Major news came out of Google yesterday as they take the next step toward launching a CPA (Cost Per Action/Acquisition) advertising model. In short, this means instead of advertisers paying publishers for a click (susceptible to fraud), they’ll pay only when a predefined action takes place, like a product purchase or a user signup.
Dozens and dozens of blogs and news outlets covered this story yesterday, including the New York Times, which offers a pretty good overview. Debates are still raging about whether Google is getting into Affiliate Marketing or not.
What I found interesting was the TechCrunch writeup, where Michael Arrington predicted the death of the affiliate networks, essentially stating that Google with it’s vast network would suck the affiliate networks dry. He summed it up with a comment in response to another comment in that same post:
This tells me that either Michael doesn’t really understand affiliate marketing, or he thinks that Google has much, much more up their collective sleeves.
Of course most of us are yet to see what the new offering will look like, but there’s one key factor that keeps Google’s new offering far away from the Affiliate Marketing model: These are Ads.
Affiliate marketing involves traditional advertising methods like banner ads and text link ads but most of the really successful affiliates are not merely ad-pushing publishers. While there are plenty of affiliates who use affilaite marketing to show ads, the majority of top affiliate marketers form close partnersips and integrate with the merchants they promote. They use tools like promotions, coupons, and product data that get tightly integrated into the affiliate’s offering. They communicate with the merchants on IM, email and even the telephone. An example is a niche price comparison shopping engine. A single page on that site may have 20 different products from 15 different merchants, each with a “buy” link going through an affiliate network.
Google simply cannot service this with a double-blind, put-this-javascript-text-link-on-your-site, advertising model.
If they go anywhere close to servicing this affiliate marketing relationship that I’m describing, they shatter their hands-off, self-service, mass-market, advertiser-publisher model. This model works well for them, scales extremely well, and they have no reason to deviate for the sake of eating the affiliate networks or even their lunches.
Will this cut into some of the publishers that currently operate in affiliate networks? Definitely, but one could argue that Adsense already did that damage. There’s a 95-5 rule that’s talked about in Affiliate Marketing. 95% of the revenues are driven by 5% of the affiliates. This 5% of affiliates cannot be serviced by an “advertising” model.
Affiliate Marketing is not Advertising.
