URGENT: Affiliate & Performance Marketing Purge
With the merger of Epic (fka Azoogle) with display expert company Connexeus (fka TrafficMarketPlace), it is time to talk about something I have been looking at for a while now. The Affiliate / Performance marketing industry is about to go through a massive change that will result in major purges and consolidations in the industry. I had hoped to write this in a few weeks, in order to do some more research and wait to learn the fate of some other players, but with this announcement, it felt like a better time. The online performance and affiliate marketing industry is about to go through what will be one of the most major changes ever, with many players disappearing, going bankrupt or merging. Please read my statement again. I have been covering this industry since 1999, in publications that I’ve owned, first in ADBUmb and then ADOTAS. I have seen these type of things happen before, and I have been correct each time on the resulting issues.
Yes, the signs are there, that while the industry has grown, it is now at a point in which the only possible future is one where the landscape of the industry will be significantly changed. This change has already started, and will happen for a variety of reasons.
1) The domino effect of the destruction of continuity marketing. Starting this year, many continuity companies lost their credit card merchant accounts and immediately shut down – these companies, some of them offshore, others in temporary offices left hundreds of millions of dollars of unpaid bills due performance marketing companies. They paid some of their January and February bills, from cash flow, but now several major CPA networks are about to enter the net 60-90 state where more and more of their affiliates will start to notice they are not being paid on these offers. I want to make this very, very clear – there are entities in this industry that are due tens of millions of dollars, and have suffered enormous losses. Already, we have heard some of the rumor, even from last year of various large CPA networks that suffered because of non-payment of their customers.
2) FTC Lawsuits and Enforcement Actions. The FTC has issued many, many rules in the last year regarding everything from advertorials to credit report offers. Expect most companies to comply with these rules. However for those companies that have depended on “flogs” for their enormous growth (many with back end continuity) they will most likely try to find ways to hide their association and then perhaps find themselves the target of enforcement actions. I’ve spoken to reporters in some major newspapers who have told me that the FTC has several major players in our industry on the radar for possible action.
3) Control of Inventory. The Epic and Connexus merger is purely about the control of inventory. TrafficMarketPlace buys a ridiculous amount of remnant media from websites and other networks, and saw Epic as part of a long term solution to fill that inventory up with “CPA offers.” Epic on the other hand, most likely saw that with all the possible problems that were going to occur in the industry, the only means of growth was to have inventory control.
4) Natural Consolidation and Pruning. It’s natural in an industry that has grown so fast, and 100’s of CPA networks have popped up in the last several years, that many of them will no longer be able to compete in this industry. Our industry is maturing very, very fast and advertisers and agencies are starting to want to work solely with reputable major players. As above, more and more advertisers will be conscious of possible enforcement actions and only want to work with those companies that have inhouse attorneys, compliance staff and a history of professionalism. Companies that are run in their parent’s basement, or depend on deceptive or fraudulent marketing will find themselves only picking up unreliable and unethical clients that major players are scared to work with. In the last few years we’ve seen people leave major players and start CPA networks, depending only on that low lying fruit. Those players, with small or no cash flow will be vulnerable to any enforcement action, non-payment and a slew of other issues.
What’s the key here for avertisers and publishers? Focus on partnerships with major, reliable companies that you can trust on. This is not the time to “test” new relationships with unknown companies that have just popped up in the last few years – many of those companies (while not all) are built on the ashes of bankrupt companies or rely completely on marketing techniques (facebook spam, flogs, adware) that will hurt yourself. If you are a publisher/affiliate, you need to now consolidate your relationships. If you are working with new companies, that “kinda pay” on time, or companies that are run out of a professional office suite somewhere, you need to examine those relationships. If a company has announced “enormous new growth” in the last 12 months, realize much of that is from continuity offers, flogs and other things that have gone away. If they are expanding too fast as a new company, wonder about their future as they spend money that isn’t there.
Now is the time to examine all your relationships, make sure your partners are able to get through this tumultuous time. If you have any doubt about the company’s reliability, start asking for credit references, and bank references (make sure they have millions in their bank account for cash flow). This is not the time to work with newbies and startups, but the time to focus on working with real partners who have proven themselves.
