Do networks deserve their override?

[drivetowin]

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As most here are aware, there is a de-facto standard of 30% override on affiliate commissions charged to merchants by the affiliate networks.

With affiliate revenues now running into many millions of pounds, are the networks doing enough to earn 30% of what is now a very large sum of money?

All networks do the ad hosting / tracking / commission accounting bit - I am not disputing that has real value but what else should they be doing - from both sides of the fence, merchant and affiliate - I know it is the merchants who pay it, but in effect it is we, the affiliates, who earn the network their 30%, so do get enough in return?

From an affiliate viewpoint my gut feel is no we don't at the moment, from any of the networks.

So what else should they be doing?

Well for starters I reckon:

A dedicated affiliate manager for a small group of affiliates once those affiliates produce above 'x' amount of revenue - after all if say half a dozen top affiliates produce £3 million sales for a network per year, then the network is earning £1 million from the efforts of those half dozen so by my reckoning the least they deserve is a dedicated manager at the network - yes I know networks send out nice Chrimbo pressies but an affiliate manager would be so much more useful (heck if you want to be festive guys get him/her to wear a strategically placed bow in the festive season )

Facilitation of meetings between affiliates and merchants

Affiliate training academies - say a two day course on what to do and what not to do to be successful

Regular affiliate contact - not just newsletters but being available on MSN and phone calls to affiliates - any affiliate who makes sales should expect at least one personal contact a year I reckon.

Safeguarding affiliates against merchants going walkies - through better merchant contracts, enforcement of contract terms on termination, and commercial insurance against merchants going into liquidation.

That's all of the top of my head - and obviously all from an affiliate perspective - I'm sure merchants will want to chip in too - and of course if any network wants to mount a solid defence to justify their current 30% - feel free!

[Qui Gon Jinn]

They do make a good buffer (courtesy of Tyson) between affiliate & merchant/agency.

Personally networks are a good thing but not necessarily doing the right thing, but some have lost or are losing their way with regard to where priorities lie or the roots of affiliate marketing. Either blinded, misguided by pandering to some of the bigger brands & agencies ... or simply scared & consequently seem to be puppeteered (as mentioned before). Networks are in some extent being bent of a barrel & some sympathy needs to be given, however perhaps affiliates could assist in fighting some of those common causes. However, I do feel they generally move too slow, how many advancements are we asking for today that we were a year or two a ago.

But on the whole networks are very important & there are more plus points than negative ... but you can never account for weakness.

However the message seems to have been lost in translation that the lifeblood of affiliate marketing is the affiliate!!!

[GW-Sean]

I've been playing the affiliate game from the merchant side of the table for a little while now - one thing you just mentioned struck a cord with me...

Facilitation of meetings between affiliates and merchants

Now I'm not into naming and shaming - but there is a problem with some networks whereby contacting an affiliate directly to discuss a deal or private offer (whatever that may be) is an issue (i.e. Networks will not allow merchants to contact "their" affiliates! )

This seems kinda silly to me.... considering most of you guys are smart enough to be signed up with a number of networks - the whole paranoia thing is no good for anyone!

The important thing I'd say is to separate out which networks need the improvements in the areas you've mentioned - there are some that work harder than others in this respect.

[drivetowin]

Just to be clear, I'm not saying that networks aren't a good thing (because they are) and I'm saying we don't need them (because we all do) - it's more a case of what should / could they be doing better...

[Red]

I agree with Qui Gon Jinn here, and that networks are a good thing but having worked with the majority of them (via differing businesses), I don't think at times, as a merchant I've really had value for money.

I often feel that working for a smaller organisation with a lesser known 'brand' often hampers the attention you get from certain networks - queries seem to take longer to answer because we're not Currys or Dial a Phone.

But the networks do provide us with stable software and interfaces to communicate with our affiliates - I guess it is then up to us then to develop the program further so it works for both us and the affiliates.

[Mogga]

All networks are equal, some networks are more equal than others.

[DomainsUnlimited]

I have used quite a few networks and independent programmes over the years, the networks behave the same as some advertising agencies who sit back and let their 15% NPA or 12.5% PPA commissions roll in whilst the publishers and clients deal direct using the agencies as booking houses...

Am working on an affiliate / advertising network directory

Now if the networks want to reduce their 30% back to 25% and give us the extra 5% they would make us all very happy!

[hpops]

30% is simply huge for what is mostly a tracking and reporting platform. I think that networks now operate in a far more competitve market place and that publisher value adds are frankly the only way that that override is going to stay that high - kbudden - great points, I'd agree with the lot.

Finally, I hear strong rumours that many programs now operate significantly under 30% override (I've even heard 15% mentioned)

[KevinEdwards]

Hi,

Programs operate under a whole variety of different metrics, from lower overrides for exclusive programs to different general overrides and also managed CPAs, where a total CPA is paid for a product leaving the network to incentivise and set general, as well as bespoke, CPAs from that total amount.

I'm surprised many people assume 30% is a standard.


Thanks,

[Rich]

I'm surprised many people assume 30% is a standard.

I'm not since that was the widely accepted standard a few years ago and the networks haven't told us any different.

