Affiliate Marketing’s Dirty Little Secrets

Posted on Posted in Affiliate Marketing, Money

Affiliate Marketing’s Dirty Little Secrets

Affiliate Marketing is the promotion of a merchant’s product(s) by an affiliate (publisher) in exchange for a commission when a sale is made. That form of marketing is called Cost Per Action (CPA).

The simplicity of that pretty cut and dry definition would lead you to believe that affiliate marketing is a simple process. It is, but there is more to affiliate marketing than just promotions, links, banners, text ads, phone number, etc., to sell said products to earn commissions.

We’ll explore the hoops affiliate marketers must jump through, mountains they have to climb, and absurdities they must put up with in order to earn a pittance (or a fortune for successful marketers).

Circular $100 Bills - Affiliate Marketing 300 x 318

A Few Bad Apples

Most merchants are honest and do everything in their power to spur sales from affiliate links, and account for every penny earned in commission, because they understand and value the symbiotic and mutually beneficial nature of the relationship: more affiliate traffic eventually leads to more sales and more commissions.

At the other end of the spectrum are the few bad apples, a handful of unscrupulous merchants who use clever marketing tricks, deceptively buried in the fine prints, to rob their affiliates/associates of legitimately earned commissions. Here are a few implausible excuses used to deny payments.

The I.P. Address Excuse To Deny Payment Of Commissions

Do you ever wonder how merchants track a customer’s activity on their websites? If your answer is cookies, you are right. But, in addition to cookies, merchants use Internet Protocol Address, phone number, home address, and names to track and identify a client.

Most affiliate marketing agreements prohibit publishers from earning commissions on their transactions, friends’ and families’ as well.

If a friend or family member were to use the publisher’s I.P. Address to place an order (through the publisher’s affiliate link), even if the name, phone number, and delivery address are different from the publisher’s information, the unscrupulous company can use the I.P. Address excuse to deny payment of commissions.

Alleging that the affiliate program is not a discount program, ordering through the publisher’s I.P. Address is a violation of the terms of the affiliate agreement in the merchant’s view. Simply put, the merchant thinks that the publisher is trying to game the system.

Note that the sleazy merchant does not use the I.P. Address excuse to decline fulfillment of the order (sorry, we can fulfill your order, because the I.P. Address you are ordering from is associated with a known publisher), but is more than happy to raise the issue to deny payment of commissions to the affiliate marketer.

Beware Of Everything-Under-One-Roof Affiliate Programs

The everything-under-one-roof affiliate programs are what we refer to as judge-jury-and-executioner affiliate programs. Everything is in house. In other words, there is no independent and objective third party to keep them in check and honest.

If you browse the Affiliate Performance Report Summary’s table of a third party platform, you notice Commissions, Sales, Leads, Clicks, Impressions, CPC, and Conversion data, – reflecting what has occurred at the publisher’s website -, are clearly laid out and accounted for.

Your interests and those of the platform are linked: you make a sale – you, and the platform, collect a commission. They have every interest to keep the data accurate, even though in the fine prints you may read they are not the final arbiters, the merchant is.

Why this lenient policy vis-à-vis the merchant? They want to keep the customer (advertised affiliate companies and/or merchants) happy, at your expense.

If you scrutinize the content of a similar table at an in-house platform (everything-under-one-roof platform), the data resulting from the same interaction may differ substantially.

The inaccuracy is part and parcel of a policy to deliberately under report (or not report at all) statistics in an attempt to minimize the chance of earning a commission.

How To Know If You’ve Been Robbed

You remember that clause prohibiting you from referring friends and family from your affiliate link (Affiliate companies want to keep the process organic, so they claim.), that policy is put in place to keep you from tracking your sales (sales made through your affiliate links).

Ironically, the only way to objectively determine whether data of transactions conducted through your affiliate links are accurately recorded and reported is to run afoul of that very policy aimed at keeping you in the dark, and to ask friends and family (different names, home addresses, and I.P. addresses) to shop through your affiliate links and to record (video and/or screen shots as evidence) the transactions. Then log into your account to verify that the successful transactions are indeed credited to your account.

Now, since it is an incognito operation, unbeknownst to the merchant, (different names, addresses, and I.P. addresses), the company can not cling to the alluded clause as an excuse to void or to fail to record the data of the transaction(s), to credit your account, and to pay you your earned commissions.

In our experience, the foregoing scenario is the only objective way to measure the accuracy of the data recorded (if they bother to record it in the first place) by the in-house platform.

If any blatant discrepancies are discerned, confront the company with the evidence. Most likely, they’ll use the prohibited friends and family argument to deny you payment (The unscrupulous merchant always favors the opacity of obscurity over the glaring light of transparency, transaction-wise, to avoid paying commissions.).

From that point on, you can extrapolate: If you are not compensated for the known transactions, how may legitimate and unknown transactions have fallen through the cracks and for which you not been paid a commission? Then you realize that you have been robbed blind by the unscrupulous merchant, and it is time to take their affiliate links down and to replace them with lucrative advertising links.

The scenario we’ve just described is not farfetched, and is part and parcel of a policy practiced by most gargantuan merchants to squeeze publishers. A penny pinched here and there, before you know it, amounts to a substantial sum of money on a large scale economy. It’s a numbers game.

Warning

While it’s okay, in our view, to encourage friends and family to shop through your affiliate links (there is no harm done: publishers, merchants and affiliate networks make money; although most merchants rather not pay any commissions at all, if they can get away with it), it is not so with respect to Google Adsense.

Remember that the companies that advertise through Google Adsense are targeting consumers who are genuinely interested in their products, not friends and family who needlessly click on ads, thinking that they are doing you a favor that surely will backfire when Google catches up with your sleazy method of inflating click through rates.

