are looking for $2.00 life insurance leads can buy them along with 9 other buyers from the past 45 days.

    The sad part is that those advertisers / buyers sleep better at night because all they’ve done is increase lead volumes by paying at the low end of the spectrum to justify the “Mickey Mouse” and “George Jetson” they’ll be receiving. Finding a diamond in the rough is often time consuming and can be expensive over long periods of time.

    The old saying: “You get what you pay for” truly applies to this industry.

    Keys to Success:

    - Execute a trial period before campaigns are scaled at a predetermined multiple based on the size of the first insertion order. (i.e. scale 4x over after the first 30 days or running the offer. Fill or kill.)

    - Respect the Affiliates, their payouts, time, energy, effort, and CAPITAL RISK placed on running the offer.

    - Advertisers should understand that “leads” should really be considered “prospects”. Only a small percentage will close to a sale in most industries.

    - Advertisers need to understand that the performance of their sales team could be the issue, not the quality of the leads.

    - Frequent communication between advertisers, networks, and affiliates.

    - Wiggle room for pay bumps (split between networks and advertisers) to reward affiliates that consistently deliver quality leads.

    - Executed contracts with clear terms and conditions. Credit checks on new advertisers. Seek prepayment scenarios when possible.

    - Clarity when describing the terms and conditions of the offer. (i.e. no incentive traffic!)

    - Work with dedicated professionals that really understand the niche / offer.

    - Credit bogus leads. Non-working numbers, fax machines, incomplete data fields etc. The prospect “not being interested” is not grounds for Advertisers to refuse payment or seek additional leads. Leads falling out of a geographical location should be honored for credit or replacement in certain instances.

    When the user doesn’t have to whip a credit card out the game changes…

    Thought provoking stuff Brandon. Catch up tomorrow!

  2. Amen, brother. Amen.
    Which church do you preach at?

  3. i was going to make a detailed comment from the affiliate side of things about what i’d like to see advertisers do to help build successful and profitable relationships for both parties but just about everything Nicky Papers said above is spot on.. I wish more advertisers got it that way.

  4. ^Nicky Papers post above is phenomenal. Here’s a guy who gets it.

  5. “The bottom line is that if you want high quality traffic you need to provide a high payout. ”

    Good info, as usual… :)

  6. I will ask my AMs to check on my quality on a new offer or if I’m sending some traffic from a new source. Most of the time they get NO response back from the advertisers. Then, after running it for awhile, I end up getting booted or they start shaving/no pixel firing/change landing page ect ect ect.

  7. Let’s be honest. An increased payout won’t stop affiliates from perusing shady channels.

  8. What roll should the affiliate networks play in this?

    Often the affiliate doesn’t have any real leverage or communication with the advertiser, and it should become the responsibility of the network.

  9. @Chris – You don’t ACTUALLY think I forgot about the networks do you? ;) – Part III

  10. [...] Stop Being So Selfish II – If you didn't read AdHustler's awesome part I post on affiliate selfishness, he links to it in the beginning of this post and you should definitely check that out as well as this one. This expands on the first post and talks about how if advertisers would also stop being selfish and thought about setting affiliates up for success then both parties would benefit. [...]

  11. [...] Stop Being So Selfish II – If you didn’t read AdHustler’s awesome part I post on affiliate selfishness, he links to it in the beginning of this post and you should definitely check that out as well as this one. This expands on the first post and talks about how if advertisers would also stop being selfish and thought about setting affiliates up for success then both parties would benefit. [...]

  12. [...] in Part I & Part II of the “Stop Being So Selfish” trilogy I covered how affiliates and advertisers are [...]

  13. No margin… no mission…

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