StatCave Episode 6: An Infestation of Affiliates

That's the right collective noun, right? Just kidding, but I am going after a few common types of affiliates that are shifty and I generally recommend avoiding. Coupon affiliates, I'm looking squarely at you.

There are a hundred ways to let others erode your margin, but I narrowed in on a few of the most common in this week's video. And yes, there are exceptions to every rule, and no, I'm not naming names, but if even one retailer reevaluates their affiliate program after watching this, I'll call it a success. :)

Up and to the right!

Video Transcript: 
I'm gonna get more hate mail for this video than any video I've ever done. But that's okay. We're gonna talk about shady affiliates!

Now affiliated marketing as a concept isn't necessarily evil, far from it. It's just a descendant from the idea of putting a sales person on commission. You wanna pay somebody based on a specific purpose like closing a sale. Nothing wrong with that inherently but in the past 10 years or so affiliate marketing has become an avenue for all kinds of other deceptive and manipulative practices that you should be aware of if you're gonna run an affiliated program. You can make sure that none of these parasites get in and start sucking away at your profit. 

Perhaps one way to come at this problem is to explain what a good affiliate looks like. I use a very specific measure of whether or not an affiliate is a positive contribution to my overall shopping funnel. That is, do they participate before or after the customer actually decides to make a purchase. Any affiliate that interacts with the customer before that point where the customer has decided to make a purchase is contributing to that shopping cycle. Then it's sort of really up to your attribution model how you're assigning credit for that based on where they are in that multi-touch chain. But, if they're touching that shopper only after they've made that decision to purchase, then really what good are they? What are they actually contributing. The shopper's already going to buy.

So these good affiliates often take the form of some kind of content site for somebody whose doing research before they get to the purchase. That's not the only example, that's just the first one that comes to mind when I think of what I want to see in my inbox coming from new applicants. There are plenty of other examples out there. But there are more examples of shady things that are intended to sort of misdirect your attention and just skim off a portion of all of your revenue.

So, why don't we take a quick look at some of the known really common actively evil versions and I'm just gonna take these straight from Wikipedia's affiliate marketing page.

Now this is kind of a mixed bag. What I mean by that is some plugins and extensions to browsers and the like are perfectly fine from the users perspective, from the shopper's perspective. But, they can still be effectively useless and irritating on the retailer perspective, having to pay those commissions. So, there are basically two types of these to watch out for. The actually malicious ones will do nasty things to the shopper, cookie stuffing, things like that. I've literally had somebody at an affiliate trade show tell me "is not hacking. Is toolbar." I didn't mention the word hacking. I don't know what conversation he was used to having as people came by his booth but it didn't give me a very good indication of what that particularly vendor was providing. 

Now, there are toolbars and things like that that will have some kind of feature that a shopper might like like automatically showing coupons that are applicable to the site that they're already browsing on. But, that doesn't really help the shopping site. That doesn't really help the retailer. They're already on the site. The only thing that the toolbar vendor has been able to tell me is that well if they don't find a coupon on it then they might not shop with you. What? You're holding customers hostage. The number of people using a toolbar is relatively tiny and the number of people who don't even realize that they have that toolbar enabled and don't even necessarily use those coupons from that toolbar are still considerable.

Now, there's a particular flavor of this kind of extension driven affiliate that is a little harder to get really upset about and that is one that's using an affiliate commission to fund some sort of donations to charity. It's hard to beat up somebody trying to generate money for charity right? Well, the nice thing is that the shopper gets to choose where the charity money goes but when it comes down to it, if you are a business decide that you wanna send a portion of your revenue to charity you can do that already. You don't need an affiliate to bridge the gap. The argument is that, oh well people are going to preferentially shop where this toolbar or this browser extension works because they wanna see that charity go and I'm not sure I buy that. People are shopping if they happen to in their normal course of their shopping behavior kick some money toward a given vendor then cool. So it's really up to you to consider whether or not you wanna give them a portion of it.

