Does affiliate commission drive up PPC?

[James Pass]

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Does the increasing numbers of affiliate programmes in the Finance arena drive up the cost of PPC? If an affiliate earns equal to or above the going PPC rate (albeit often the affiliate is paid on a different financial structure than PPC) then surely they will utilise PPC to drive more traffic and make revenue on the profit margin. With multiple affilates operating on the same scheme, surely this drives up PPC rates and reduces the profit margin. The knock on affect of this is for the affiliate is either:

1/. Request more commission (which may or may not be possible)
2/. Quit the programme looking for fatter margins elsewhere
3/. Become increasingly reliant on natural traffic (SEO, Email, etc) to earn revenue.

I know that certain brands ban bidding on certain terms to prevent this, but was interested to here want Merchants and Affiliates feel with regards this issue? Obviously this can lead to some instability in the market.

[pricethat]

To a degree yes, but what is most often overlooked and not considered by merchants is that the affiliate often does this at his or her own risk. It is very easy as a merchant to just look at what is paid out, but never do they see the hundreds of hours put in by affiliates to get those kind of returns.

It is also easy to think that there are a set amount of players and that affiliates raise the costs, but if the costs were lower then their would be an equally high amount of novice merchants fill those shoes, perhaps it is the high costs that put off many of the smaller merchants from filling the shoes.

[10k]

This is the age old question - and of course in simple terms the more people bidding on a keyword, the higher the price will go up, however with recent changes this isn't always the case. The brand name bidding question is always a touchy one. The conversion rate on brand name bidding is great, so very lucrative for affiliates, and very easy - however most merchants don't allow it - after all they have spent time and money building up the brand so shouldn't have to pay commission for traffic they could easily get themselves.

The other side of the coin is that there's nothing stopping competitors bidding on your brand (Unless it's trademarked of course) so searching for any given brand is going to return a whole host of google ads, so surely it's better that these are affiliates rather than competitors? It'd be intersting to see what other people think about the brand name/restricted keywords bidding issue. In my experience most affiliates think that merchants shouldn't have restrictions on keyword bidding at all, and most merchants think they should

[pistol101]

The other side of the coin is that there's nothing stopping competitors bidding on your brand (Unless it's trademarked of course) so searching for any given brand is going to return a whole host of google ads, so surely it's better that these are affiliates rather than competitors?

We've actually started to find that if the brand is strong enough that the loss of business to the competition is often less than the cost of bidding on the terms! Interesting times ahead for some affiliates and some agencies.

[Gavinio]

We've actually started to find that if the brand is strong enough that the loss of business to the competition is often less than the cost of bidding on the term

Very interesting - brave thing to do though.

And there's a Kudos factor to being in that nice blue box - even the old MD of WidgetsRus can type "WidgetsRus" into Google.

[sarah broome]

The other side of the coin is that there's nothing stopping competitors bidding on your brand (Unless it's trademarked of course) so searching for any given brand is going to return a whole host of google ads, so surely it's better that these are affiliates rather than competitors?

I agree with the fact that it would be better that it is affiliates bidding rather than competitors, so why don’t the merchants highlight what they are bidding so that the affiliates can bid but not above that set amount.