I’ve never noticed this one before, but apparently Facebook now has an “On This Day In [Year Here]” widget in the sidebar. Here’s what mine says today:

Yes, I surely remember that one. It was probably the most surprising one I’ve ever seen.

Russians have a proverb “Как корабль назовешь, так он и поплывет”. Some translate it as “A ship begins with its name”, but its literal translation is really: “A ship will sail the way you name it”. Needless to explain why this particular proverb came to my mind when I saw the name of the above-quoted affiliate in a program application.

On a separate note, it also seems that some especially beginning affiliate marketers believe that the more serious the name of their company/business sounds, the more credibility it adds; and so they include words like “Corporation”, “Solutions”, “Marketing”, etc. For me, as an affiliate program manager, the name is irrelevant (unless it’s as obnoxious as “Rogue Marketers”, of course). In fact, it’s not an element that I consider for longer than half a second when evaluating affiliate applications. There are other, more important, things to consider, and I’ve mentioned them in my How to Evaluate Affiliate Applications earlier.

As always, the comments are all yours, and I’d love to hear other people’s opinion(s) and/or observations on this front.

(If I had a way to have a subtitle for this post, it would’ve been When I Really Wish I Were Called Something Else)

Picking up the topic of what we should be called both individually and as an industry, and also returning to the topic I raised back 9 months ago in my 93 Percent of “Affiliate” Tweets Are Junk post, I’d like to share a little experience.

For the second or third time in my life, I’ve used an #affiliate hashtag in one of my tweets, and guess what? Spam immediately followed (as it frequently does):

It is interesting to see that both of the tweets I received this time were sent “via API”. To start using Twitter’s API you actually must “register an application” with Twitter [more here]. Does that mean we’re actually seeing automated spam here?

In any event, it’s when I see people abusing the word “affiliate” in such ways that I wish I were just called something else… We shouldn’t be tolerant of those who try to make the name of our industry synonymous with “spam” (like it has already sadly happened with at least one other type of digital marketing). People like the two mentioned above have nothing to do with authentic affiliate marketing! They are plain spammers.

Reading through thousands of tweets, blog posts, affiliate program descriptions and other material related to affiliate marketing on a monthly basis, I see the same set of words and phrases being used over and over again… to the point when they no longer strengthen the content, but do exactly the opposite — discredit and weaken what you’re trying to say. Just as excessive exclamation marks or capitalized words, I believe the following 10 words and phrases should just be avoided at all times:

1. Instant / Fast — Whether you’re talking about an “instant access” to an army of affiliates, or an “instant income” for affiliates, you’re just making things sound too unbelievable to be true.

2. Easy / Simple — C’mon, folks! Using these is akin to calling affiliate marketing income a “residual/passive income” (or even “autopilot income”) as some do. By definition, passive income requires very little effort to maintain the income flow. This is not true about affiliate marketers who have to stay alert on the latest changes, developments, and threats, and adjust their strategies accordingly.

3. Success — Real “success” will always depend on the affiliate (or the merchant) themselves. It’s not something you can promise anyone.

4. Hot(est) / Best (especially when talking about an affiliate program) — Inserting adjectives like this into your affiliate program description just discredits the rest of the text. Either replace them by stats and real success stories, or avoid them.

5. Make Money Online — In case you haven’t heard, performance marketing is no longer only about online, and neither is it only about making money, by the way.

6. Highest Payouts/Commissions — They aren’t worth anything unless your product/service is in real demand, priced right, and hence, the conversion is there.

7. Boost Sales — They won’t “boost” unless you put in considerable effort.

8. Unique / Innovative — Add “revolutionary” to these, and you’ll loose thousands of listeners.

9. Outside the Box — Just substitute with “differently” or, better yet, explain how different it is, and why this difference is valuable.

10. Integrity, Trust — These are not for you to claim about yourself. Leave it to others to decide.

Have I missed anything? Feel free to add more in the “Comments” area below.