The first one is really pretty obvious. Those are trademark bidders. So trademark bidding as a concept is if you say were running RoysSpecialtyRunningShoes.com then whenever people search for RoysSpecialtyRunningShoes.com that add that might show up is a trademark term because I'd be advertising against people searching specifically for my brand. Not everyone does it but those who do tend to capture a little bit more of the traffic because some of it gets distracted before it gets to the organic results and the cost should be relatively tiny because your quality score is outstanding and generally you don't have a whole lot of competition for your own trademark. So there's no reason not to be doing this yourself. It takes so little effort it's ridiculous. I mean we barely end up charging anybody for managing that campaign because it just is so tiny as a percent of spend. Now, if you're looking at it as a percent of revenue, which is exactly how affiliates work, it becomes a different game. Now the only argument I've ever heard in favor of affiliates being allowed to bid on trademark terms that wasn't just bald face absurdity was the classic refrain of "oh but we only get paid if you get paid."

Yeah well the same is true of a tapeworm. Come on. Now the other kind of PPC Parasite is a little more insidious and it's actually built right in to merchant center. Check this out. Some of these sites are effectively comparison shopping habits right? So the experience would be you have listings with that comparison shopping engine. It's powered by one of your feeds, then they're going to be bidding on products that you carry in shopping against you. They're competing with you. You're driving up each other's costs and then at best the shopper then clocks on one of these ads from one of these affiliates, lands on a comparison shopping site that has a bunch of other site stuff on it. Lots of opportunity to get distracted and not click through and then eventually land on the same landing page you were gonna land them directly on. That's a terrible user experience and it's going to hurt your overall conversion rate for that slice of traffic. If you are running a really incomplete shopping campaign and you're really not doing anything sophisticated with your catalog within that campaign then they might be able to fill in some gaps and that's the argument they're gonna give you.But, my recommendation is just run your ad words well and you won't need any of these people.

Think about the way the shopper interacts with your website when they're browsing around, they're finding the products, they're adding them to the cart and then when they get to the cart they see that little coupon entry field and they go out to the web and look for a coupon to get a few more bucks off and who could blame them. Right? It's not really a problem with the shopper. But then this coupon affiliate brings the shopper back to you as if they had found them in the wild and was delivering it back to your doorstep, when that's just not what happened. They came in after the decision to purchase has already been made. They didn't contribute to that decision in the slightest. Further, if you don't pay them, what's the difference in the customer's experience? They are on your site, they go to a coupon site, the coupon site still has all these coupons because their traffic is dependent on it and then the customer still gets a discount. So instead of giving a discount to a customer and then giving a commission to an affiliate as well and eroding your margin from two different directions, why not just do it one.

There's one reason I can imagine giving an affiliate a share of that kind of shopping experience and that is as a stick to beat them when they aren't compliant with your coupon rules. So if you have coupons that are allowed to be used among your partners and coupons that are exclusive to your internal channels, if you don't pay them any commission then there's no reason for them to respect that delineation at all and every time you send out an email one of your list is going to add to that site. That site may be hidden in your email list. So maybe worth giving them a tiny tiny commission just so that you could threaten to take it away if they don't obey the rules. Some affiliates will claim that the value that they produce is due to the fact that they have your competitors' coupons on their site as well and there's some opportunity to end up with a shopper that decides to shop with you instead of a competitor. 

Few problems with that. One, nothing stopping the shoppers from going the other direction so then it just becomes a coupon price war and two, it just doesn't happen often enough to matter. Perhaps this is their most critical error, that's a testable hypothesis and we tested the crap out of it. We demanded that our coupon affiliates generate at least one percent new traffic. So if only one percent of the shoppers that we were paying them a commission for were coming from other shopping experiences rather than just from our site, we said good enough. One percent was a passing grade. I don't know any other situation where that ends up being the case. None of them could meet that threshold. They're not doing it. They're not doing it at least in any significant volume. Some of them will use paid advertising to encourage that sort of cross-brand shopping so I'm not really criticizing that potentially but just claiming that you should be paying them a commission because of this possibility of a shopper coming from your competitor's funnel is ridiculous.

I look forward to your letters.