August 28, 2007
What are Affiliate Network Responsibilities as a “Trusted Third Party”?
So yeah, if you’re quick on the newsfeed you’ll noticed that I pulled this post from yesterday, which was very different than this repost.
I received an email from an affiliate asking me to write about an issue they were having with a merchant getting deactivated at a network, and the merchant owed the affiliates a few months of commissions. There was no communication about what happened, why it happened, and if theres anything being done about it.
This has always been an area of interest to me, so I picked it up and wrote.
Unfortunately, it came off looking like a bitch post, which was not my intention. I don’t want to drag anyone through the mud based on second-hand information.
With apologies to the person who asked me to write about the subject, I have pulled it, slept on it, and decided to fill the void with something a bit different. I’ve removed the comments identifying the merchant and network. I don’t want this to be a place to air a grievance, however valid it may be.
My intention was to use this example as a discussion point for a broader topic, which is what is a network’s role in the Affiliate-Merchant relationship. For now, I’ll ask a bunch of questions.
Who owns the relationship? When a relationship is formed between an affiliate and a merchant, who is responsible for that relationship?
Is the merchant entitled to have that affiliate’s contact information?
When one party acts badly, should the network identify, intervene, and remove that party from the relationship? Should the network be responsible for the actions of the member of their network?
Who is responsible for communicating merchant standing and status? For example, if a merchant has been deactivated due to non-payment, what sort of communication should be issued by the network? Does the network owe the affiliates an explanation as to what is going on and what’s being done to resolve the situation? Or is that up to the merchant alone?
Should a network allow a merchant to get in a situation where money is owed to affiliates but the network doesn’t have the money? Should the network bear some of this risk?
What is the network’s role?
Are the networks like credit card companies? Enabling business and transactions between parties, and when something goes wrong they take responsibility and protect the consumer.
Or are the networks like the telephone company? You can conduct business through their lines, but they have no responsibility for what goes on there.
There’s nothing wrong with either role. Whether you’re dealing with a credit card company or the phone company, you get what you expect.
I don’t blame the phone company for telemarketing because I don’t have any expectations that they are responsible for that. Even though the phone company makes money from the telemarketers.
When expectations of what the role is doesn’t match reality, that’s when problems arise. And worse, if the networks can pick and choose the role they want to play depending on the situation, that results in a bad experience for everyone involved.
How can they justify owning the affiliate relationship when it comes to contact information, but not when it comes to money? Shouldn’t it be one or the other?
Whatever the role is, it should be made perfectly clear.
Let’s use the example that prompted this post in the first place. Somehow a merchant was deactivated from a network and it seems that affiliates may be out of commissions. What makes a bad situation worse is that there’s probably no information available about what happened. This has played out in every affiliate network time and time again.
An affiliate’s expectation may be this:
The Affiliate network has an escrow in place so that any amount of money owed to affiliates is always exceeded by the amount of money in an escrow account. If a merchant goes belly-up or otherwise stops their program or paying into the program, at the very least it’ll be deactivated quickly before any debt in commissions accumulates. And since the network has skin in the game too, they’ll do everything they can to ensure that the merchant pays what they owe.
The network’s perspective is closer to this:
We’ll do everything we can to ensure that affiliates are made whole on commissions they’re owed, and to ensure that a merchant doesn’t default on any commissions owed. This may include holding money in escrow. This is not practical in all cases and we must make concessions for larger, more credit-worthy merchants where there is a low risk that they’ll default on any commission payments. 99.99% of the time, this all works great. Usually, everything runs smoothly and merchants pay everything they owe. But sometimes, things go bad and we and affiliates are out of commissions. We try to minimize this risk, but when it comes down to it there’s little recourse we have when it happens, we’re not responsible for any fees owed to affiliates. We may go after the merchant for our fees. The affiliate is on their own.
How do these differing expectations come about? The former is sunny-day, best case scenario, PR speak. It’s how the people at the networks hope things will work, and for the most part it does. The latter is closer to the hard truth and exists only in legalese in terms and conditions.
We’ve been operating for years with this reality. Somehow we are surprised every time things go badly.
I don’t expect the networks to all of a sudden take on the burden of bad business like credit card companies do.
I do challenge the people at the networks to pick a role, be clear about it, and stick to it.
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Scott -
I am a firm believer that the role of the ANP is changing and will evolve as new revenue demands are placed on them from new owners. Rakuten, Google and ValueClick do not care one lick as much about affiliates. A few years ago the networks new where the value of the relationship was on both sides of the fence. Despite all of the flack some affiliates threw at the networks, some of it rightfully directed, I think it will be very soon that affiliates will be longing for the days of Messer, Hanger, Pike and Crawford. I did a similar post on August 13th that illustrates where at least one network is going vis-a-vis their Affiliates. This is no doubt a timely topic and one that will only really blossom in the next year or two.
For clarification, my response posted above was in reply to Scott’s original blog post, since removed, where he commented specifically how some hotel affiliate programs work. He did not include those comments in his replaced blog post so some may question why I gave the specifics that I did. My point is that my response is in response to what no longer exists on jangro.com, not Scott’s existing comments.
