Affiliate Commission Drops: Why Not Take Cookie Life into Account?

An excellent question came from a director of a young Europe-based affiliate network (well, truth be known, from an affiliate on his network), and with his permission I’d like to answer it in public. Here’s what he wrote:

We have received a question from an affiliate regarding a commission drop in one of our programs… The affiliate says that when a merchant changes the commission, the affiliate should be paid with the old commission for all clicks that happened before the change was announced, even if the sale happens after the commission change. In other words, all cookies set before the announcement, should track sales with the old commission until they expire. The reasoning behind this being that the affiliate entered into an agreement with the merchant that includes commission and cookie lifetime and potential earnings were calculated based on both parameters. Not being able to attribute commissions this way is a technological and business drawback according to that same affiliate.

Although I understand the affiliate’s reasoning and in theory I agree, I also keep thinking that it’s not possible to do what he says from a practical point of view. What about really long or even lifetime cookie lengths? What if the merchant’s profit margins have really changed?

What is common practice regarding this issue with major affiliate networks? Do other networks support this technologically? I know that commission drops are one of the “deadliest mistakes to avoid” according to your book, but they do happen so what’s the best way to deal with them when they do?

First of all, yes, affiliate commission decrease is one of the deadliest mistakes to avoid in affiliate program management (it just demotivates your affiliates).

Secondly, yes, unfortunately, these things still happen day in and day out.

And, thirdly, I must admit, I just love that affiliate’s reasoning (no tongue-in-cheek here, I’m dead serious). I also see how affiliate networks would, actually, be quite happy to entertain the proposed “cookie life” idea (as many networks earn their “pay” from what affiliates earn, collecting 20%-30% transaction fee from every affiliate payout). However, (a) I do not know of any affiliate network that supports something like this, and (b) How would you then handle situations with affiliate commission increases (which also does happen)?

It may be a sexy idea, but hard to implement technologically, and nearly unrealistic (unless every major affiliate network agrees to approach cookie drops way, which they never will).

Also, I love that “merchant’s profit margins” line of thought. What if they have really changed? What if the merchant has dropped their prices to become more competitive than everyone else in their niche? This would only result in higher conversions; and even with lower commissions, affiliates would be able to earn more, not less.

So, in reality, things aren’t as simple as they may seem on the surface. Too many situational variables have to be taken into account here; and, after all of them have been considered, what do you do with long or lifetime cookies, or commission increases?

6 thoughts on “Affiliate Commission Drops: Why Not Take Cookie Life into Account?”

  1. This is a very well thought out post. My question would be, does the original affiliate agreement have anything in it that states that the merchant reserves the right to change the commission rate at anytime? The wording of the affiliate agreement could play a huge part in how this situation should be handled.

    1. Great point, Heather, and depending on the network this one will differ (usually requiring a particular period to pass for the new commission rate to take effect). But you’ve hit the nail on the head. It should all be spelled out in the agreement. Otherwise, the discussion of what’s “fair” or “just” may be endless (and equally as fruitless).

  2. I’ve noticed that CJ tends to have a grace period between when an new commission structure is offered to affiliates and when you are required to accept it to remain in the program. I haven’t ever bothered to see if that maps directly to the cookie life of the offer, but it’s generally a long enough period of time that an affiliate could modify their marketing and be reasonably assured that most of the people who were likely to convert would convert before you the new terms became effective.

    As an affiliate, I’ve never viewed lifetime cookies as realistic. People change their computer configurations frequently enough that lifetime feels more like a marketing hook to get people to sign up for a program, rather than being something that an affiliate would consider building a business around.

    1. On CJ: “Replacing terms requires a minimum 7 day advance notification to your publishers.” Same rules on ShareASale.

      So, on the one hand, one may argule that a 7 days advance notice isn’t really that long . However, when you into consideration that anywhere between 92% and 95% “of affiliate-generated sales” occur “within 2 days of the original click” [more here and here] that’s plenty of time.

  3. I’m guessing that every serious network enforces a minimum notice period for commission changes and this is also mentioned in the agreement. At least that’s what we do. Some networks like Affiliate Window also let advertisers commit themselves to longer notice periods if they want and publish this information to affiliates. But the notice period can’t always be as long as the cookie length, it wouldn’t be practical.

    Moreover, if it was, I’m afraid it would lead advertisers to think twice before setting a really long cookie length as this would then mean they’d have to wait a corresponding amount of time before being able to change commissions. That would make them feel very uncomfortable when setting up the campaign, even if in reality they probably might never need to lower commissions.

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