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11 Responses to “URGENT: Affiliate & Performance Marketing Purge”
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(C) 2010 Pace Lattin. It is the policy of this blogger to not edit or remove any content and comments, unless it is specifically attacking a protected group or irrelevant to the conversation, such as a spam. These are the OPINIONS of the respective writers, posters, commentators. All DCMA Notices shoudl be sent to pace@pacelattin.com
It strikes me though that (3) doesn’t make as much sense – anyone selling inventory wants the opportunity to sell it to the highest bidder – if the CPA offers are not converting, why would they bother? Also, the affiliates have proven to be very innovative in making the best of ad inventory so why would EPIC want to try to control that at all?
It doesn’t make sense.
One word: margins. If Epic takes 10%, and Connexus takes 40%, then they combine, they can pay more money for the inventory.
Is it possible that Epic needed to merge or wouldn’t survive? I would guess they have some bumps and bruising from the continuity space
I could not agree more. The industry needs legitimacy to continue, and the cross publication fly by night networks whose only contribution is to commoditize our industry need to be a thing of the past. We need to move to the next level where CPA networks act more like the new model for digital agencies. Where advertisers/agencies will place their trust in this space and the acquisitions by the large media agency powerhouses will begin in earnest. The Performance Marketing Leadership Summit is exactly about this issue. I invite the leaders of the major networks to join us on Monday April 19th at the Intercontinental Hotel in San Francisco (www.offervault.com/leadership) to not only hear two heavy hitters speak – EJ Hilbert (Epic) and Peter Bordes (Mediatrust) – on exactly the issue Pace brings up, but also to participate in setting an agenda for change in our industry. Let’s not just talk about fraud, compliance and transparency, let’s do something that sets the standard going forward so performance marketing can attract Tier 1 advertisers on a regular basis. There is so much money flowing into online right now and PM is not getting it’s share because of the issues Pace is bringing to light. Thanks Pace for taking the lead.
Man, Epic is the biggest scum network. Don’t worry about Clickbooth…
Joe/Alex are big time TROUBLE MAKERS!
Rubbish. You have a point, but are using hackneyed tabloid journalism style reporting.
It’s pretty obvious to me that you are sneaking in the only obvious solution: join YOUR network!.
All the others are going bust?
Net 60 & Net 90? And what, your network is the only one that pays on time, all the time?
Seems you have a conflict of interest in this post. Either declare your interest or keep your sales pitch for the uninformed.
Pace, while I agree with the sentiment of your article it is written a bit like an article you would see on the front page of the National Enquirer. I do however think you’re spot on with your observations. I can tell you that this "change" hasn’t been like some type of catacalysmic event in our industry. This is more like a straw the broke the camels back so to speak. Things have been going down hill in the CPA industry since 2006. Advertisers are pushing harder and harder for maximum returns and are calculating ROI down to a fraction of a penny. Traffic is getting scrubbed, re-scrubbed, and then scrubbed again at both the advertiser level and also at the network level. ALL networks are involved. It’s survival time. If they want to take the advertisers money then they have to make promises that short change their publishers. We’re getting ripped off on our traffic big time. Campaigns are being designed and put up on the networks that purposely have break even or less return for publishers. Shaving is rampant. CPA Managers are whoring out offers that they know damn well don’t work because if they don’t drive X amount of revenue per week their facing the un-employment line.
What really needs to happen is that the publishers need to step up and say "screw this, we’re not sending you guys any more free traffic." Back in 2005 Publishers ruled. Advertisers had to beg for our traffic. It’s a different world now. A publisher strike would be phenomenal. I’ve already quit working with CPA networks altogether. I do some CPC stuff personally, but have moved on. I’m building my own line of products and services to sell. Why should I squander my traffic on some scammy ringtone offer or gevalia coffee for a payout of $2.75? It’s totally illogical, especially considering how rampant publisher rape is becoming.
(*Note. I am still doing a few tests on Affiliate.com offers but it is very limited for the time being. Gina Spano is my affiliate manager and she is an awesome person.)
Response is down too because people are sick of seeing the same crapola every day. I mean how many times can someone get an email about debt consolidation or a free Walmart gift card and be excited about it? ZZZZzzz boring!!!! Too many scammy offers and programs designed to treat the consumer like they are mentally challenged. Offers are designed for the lowest common denominator and stupid people. There are only so many suckers out there and once burned twice shy..
I love how the CPA network owners love to blame everything on publishers too.. like we’re all a bunch of click fraudsters. This is a propaganda tactic being used by the networks and the advertisers so that they can suck all of the profit out of each and every campaign through shaving and scrubbing the shit out of everything.