The amount of business and even e-commerce literature that equates affiliate marketing to multi-level marketing is substantial enough for me to address this common misconception in my blog. Paul Ford, for example, in his Multi-Level Marketing brochure states that affiliate marketing is just another term for MLM marketing, a name that appeared due to recent changes in legislation regulating businesses that employ multi-level systems. Shah and Erickson in their Dictionary of E-Commerce state that affiliate programs use “a multi-level marketing concept where consumers (affiliates) attract additional consumers.” Well, first of all, affiliates are most often not consumers, but marketers, and frequently, professional marketers. Secondly, the “multi-level marketing concept” is utilized only when an affiliate program has a second tier, which allows affiliates to either (a) earn a one-time bounty on every affiliate they refer to the merchant (e.g. you may decide to pay your existing affiliates $1.00 for every new affiliate sign-up) , or (b) be paid a lifetime second-tier commission on all sales generated by the affiliates they refer (e.g. a merchant may be paying a 10% commission on the first tier, and 2% on the second tier). It is this last possibility that merchants have that confuses some people; and it is important to mention that it is extremely unusual for any affiliate program to have more than two commission tiers (most have only one).

In her Riches in Niches book Susan Friedmann warns affiliates from being trapped into MLM type “affiliate” programs, especially those that charge affiliates to join the program. Just as the sign-up fee should immediately raise a red flag in the affiliate’s head, so should the presence of multiple tiers too.

Another interesting point is being raised by Scott Dacko in The Advanced Dictionary of Marketing. Dacko states that the scope of network marketing (also known as matrix marketing or multi-level marketing) overlaps “with many aspects of affiliate marketing.” He writes that the basic approach of both affiliate and MLM marketing is united by “the use of an interconnected system of firms or other individuals outside the organization who essentially act as agents of the firm in facilitating the distribution of the firm’s offerings and in securing sales from end-customers.” The author is only partially right — both affiliate and MLM marketing use outside people to market a product/service. However, the outside sales force that is “interconnected” in MLM programs, is not in any way interlocked in affiliate marketing programs. Additionally, while the primary goal of most MLM schemes is to create (and profit from) pyramids of resellers, the main idea behind affiliate marketing is the creation of a direct partnership/affiliation between a merchant and an affiliate, and collaborative work towards the achievement of common goals — creating sales, leads, or other desirable end-customer actions. There are other specifics, but these would be main differences.

Affiliate marketing is not MLM marketing, and a close look/comparison quickly reveals the differences.

While I fully understand that the motivation behind this particular article was to generate affiliate sign-ups for one given “CPA network” — and this fact alone makes the endorsement highly subjective — I do feel that it is important for me to address a few misconceptions that this article is spreading. There are at least four major fallacies present in that text.

They are:

Fallacy #1
“CPA marketing” is different from affiliate marketing.

CPA stands for cost-per-action. Cost-per-action is basically the very idea behind affiliate marketing as a method of advertising/marketing. It is a type of remuneration that essentially says: I’ll pay you when there is action. The two most widely spread CPA payment models are CPS (cost-per-sale) and CPL (cost-per-lead). The advertiser decides which action to pay for (sale, lead, subscription, etc), and some cases both CPS and CPL models are combined within one affiliate program (e.g.: 10% commission on each sale (CPS), and $0.5 for each newsletter sign-up (CPL).

CPA is the backbone affiliate marketing. It is affiliate marketing. “CPA marketing” = affiliate marketing.

Fallacy #2
“CPA marketing” is what “CPA networks” do.

As I had written elsewhere, a better name for “CPA networks” is sub-affiliate networks. They have contracts with advertisers which agree to pay them a certain amount of money “per action” (normally, “free to the end user” as the article I’m critiquing  points out), which the network, in its turn, redistributes between its affiliates. The network itself acts as one big “affiliate” with multiple sub-affiliates under it. Is the basic marketing model that’s being used any different from traditional affiliate networks (like Commission Junction, LinkShare, ShareASale, etc)? No. It is exactly the same, with the only difference that the “network” acts as your one affiliate. This, in its turn, changes the task of affiliate program management to something significantly narrow than affiliate program management on one of the traditional affiliate networks, but that’s a separate subject.

