June 21, 2006
The Mother of All CPA Networks?
Google’s jumping into affiliate marketing with their Adsense team’s un-announced new initiative they’re calling the “Content Referral” network.
Google sent out on invite to some of their publishers to test. In short, they’re going to be offering lead generation type creative for publishers to include on their websites. Google will be paying on a Cost per Acquisition (CPA) model. This news came from an email sent out to some of their publishers inviting them to test it out.
Does this spell the end for ValueClick (Commission Junction’s parent company)?
It does according to one internet stock blogger (includes the Google email).
Make no mistake about it, CPA is a big part of Commission Junction’s business. Just take a look at their advertiser list and the EPC numbers. It’s loaded with big-money CPA-type merchants (Finance, VOIP, ISPs, Hosting). If Google succeeds in creating a CPA network, this could take a big chunk out of CJ’s business.
But affiliate marketing isn’t all about non-transparent CPA. Jeff Doak raises some excellent points that pull CJ and other affiliate providers, like the one he works for, Kowabunga, back out of the gallows.
The smaller CPA networks also have to be concerned, though they can surely compete on price. Google, like any large company, will be bogged down in policies and accounting that will probably make it difficult for them to compete with the creative and nimble CPA networks at a pricing and service level. In spite of that, Google can succeed on exposure and momentum alone that it has from it’s enormous Adsense network.
But CJ suffers from Big-Company-itis as well. In case Jeff’s points aren’t enough to make CJ completely impervious to a Google full frontal assault, what can they do to keep their business?
First, they’ll need to increase focus and services toward the retail business. This has never been CJ’s strength. It has been Linkshare’s and Performics’ strengths and it was the mainstay of Be Free as well (now part of CJ). Unfortunately, they’re losing those big retailers left and right as they migrate them away from old Be Free platform. They simply need to stop the bleeding.
Second, they need to become more like the CPA networks who have been nipping at their heels for a while now. For the same reasons CJ has been able to stave off the CPA network competition — momentum and strength of the network — Google can eat their lunch. Instead, they’ll need to compete on price and in doing so, join the CPA networks in sweetening deals above and beyond what the advertisers are paying. CJ, give up some of that big fat 30% on commissions that you earn and use it to keep your publishers.
This is a big one and will surely test the mettle and creativity of JZ and the VCLK bunch.
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As soon as someone leaks the merchant terms we will be able to judge what it is that we are dealing with.
Google will buy VC before they put them out of business. JP says buy VC and hold.
Can someone help me how this CPA model works and what are the threshold decided for payments and how much payments decided i.e. supposing if 5 acquisition then payment made $10.00 per month or whatsoever for CJ & Link share.
Second, they need to become more like the CPA networks who have been nipping at their heels for a while now. For the same reasons CJ has been able to stave off the CPA network competition
[...] Seems like google has not yet surpassed 50% market share for search engines. Apparently, they are also going into a Cost Per Aquisition (CPA) business model. [...]
[...] Jeff Molander makes the following lucid and well thought out insights about affiliate marketing’s scalability in the context of the relationship paradigm… Why the freak-out by traditional affiliate managers and executives as Google enters the space? One word: Scale. It’s a word that, to many, is not comfortable in a realm that is dominated by relationships (those nasty little things that don’t scale!). The concepts of transparent (you know who, what, how, when you’re dealing with) advertising and opaque (you have less of an idea) are central as the former offers less scale, the latter more. As time goes on (competition for advertisers heats up) making performance-based ad buying frictionless is becoming more important. Hence, “traditional” (relationship-oriented, transparent, high maintenance) affiliate programs become more focused (coupon and loyalty shopping sites) and receive less attention (as they require more people power to scale). [...]