The relationship between online advertisers and their affiliates is one of the biggest sources of frustration we hear about from our clients. Online advertisers feel like they’re not fully in control of their sales, and they’re afraid of the risks it causes.
What if your affiliate network goes out of business and traffic to your site stops?
What if they change their commission structure, so that their top affiliates leave for other networks and the quality of your traffic goes down (along with your conversion rate)?
What if one of your competitors starts providing a more lucrative offer to affiliates, and over night affiliates stop sending traffic to you and send it to your competitor instead?
These are just a few of the scary questions that online advertisers face because of their reliance on affiliates. And sales declines can do more than just hurt your bottom line, too.
One of the metrics merchant processors track to determine the health of an account is the ratio of complaints to new orders. This can be especially problematic for continuity businesses.
If you operate under a subscription model, a large portion of your business will be from existing customers, which means there will also be some complaints from this group. So if you’re not bringing in a significant number of new customers to offset these complaints, it can put you in hot water with your merchant processor in addition to decreasing your revenues.
Of course, the nightmare scenario is when affiliates defraud advertisers by doing things like using stolen credit card numbers. The affiliate earns the commission, and the advertiser is left holding the bag since they won’t ever collect that payment and will get chargebacks and customer complaints filed against their merchant account on top of it.
The tension between online advertisers and affiliates has its roots in an economic theory nearly two centuries old. In the 1830s, economist William Forster Lloyd described the “Tragedy of the Commons” for the first time.
This phenomenon occurs when the best interest of each individual member of a group undermines the best interest of the collective.
For example, it’s in the best interest for the fishing industry as a whole to make sure they leave some fish in the ocean this season. That way the fish can reproduce, and there will be a full crop of fish again next season.
However it’s in the best interest for each individual fishing boat to catch as many fish as possible, since the more they catch the more they sell.
So while the group knows that they should leave enough fish left to replenish their supply for next season, the individual benefits from catching as many as possible right now.
The same thing is happening with online advertisers and affiliates.
More aggressive advertising tactics and deceptive business practices resulted in a short-term increase in sales. Since they were successful, these practices continued to escalate as both offer owners and affiliates tried to stay ahead of their competition.
But while individually online advertisers gain an edge by being slightly more aggressive, it’s best for online advertisers as a group to operate with integrity and respect for the consumer.
Unfortunately that knowledge wasn’t enough, and consumers have now become increasingly skeptical of online businesses. Plus their complaints drew the attention of regulatory and merchant processing agencies.
Now the online advertiser and the affiliate have to fight against these trends. Some of them, driven by greed, simply started to think of their businesses as a cash-grab. They are as aggressive and deceptive as possible, trying to snatch as much money from the market as they can, knowing it’s just a matter of time before they get shut down.
But there is another group emerging. A group that thinks of their business as a long-term investment. A group that values ethics, transparency, and customer loyalty.
For this group, there is a tradeshow called ADSUM coming up from December 2-5 in Aspen, Colorado.
If you want to stop the pang of fear that you get every time your merchant provider emails you — wondering if this is the one that shuts you down — ADSUM is for you.
If you want to actually be able to enjoy when you see your sales spike — instead of worrying if it’s fraud by one of your affiliates — ADSUM is for you.
Most importantly, if you want to actually feel good about the business you run — and not like you’re tricking or deceiving your customers — ADSUM is for you.
At ADSUM, you will be able to connect with vendors who share your vision that integrity and longevity are more important than short-term increases in sales, since those increases usually come with a greater risk for being put out of business for good.
You’ll meet vendors who are on the cutting edge of reporting, tracking, and other systems the provide greater accountability for affiliates. You’ll also meet affiliates and other online marketing agencies that are happy to provide transparency. Fraud isn’t good for their businesses either, after all.
Of course, you could choose not to attend, and that’s completely up to you. But before you make that decision, ask yourself what you’re going to do to make sure you’re prepared for the industry changes ahead.
Do you have a plan or strategy to make sure your business doesn’t become collateral damage from deceptive online marketers? What about if legislators decide to step in and drastically increase the regulatory standards? (they have before after all…)
If you don’t have a concrete plan for dealing with these changes, candidly you’re putting your business at risk. Fortunately, you can build the connections and discover the best practices to make sure your business is ready for whatever the future holds at ADSUM.
Moulton Logistics is a proud sponsor of the 2016 ADSUM event. We invite you to schedule a meeting in advanced with one of our staff, and use Moulton's promo code MLMADSUM10 and we will cover a portion of your registration on the official ADSUM Site.