Fallacy #3
“CPA offers” are more effective.

The author of the CPA Marketing vs Affiliate Marketing article writes:

The reason why CPA is far more effective than promoting affiliates is that often its free to the end user, all you need to do is get them to sign up for a free trial or give their email address or contact details. In return you can get commission of anything up to $40 per sign up (this depends on the product) Affiliate marketing relies on someone ‘buying’ a product in order to get commission which you can imagine is much harder.

Very accurate description, but which of the above really speaks of the effectiveness of this method? It may be great for an affiliate (or a sub-affiliate of a CPA network) who creates a JillsFreeTrials.com website (or something of the kind), and markets free trial offers to its visitors, getting paid “up to $40″ for each free trial/sample requested. But how effective/beneficial is it to the merchants/advertisers that Jill promotes?

Speaking from experience, I’ve had a merchant tell me that they have really wanted to partner with a particular “CPA network”, but because the network has explicitly expressed that they are only in working with merchants who have “free sample” offers (and didn’t care much about this particular merchant’s data feed, or marketing the real product(s)), they had to pass this “opportunity” on.

Fallacy #4
Some “niches” are more profitable (for affiliates) than others.

This simplistic approach is based on one metric only — the payout amount. This may work in some affiliate marketing contexts, but in most cases it won’t. Read my post on 5 C-factors that should influence your choice of an affiliate program, and you’ll see why. That commission or bounty amount may be extremely deceptive.

I could probably write a whole chapter on the topic of “CPA offers” versus traditional affiliate marketing, but I have to mind your time, and stick to the blog’s format too.

When someone makes a claim that that “CPA has become the next biggest rage to make money online”, and it is “a much easier way to get conversions and profit” than affiliate marketing, please understand that this person is (a) wrong on their terminology (the basics), (b) is trying to sell you a get-rich-overnight myth, and (c) may be spreading a number of fallacies. If the spelling mistakes in the above-quoted “article” didn’t turn you off, I hope this post makes you much better prepared to digest the real differences.

A few days ago Russia celebrated Christmas, and while choosing a movie to watch yesterday night my attention was naturally drawn to a new film by Pavel Lungin — “Tsar” [more here and here | it's also available in the U.S. with English subtitles]. It is not an easy movie to watch. Much of it depicts the terror and chaos that the 16th-century Russia lived in; and many of the happenings reflected in it reminded me of the topic of my Cambridge dissertation – Stalin, people’s attitude towards him, his terror, etc. The two main characters in the “Tsar” movie were Tsar Ivan the Terrible and Metropolitanate Philipp (tsar’s childhood friend). Ivan invited Philipp to serve as the metropolitan/chief bishop over all Russia during a very uneasy time in the history of the country. Philipp agreed, and dived right into the terribly reality of oprichnina, and the omnipresent fear and terror. Without a shadow of a doubt he stood against the sin, and refused to bless anything connected with it. Such a decision ended up costing him his life…

We live in a world of very different realities. However, the questions of ethics, and adherence to moral norms constantly come up — especially in the industry of affiliate marketing. Many are going with the flow — the big-cash-in-short-time flow; but there are people (OPMs, affiliate program managers, industry’s advocates like Kelly Stevens and Melanie Seery, networks like buy.at, ShareASale and AvantLink) that take a stand against unethical affiliate marketing regardless of what it costs them. Of course, these days the costs are not as dramatic as one’s life, but still…

I’d love to see more of Metropolitanate Philipp kind of people around me, and I will keep on doing everything that I can to keep exposing the “black hat” players in the industry — to make things more transparent and obvious for everyone. The choice will always remain open to you, my readers. I hope you’ll take a clear stand too. It’ll only help your business.