The way I look at it is the network take a cut out of the transaction between merchant and affiliate and as such its wrong to think of it as just a charge to the merchant. This override is equally a cost to affiliates and so networks should be more open about what they are taking out of the deal and what they are offering both sides.

For example... taking the view that the merchant pays the override...
A Merchant has a sale for £100, pays 10% commission and is charged a 25% so pays the network £12.50, the network keeps £2.50 and passes on £10 to the affiliate.

Now.. taking the view that the affiliate pays the override...
The merchant has shown they will pay £12.50 for the sale, so they pay the same amount as before but this is all due to the affiliate. Now the network still needs paying so they charge the affiliate 20% of their income which works out as the same £2.50 as above. To simplify the accounting the network takes this charge out of the money before passing on to the affiliate so you're in the same situation as above. The merchant pays £12.50 Network takes £2.50 and the affiliate gets £10.

Ok, thats probably made my point as clear as mud but, ultimately, both sides share the cost of the networks override.

Also, in the same way they say they offer different terms to different merchants, isn't there an argument that could be made that different affiliates should get different rates? For example, surely the largest affiliates have a lower admin cost per transaction than the smaller ones and so should benefit from that?

[Hero]

surely the largest affiliates have a lower admin cost per transaction than the smaller ones and so should benefit from that?

Actually, they have a higher cost, as they usually have an account manager as well, they are a bit more demanding, more reporting is needed etc etc. Not that we're complaining

One thing that hasn't been pointed out: networks take up the payment task, apart from providing the tracking and technology platforms, which is another factor included in the override. It's not an easy job with all those affiliates prefering cheques, for whatever reason, over bank transfers.

On top of this, many merchants don't have affiliate managers or admins in place, which leaves the job up to the networks: recruiting affiliates, keeping those affiliates' interest, organising promotions, getting the stats together, identifying problems, blah blah blah blah. And that for programs on supported solution, so imagine the fully managed programs...

Having worked for merchants for so long, I can understand why both merchants and affiliates would complain about networks, although I never was among those complaining. I have very rarely come across an idependent affiliate scheme that has a)reliable tracking b)frequent payments c)access to stats for the affiliate d)higher commissions (most merchants, for reasons beyond my understanding, just replicate the same commission rates for all platforms).

At the end of the day, who would you rather interact on a daily basis with: 100+ grumpy merchants, or one smiley network

[eskimo]

In my experience as a publisher, I personally don't think I'm getting great value for money, and this is a charge which which I could level at a number networks.

I'm constantly surprised at the lack of professionalism displayed by some networks and their ever growing catalogue of basic errors and broken promises.

I do get the feeling that they are beholden to merchants, and I fear that with the rise of PPC, the networks need merchants more than the other way round.

I also agree that networks have been to slow to innovate and change, just take the issues with product feeds as an example. In return, this may explain why I don't feel any allegiance to any particular network

[Qui Gon Jinn]

Networks Role

Reputable Networks fuse things together and are the prime mediator within what is a Symbian relationship between merchant, network and affiliate, applying to programs via a network is a preference rather than stand alone deals known as independent programs.

Networks provide publishers the opportunity to earn more revenue from their audience on a pay-for-performance basis. Publishers can partner with hundreds of advertisers and access millions of ads from a single web-based interface. Networks are supposedly the trusted third party that tracks and reports on every ad in the network, sends a monthly payment to publishers, and provides a suite of online tools to help publishers optimise their performance.

How it Works

An advertiser joins the network and places ads, offers, and links in the network, making them available for placement by a publisher. Publishers apply to join the advertiser's program, and upon acceptance, select and place the advertiser's offers on their Web site.

These offers and links are served and tracked by the network. When a visitor to a publisher's web site makes an actual purchase online or fills out a form, that transaction is tracked and recorded by the network. The Network handles all of the collection and processing required to ensure fair and timely commission payment for the publisher, and all of the administration and verification necessary to ensure qualified sales and leads for the advertiser.

The Benefits

- Account monitored by an independent third-party
- Single interface to manage multiple advertisers
- Single id and password to access all accounts
- One consolidated monthly payment via direct deposit
- Payment available in multiple currencies
- Real-time tracking and reporting
- Hundreds of quality advertisers
- Multiple link types and offers
- Online productivity tools
- Free service and support
- Online knowledge base
- Free sign-up
- Merchant Product databases

All these benefits allow a publisher to devote their time and focus on what they are best at - Internet marketing and SEO. By sending quality traffic / customers to advertisers resulting in sales at a low CPA (Cost Per Acquisition) and a fantastically higher ROI (Return On Investment) for the merchant - a model which offers the utopia of fully accountable below the line marketing .

[AdsertiveJen]

I'd also like to add to Qui Gon Jinn's list of network benefits that many networks also give affiliates the benefit of being paid their commissions sooner. Many merchants pay networks Net 30 and a lot of networks are paying their affiliates Net 15 to give them an extra bonus and say "thank you for working with us." We really do value our affiliates' business and we're here to help make your job easier.

[drivetowin]

While there may be a couple of networks that work that way I don't think there are many - many networks which offer shorter payment cycles do so only because they are effectively pre-payment to the merchant, i.e they are already holding the funds from the merchant.