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It’s happened time and time again. A company produces a product and pays online affiliates to sell their product with the promise that they will receive a commission.
The online affiliates begin to sell the product and end up selling more than the actual company. Then the age old question occurs, why are my online affiliates selling more than me? This seems to be a problem for ecommerce companies who sell their goods online and use online affiliates to help. There are many reason why online affiliates outsell company’s on their products, but the main two that we will focus on are price and incentives.
One of the primary drivers of consumer purchases is price. Everyone should know that consumers have become “shop around” savvy. It’s no longer the “buy because I want it and forget price.” Instead it has become “let’s shop around on the internet for the best price,” and this isn’t hard for consumers to do with shopping engines and comparison shopping sites springing up on the internet daily. If a company is selling a product online and they want it to generate more revenue than online affiliates, they need to make sure that they have the best price possible. A perfect example would be my recent purchase of a cell phone. I bought my cell phone from a third party vendor instead of my cell phone service provider. The third party vendor had a better price; they included a car charger, a leather carrying case, and didn’t require that I extend my cell phone contract. If I had bought my phone from my service provider I would have spent at least $40 to $60 more, plus I would have had to pay an upgrade fee. The third party vendor offered better incentives than my actual cell phone service provider.
Incentives to buy a product are also important factors to help a company outsell their affiliates. Let’s say that your company and your affiliates are selling product “x” for $40. This puts you on the same playing field as your affiliates, but what happens when your online affiliates adds incentives. The affiliates offer free shipping on orders over $25 for example. Guess who’s actually gaining a new customer? Correct, the affiliate. Incentives such as free shipping, a free gift, and discounts can influence consumers to buy from an online affiliate instead of the manufacturer. What’s the purpose of selling a product on your site if a consumer can go to reputable online affiliates and buy it cheaper, with better incentives?
Many online companies need to sit down and be honest with themselves about their online affiliate strategy. Online affiliates are supposed to increase company revenue not take away from it. If all of your customers are going to online affiliates, then you have to pay out more commissions. The whole purpose of online affiliates is to help your company generate more revenue by reaching consumers that normally wouldn’t know or come to your site. There’s a delicate balance that must be kept between online affiliates and companies, otherwise the online affiliate becomes a paid competitor. If you’re going to sell your product online and use an online affiliate marketing program, make sure that your website has the best price and the best incentives. Otherwise, you should let the online affiliates sell the product and focus your attention elsewhere.
When Google officially bought DoubleClick on March 11, 2008, one could have seen this coming. In fact, many did; but were unsure what form it would take. Along with DoubleClick came their Affiliate network known as Performics; which is one of the oldest networks, started back in 1998.
In actuality, Google already owned one of the largest affiliate networks; Google Adsense. The only difference was that it operates on a cost-per-click basis. Traditionally, Affiliate Marketing is conducted on a cost-per-action or cost-per-lead basis.
Many people were unsure how Google would proceed with Performics. On June 30th, 2008, Google and DoubleClick made it official, releasing this statement:
“We are pleased to introduce Google Affiliate Network. Effective Monday, June 30, 2008, DoubleClick Performics Affiliate will operate as Google Affiliate Network. The integration with Google’s brand is a reflection on efforts to quickly assimilate our business and teams, as well as reinforce Google’s commitment to the Affiliate channel. Together with our new colleagues at Google we are creating new opportunities for monetization, expansion and innovation in Affiliate Marketing.”
So there it is. The Google Affiliate network has been born. Personally, I think this can be good for Affiliate Marketing as an industry. Along with Google comes credibility and recognition which can help to attract new advertisers and publishers to this channel. Performics has a history of attracting some big names and that shouldn’t change. With the potential influx of new merchants, there will be more choices for publishers. Advertisers will have to take their program t the next level to keep the affiliates they have and to attract new ones.
With that being said, you can probably expect the other affiliate networks to step up their game as well. One thing that this shows is that Affiliate Marketing is here to stay. So in order for other networks to compete and maintain their market share, expect improvements and innovation. Going up against the big G can be tough. Just ask MSN, Yahoo and the likes.
The changes to date have been minimal. The reps at Performics now have @google.com email extensions and the interface was given a face lift to reflect Google’s look and feel. Currently the platform will still be hosted on Connect Commerce, but will eventually be migrated to a google.com product url. Once that happens, you should be able to incorporate the Google Affiliate network into your current Google account.
In conclusion, this is an exciting time in the Affiliate Marketing industry. I think the majority are hoping that this brings new technologies, increased competition, improved service and more selection. Only time will tell…
Affiliate Marketing is the oldest, most original form of performance based advertising. It goes way back to the days before the internet. The evolution of the internet and related technologies has helped propel this marketing mechanism to the forefront of online marketing opportunities today.
More advertisers are beginning to realize the importance of this channel due to increasing competition in the search engine marketing spectrum. As a result, some heavy hitters are making a bullish effort to capitalize on its popularity. In addition to the “big guys,” small CPA (cost per acquisition) networks are popping up all over the place.
If you haven’t been in a hole for the past few months, you’re aware of the Google/Double Click deal. Double Click owns Performics which is a search engine marketing company as well as an affiliate network. In early March, the deal received approval from the Federal Trade Commission and the EU. The deal quickly drew enormous amounts of scrutiny as many saw this as a conflict of interest for Google. Finally on April 4, Google announced it would go through with the acquisition but would sell off the search engine marketing side of the business. Google made it clear however, that they would in fact retain the affiliate marketing division of Double Click/ Performics.
Another big player to join the Affiliate Marketing arena is AOL. AOL recognized this as an important online marketing sector that is growing at a rapid pace; and this past February acquired buy.at. Buy.at is a large affiliate network which was started in 2002.
The emergence of these large companies joining this channel along with the startup of many smaller CPA networks; has helped propel this marketing technique. With the forecasted spends for online advertising, it appears that this method is poised to grow impressively. It should be exciting to see what these new players will bring to the table.