There is a book co-authored by Dave Chaffey, Richard Mayer, Kevin Johnston and Fiona Ellis-Chadwick, and entitled Internet Marketing: Strategy, Implementation and Practice. In the chapter on Traffic Building the authors spend some time talking about affiliate marketing. One thing that jumps right at me is the following statement:

To manage the process of finding affiliates, updating product information, tracking clicks and making payments, many companies use an affiliate network or affiliate manager such as Commission Junction or Trade Doubler. (p. 388)

The authors also show the following graph to illustrate “the affiliate marketing model”:

It seems that there is a bit of an inconsistency between the quoted sentence and the figure. In the above-quote statement, the words “affiliate network” and “affiliate manager” are used interchangeably (and both affiliate manager and affiliate network’s responsibilities are bundled together); while the graph is bit closer to the truth, saying that it doesn’t have to be an affiliate network, but the whole system may be managed by an independent affiliate program (not “network”!) manager. But even with the graph, there is no explanation of scenarios when an affiliate program is run on a network, but managed by an affiliate program manager, and I really wish the authors elaborated a bit more on the topic of program management.

The problem is that many merchants really confuse affiliate networks for affiliate managers, whereas in the vast majority of situations these are different participants of the process. See a more detailed explanation of the differences in my “Affiliate Networks, OPM Companies, Transaction Fees, and Performance Bonuses” post, as well as in this month’s FeedFront magazine (in my “Choosing an Affiliate network” article on page 32).

Reference: Chaffey, D., Ellis-Chadwick, F., Mayer, R., & Johnston, K. (2006). Internet Marketing: Strategy, Implementation and Practice.

One of very few theoretical and more academically-written books on affiliate marketing (if not the only one) is the Strategic Affiliate Marketing by S. Goldschmidt, S. Junghagen and U. Harris published in 2003.

While discussing the basics of affiliate marketing, the authors spend time looking at “Affiliates’ Characteristics” (p. 51-52). In their categorization of affiliates they split them “into three main categories” which are “based on their size/traffic and their level of specialisation/focus.”

These are:

1. Hobby Sites – 75% of all affiliates in the program – characterized by “relatively low traffic”
2. Vertical Sites – 20% of affiliates – affiliates with medium traffic “that have chosen to specialise in a certain topic” and therefore have “a very focused audience”
3. Super Affiliates – 5% of affiliates – characterized by ability to “draw a large amount of traffic, but are relatively unfocused in their content and audience” [underlining mine]

In this post I will not speak about the basis for the categorization, and the observations/statements made about any other group but the “Super Affiliates” one. The authors state that this particular group of affiliates is “characterized as businesses and organisations that evaluate the revenue potential of affiliate marketing in comparison with banner advertisement and other opportunities” and “are usually less interested in sales commissions than click commissions.” Whoa there! We’re either talking completely different industries, or all of the top affiliate producers that I have ever met are not really super affiliates. Let’s summarize. The authors characterize super affiliates as:

1. Websites with (a) loosely focused audiences, and (b) no particular specialization
2. Always comparing affiliate marketing opportunities with other types of advertising
3. More frequently interested in the pay-per-click than to per-sale or per-lead models

I would argue that none of the above three points correspond to present-day affiliate marketing reality. On the contrary, super affiliates are frequently extremely focused on their niches, have well-focused (and loyal) audiences, know exactly what they are doing through the affiliate partnerships with merchants, and aren’t looking at CPM or CPC models.

Three years ago the AffStat 2007 report registered the following breakdown of payment models across different affiliate programs:

• Cost per sale (CPS) – 80%
• Cost per action (CPA) – 19%
• Cost per click (CPC), etc – 1%

I don’t think there is any way to get farther from the truth than by defining super affiliates in light of the three above-quoted points. I’m including this post in the Affiliate Marketing Fallacies section of my blog.