Personally, I think there should be full communication between network and merchant and the network should be involved in what the merchant does. This will ensure that if there is a slip up of any sort, the network already knows about it and does not jump to conclusions and make irrational decisions. Nowadays, these big networks don’t give a rats ass about their merchant and if a problem arises, account closed. They don’t want to deal with the problem and no contact is ever made between the two “partners”.
JP, if you mention a related post, please provide a link also. No, that is not comment spam. The deactivated nofollow is not meant to deter people to post useful links.
Correct me, if I am wrong Scott.
Okay, here is the link to JP’s post
http://bluetent.typepad.com/onlinemarketing/2007/08/affiliates-bewa.html
I can only find the beginning of your original post, but what you described sounded familiar. I saw enough to get my suspicion confirmed, that it is who I thought it was. If it would have been January/February and the merchant would not be inactive, then I would have had a good theory for what happened. It would be interesting to know who that merchant is, is it a big brand? Did their bail out of affiliate marketing or completely out of business, or only out of the network? If thinks turned bad and the merchant has no contact information of its affiliates, how would he be able to communicate with his (former) affiliates, if he did not collect the information outside of the network somehow?
I agree with you that networks are like credit card companies who state that their responsibility is like the one of a phone company. That could be seen in the past and it only gets worse. It does not make sense at all and only creates more issues and pain for everybody (in different ways) and makes you think why that is… What is the intention? There are more than one answer to that question and I don’t like any of them.
JP has a point and it is also hard to ignore that there is some major consolidation going on (beyond affiliate networks). I don’t believe that affiliate networks will become history. There will always be the need for a solution provider and there will always be somebody like an affiliate who promotes another business and needs the means to do the tracking and reporting. The details will probably look different than they do today and you might not even recognize them at first glance, but they will be there.
For me does it look like a movement back to the roots of affiliate marketing. Some of the larger players who call themselves affiliates, were/are not real “affiliates”, compared to classic Amazon.com and CDNow affiliate partners, in the first place. They use the affiliate tracking technology and that is were the similarities end. Those guys can (and will) be perfectly integrated into old school direct marketing etc.
Affiliate marketing as in getting an incentive for referrals of business existed for ages before the internet and will continue to exist unless the world turns into something fictitious that could be described as the wildest dream of a grass root communist.
The old networks sit kind of in between the “chairs” right now. I agree with JP that the big three are probably going down the route that has nothing to do with affiliate marketing, or at least they will try to first. It’s the most lucrative one, the low hanging fruit so to speak.
While I do like your idea of picking one role, or the other, there’s a third working solution that one of the smaller affiliate networks, ShareASale, uses.
They transparently show which merchants are essentially escrowing (they call it auto-deposit) and let the affiliates make their own decisions regarding what value this extra information has in choosing their partner merchants.
Since it is true that expecting all merchants to conform with a network-wide pay-up-front method likely isn’t palatable in recruiting all merchants, I think the “display the role we play” works better than expecting the network to choose one method, or the other, as their sole choice.
Then again, expecting transparency from some of the bigger networks is fairly naive, given their history in so many other areas.
Given the current state of the way different merchants seem to get different treatment, it would be tremendously helpful to see this info like Shareasale does it. Excellent point, Pat.
…up until your fatalistic comment at the end, of course.
Why do you bother talking up these issues if you think it hopeless?
Who said it’s hopeless? I said it’s naive to expect folks like CJ and LS to provide transparency in how and when their merchants deposit funds… do you expect them to do that soon?
sorry, pat, I guess I misread you.
CJ shows a lot about the payment process. I don’t see why they wouldn’t also show this once they realized the impact it could have.
I don’t expect it from LS, but more because I don’t really expect anything from Linkshare.
“I don’t see why they wouldn’t also show this once they realized the impact it could have.”
I share your hope! Reducing affiliate’s risks by providing information is a sure fire way to get them to push harder to make more sales.
Every marketer makes choices every day about where to allocate their next slice of money and time - the more I know about each choice I have, the less risk I have in it and the more inclined I am to pursue that as a “channel” of mine, to then focus on growing and fattening it.
As far as giving affiliates things to help them, information is likely the easiest and cheapest thing for them to provide… networks would be wise to consider the “ROI” of providing more information!
Hi,
I agree that there are a lot of affiliate networks who protect their affiliates as long as merchants/advertisers pay everything as they should… And the worst case is that affiliates are actually left without any payment. I think that all affiliate networks should treat affiliates as nr.1 priority members - not merchants. Why? That’s because in most cases the affiliates generate all the incomes. If affiliates are happy, then they will reward the network with all their work - they will use the system. And more happy affiliates = more happy honest advertisers who will pay their affiliates always on time. To add more, I think affiliate networks should implement the affiliate protection system and would always stand on the affiliate’s side.
Just my 2 cents.
Have a nice day,
Egidijus
Thanks
I can see how this can become an issue, especially for the affiliate. I would recommend sticking to the larger firms (like CJ), but the commission paid probably differs from the larger organizations to the smaller ones; making it more appealing to work with a smaller network.
Thanks man