Bottom line? Ad Networks – Things will get back to normal when publishers are paid fairly for their traffic. We’re the reason advertisers want to work with you in the first place. If it wasn’t for us you’d be flipping burgers. You’re letting your customers control your business because you don’t know how to say no.
Advertisers. If you keep penny pinching and stealing down to the micro penny you wont have any one left that will be willing to push traffic to your shitty offers.
It’s getting to the point where advertisers are simply refusing any and all traffic unless it converts based on their inflated expectations. They choose an arbitrary number that they need it to back out to but won’t do the work to make it happen. Creatives and landing pages and offer designs look like something out of 1996 with stock photography all over the place and nothing in it for the consumer but pain and suffering if they actually sign up for anything.
I quit. Call me when you fix your business model and find some customers that aren’t scum bags.
Sincerely
Russell Rockefeller
Extravagant Media / Opt In Plus
Yep’
100% agree with you!
I have seen it in my own eyes.
Lots of companies doing the ‘Big Talk, No Action’
Gives you the sales speech of a life time, then disappear..
Nature correcting it self.
I’m ready for the change. if fact, I can’t wait !!!!
If publishers dont get paid enough to make a profit then why publish?
CPA works only when an advertiser has skin in the game…
When I am approached by one of these compainies, i listen.. agree that they have the greatest thing since sliced bread and ask for a pre pay that will be worked off…
Most of the time I never hear from them again… we don’t need any partners who won’t make a capital investment in their great deal
I agree to all the things mentioned, however I disagree with the conclusion. There’s always networks coming into and out of this space. It’s really easy to start a network. Takes little knowledge and capital investment to start a network which is what causes this influx and outflux of networks all the time. As far as the network consolidation I don’t know that I agree with that. I think it will continue to expand with 20-50 networks started a year. And 1-2 of those being left 2 years later. But this really brings more and more networks into the space to divvy up the pie more. Such is life. We’ll probably see some networks that specialize in verticals which is happening now but will happen more and more.
A lot of the network owners are just big affiliates themselves that want good pricing from advertisers. And then once they have that parlay it to a few of their friends and wala you have a network
I know someone mentioned, everyone is screwing me, scrubbing, shaving…… Well to be honest you sound like a lot of the friends I have that live in the past. Back in the day SEO was so easy all I had to do was put 2 keywords on the page and 1 link and i ranked and I got rich. Man when adswords first started blah blah blah…. Don’t live in the past embrace where we are now and plan for you future.
I think the natural progression of this business is people learn how to market online using affiliate marketing. Promoting other peoples products and services. Once you get the skills and have some good ideas for things to create it’s natural to move away from being an affiliate. Then to being and advertiser and promoting your products. This is nothing new and has nothing to do with the affiliate space falling apart.
this is healthy for the market after another bubble. similar to the FREE ipod days. Its unfortunate that marketers came in and once again took advantage of the consumer and a good business model. There is no value in tier 3 brand-less brands and products that dont have value to the consumer. there are good products, networks and affiliates that get hurt due to this short term types of thinking & behavior. in the end run this will clear out the noise. there is not enough room for 300 cpa networks.
there is a contraction primarily in continuity marketing and CPA networks & affiliate marketing. . the industry ballooned to 300 cpa networks. 90+ percent sitting on rented back ends and have no investment in tech or enterprise value which means no investment in long term business. just money in and money out short term thinking, with very low barriers to entry and working with tier 3 brand-less brands. Highest payouts and exclusives is not a long term value proposition for anyone, and the affiliate marketing industry has to stop thinking in this short sited way. There is a very big business with long term value for everyone in performance marketing/ affiliate marketing.
there are good networks that own technology and have invested for the future as well as good tier 3 offers that make real products that have value for the consumer, and affiliate marketers who are building long term businesses and their own brands. not looking to be overnight millionaires. We are going to have a healthy cleaning out of the noise. This is typical in any company or industry after a bubble. This allows the industry to contract, take a breather, evolve (if everyone learns from this) and start the next leg of growth.
while this flushes out the noise in the industry you need to find stable partners who have breadth and depth in their product offering and technology and think long term. This is a flight to quality time in the market. Affiliate marketing is a great industry with a bright future as long as we all learn and evolve.