Reference: Goldschmidt, S., Junghagen, S., Harris, U. 2003. Strategic Affiliate Marketing. Cheltenham, UK: Edward Elgar Publishing

Today I am starting a series of posts (I am not planning to publish them in a consecutive manner, but new ones will be added as I come across the issues to address), and a whole new category – Affiliate Marketing Fallacies. In this rubric I will be covering the popular fallacies and misconceptions about affiliate marketing. About a year ago I recorded this video (my most popular YouTube video to date) where I addressed the misrepresentation of affiliate marketing as “possibly the absolute laziest way to make money.” I will certainly include it in the corresponding post in this new category as well.

Today we are going to look into yet another misconception about affiliate marketing.

A book by Patrick Tan entitled Success with Online Retailing: For Small Businesses, and published in 2003, has a chapter devoted to affiliate marketing (pp. 160-184). Among other things in this chapter, the author gives a definition to a super affiliate [see mine here], and speaks to the question of attracting such affiliates. Tan writes:

A super-affiliate is an Internet marketer who has made a successful living online. He is busy making money online and would not be interested in a program that pays mediocre commissions. You must offer exceptionally high commissions to attract the super-affiliates. (p. 166)

I have actually seen merchants who — being driven by (or talked into) the same thinking — were creating separate storefronts, with higher prices, to be able to afford higher than the vertical’s average commission rates. By so doing they’ve been making their offer uncompetitive, which reflected negatively both on the conversion their overall website, and on their affiliate traffic conversions in particular.

Recalling the topic I’ve discussed yesterday (but in no way supporting Amazon, as I believe they have a lot to improve in their affiliate program), the affiliate has partnered with a merchant that converted at 22%. While 20% is about an average conversion ratio (CR) for the top online retailers (see these charts), most e-tailers out there enjoy a considerably more modest CR. My personal experience with affiliate programs shows that while much depends on the vertical, solid CR generally ranges from 2% to 5%. So, speaking simplistically, if to raise your commission to the “exceptionally high” level you must raise your prices, making your conversion rate drop to 0.5% or less, you’d have to be paying your affiliates 44x times more to compete with them in the eyes of the affiliate.

It is never just about the “commissions”, but always about the payout; and payout is always contingent on the (i) commission rate, (ii) conversion ratio, and (iii) reversal rate — the three variables that should always be looked at in a bouquet, and never separately. Often, higher conversion ratio coupled with a low reversal rate make moderate commission rates more attractive than “exceptionally high” rates.

Reference: Tan, P. 2003. Success with Online Retailing: For Small Businesses. Bloomington, IN: iUniverse.

I am tired of seeing the affiliate marketing industry being misrepresented as just another one of those get-rich-quick schemes! Hundreds, if not thousands, of websites are full of promises of helping you turn in a quick buck if only you buy their eBook or, even, join their affiliate program. Twitter is also full of tweets on “easy cash,” “lazy affiliates,”  earnings of “$1000+ a day,” etc. So is YouTube… Furthermore, a Summer 2008 article in Entrepreneur.com read that affiliate marketing “may possibly be the absolute laziest way to make money because it doesn’t require you to have a product, make a sale or ever have any interaction with customers.” [source] The author seemed to equate all of affiliate marketing to pay-per-lead programs, but in this post I will not focus on this flaw in his argument. I want to pause and ponder on that first half of his statement where he suggests that affiliate marketing “may possibly be the absolute laziest way to make money.” C’mon! This is a huge misrepresentation that does not do justice to what one of the most sophisticated elements of e-marketing consists of!!

Let me make my point in a video:

Affiliate marketing is neither a recipe for easy cash, nor “the absolute laziest way to make money.” Getting to the pinnacle always involves a lot of hard work, and I do not know of one super affiliate who has not spent endless hours in front of their monitors, or has never been burned and lost money on ineffective campaigns or poorly converting merchants.

If you disagree, my challenge to you is this: post your arguments below, and I will entertain every one of your comments. I promise to respect your point of view, and do everything possible to understand where you’re coming from before posting my reply. If, however, I see no opposing views (which I explicitly welcome here) expressed, my case will only be further proven to be true.