The affiliate marketing industry is responsible for creating and growing a number of innovative business models. There's a wide mix of segments, including sites providing shopping information, rewards and cash-back programs offering services to their customers, as well as professional search engine marketers specializing in driving traffic through various marketing techniques (using natural search or PPC, from white techniques to black and all the shades of gray in between). It's been a rewarding experience being part of the birth of an industry. It's not without it's flaws, however. Issues that have challenged sales organizations for decades also appear in this newer sales model. One of the most important issues is channel conflict: If more than one party were involved in a sale, who gets credit?

Like many sales channels, it’s possible for multiple parties to have their hands in the generation of a lead or sale to an advertiser. In most cases, affiliate marketers are ok with the rules of fair competition where “last-in wins”. In other cases, more than one publisher can have played a significant and costly role in the generation of a referral and “last-in wins” seems less than fair.

The conflict is most apparent when an acquisition focused publisher and a retention or incentive publisher is involved in the same sale, and particularly when one affiliate employs technology that gives them a last-mover advantage over the other.

The acquisition affiliate is the sales person (many affiliates don't like that term, but they're selling either actively or passively). If their pitch is successful, they've handed the end-user off to the merchant to seal the deal.

The retention affiliate focuses on creating and serving a loyal customer base. They typically offer incentives to the end-user in the form of rewards or cash-back when they make a sale. Clearly, when an incentive is involved, the end user is more likely to buy. That’s the value that these publishers offer. Further, and critical to their business model, with the use of software these affiliates can remind the end user when they land on an advertiser site that incentives are available.

At the beginning, the software model was seen as brilliant by Networks and Merchants and the affiliates who had a model that could benefit from it. But somewhere along the way, things went south. They became wildly popular and started stepping on other affiliates by jumping in at the tail end of the process. If the acquisition publisher sent an end-user off to buy something from a merchant, it isn’t right that the retention publisher should be able to jump in and take full credit for the commission with the justification that that’s what the end-user really wanted.

As long as this conflict exists, there will be tension in the affiliate marketing industry about the lack of fairness in this model. Even if the retention publisher avoids acting on clicks from a publisher, the entire referral period is still subject to getting stepped on by a publisher with a software plug-in. The industry leaders have tried to address this problem with policies and guidelines, and while some progress has been made, there are groups of publishers and advertisers who remain unhappy with the lack of a good solution.

Until this solution is resolved, the industry will be distracted by these issues. We can point fingers and set policies and guidelines forever.

A Technology Solution

A solution allowing compensation to parties in both channels if they were both involved in a sale would eliminate the conflict. Reform the model and separate these conflicting sales channels.

Treat these two types of publishers as separate channels at the tracking level, allowing a publisher in each group to be compensated on the same action. The first group, the acquisition publishers, is the large number of ordinary publishers. The second group, the retention publishers, contains any that are identified as using software plug-ins or other technology that ensures for the lifetime of the end-user that they will receive commissions.

When there is no overlap, a publisher in either group may be entitled to the entire commission for the sale, as normal.

When there is overlap, business rules will dictate which publisher gets commissions. Merchant and solution providers can create terms where it is possible for commissions to be paid to either or both parties. What those commission are would be set by the advertiser. It should also be possible to specify a different referral period for publishers in each group.

In addition to the standard terms, the terms would dictate how compensation would change (if at all) if there was a publisher in the opposing group involved. Each publisher would have the potential to earn a different commission rate in the situation where there was an out-of-channel publisher involved in the sale.

Can a technical solution that allows a fair assessment of commissions solve this industry issue? I think it can.

There are certainly questions and problems that come out of a solution like this, like how commissions would be allocated, but what a great industry change would take place if an acquisition affiliate was able to refer an interested buyer to a merchant. That interest could be strengthened by the promise of a rebate from a retention affiliate, and both affiliates could be rewared for their work.