Bottom line: If you are sincerely interested in a Google ad, click on it. If not, refrain from doing so.

All Merchants Are Not The Same

Not all merchants have this stupid I.P. Address policy to rob you of your earnings. Most merchants are so keenly aware of the surmounting difficulty associated with conversions, that they encourage you, the publisher, to place your first order through your affiliate link, so you can earn your first commission to keep you motivated.

Most merchants do not care about I.P. Address, name, delivery address, phone number, etc.; as long an order is placed through your affiliate link(s), and other conditions are met, your account will be credited, and you’ll earn a commission. Period. None of that idiotic policy alluded to earlier, aimed at insulting your intelligence.

Incentivized Methods

Some affiliate websites offer incentives (rebates, cash back, free gifts/services) to drive traffic to the merchant’s website and to encourage customers to buy the merchants’ products through their affiliate links, a practice frown upon by most merchants. The inducements are a form of affiliate’s commissions sharing with customers.

If you plan on using Incentivized Methods to promote your affiliate marketing business, read the merchant’s program terms first to find out if it is allowed, because unauthorized incentivized methods may lead to “commission reversal and expiration of the affiliate program”. Most merchants allows sub-affiliates as a promotion method, as well.

Most affiliate networks, because of an acute awareness of the low probability of conversion, give the publisher a relatively generous time frame (6 months or so) to generate commissions, in order to remain an active publisher. If no commissions are generated within the allotted time frame, the publisher’s account is deactivated and will not be credited for any sales during the intervening period of deactivation.

Costs Of Affiliate Marketing

If you think that affiliate marketing is just a copy-and-paste-codes-into-posts-and-pages exercise, and wait for the money to roll in, think again: not only is it a time-consuming endeavor, but also costly.

If you are serious about marketing, and want to be successful at it, you need:

  • Websites
  • Email Database
  • Email Campaigns
  • Advertising, and
  • Social Media

Websites

Most merchants and affiliate networks won’t do business with you, unless you have a top domain website (mywebsite.com), not a sub-domain (my.theirwebsite.com). They also want a paid email address (me@mywebsite.com), not a free email address (me123@gmail.com, or me123@yahoo.com), for instance.

If you are contemplating a foray into affiliate marketing, or any business venture for that matter, and don’t have a website yet, you can buy a web hosting package here, and, as a reward for taking action, we’ll build you a basic website optimized for affiliate marketing, or otherwise, for free to launch your affiliate business. This offer is valid only if the web hosting package is purchased through the link. If you can’t afford to buy now, subscribe to the newsletter to be kept in the loop about upcoming sales of web hosting packages.

Email Database

To promote the merchants’ affiliate products, you need to email those offers on a regular basis to your visitors who voluntarily opted to receive emails (no spamming) from your website.

You can either buy an email list, or, preferably, build your own. We like the second option better for its authenticity. The volition expressed by your visitors, readers and viewers to receive emails is based on trustworthiness. As such, they’ll be more receptive to your offers and are more likely to respond favorably. Potential costumers buy only from people they trust. Good reputation matters.

You can build the email database by using online and offline marketing strategies and tactics:

  • Online, by inviting visitors to subscribe to your website’s newsletter, in exchange for virtual gifts; by launching a subscription campaign on social media (Facebook, Twitter, Google Plus, Pinterest, Linkedin, etc.); through contests, webinars and videos; by buying advertisements, etc.
  • Offline, by handing out business cards, fliers, through face-to-face meetings, seminars, contests, etc.

The more traffic you drive to your website, the better. Increased traffic will most likely result in converting your visitors into subscribers; thus expanding exponentially your email database.

Email Campaigns

The email database you’ve just built would be useless if you were not to leverage it to send mass emails (no spamming, Can-SPAM compliant) to your subscribers to keep them apprised of your latest articles, videos, and affiliate offers.

To do that, you need email marketing software such as ActiveCampaign, AutoPilot, Aweber, Constant Contact, Campaign Monitor, GetResponse, iContact, Infusionsoft, Jango Mail, MailChimp, Pardot, Salesforce Marketing Cloud, Vertical Response, Zoho Campaigns, etc. An unsubscribe option must always be included in your email campaigns.

Advertising

If you are serious about your affiliate marketing business, you can not rely exclusively on free advertisements and search engine optimization (SEO) to promote your business, you must also allocate a slice of you budget cake to advertising. That is where Cost Per Click (CPC), Earning Per Click (EPC), and Cost Per Impression (CPI or CPM: Cost Per Thousand Impressions) enter the picture.

Luckily, no matter how modest is your advertising budget, you can always count on either of these platforms (Google Adwords, Bing Ads, FaceBook Advertising, Twitter Advertising, 7 Search, Stumbleupon Ads, Pinterest Ads, LinkedIn Ads, Instagram, etc.) for maximum advertising exposure at a reasonable cost.

Social Media

To increase the probability of conversion, constant promotions of affiliate products on social media platforms are required. To earn that elusive commission, you become a social media junkie on Facebook, Instagram, twitter, Google Plus, Linkedin, etc., nagging and trapping followers in an infinite loop of affiliate promotions and offers.

As you can see, affiliate marketing is time-consuming, expensive and intellectually labor-intensive. Shouldn’t you be compensated not only for conversions but also for promotions? In the current state of affairs, the only eventual remuneration for your hard work will emanate from probable conversions, not promotions.

Keywords Bidding Prohibition

If you bother to read the fine prints of the affiliate agreement (under program terms), buried is a list of “keywords (trademarks or variation on trademarks, protected search engine marketing keywords, etc.) that publishers are prohibited from bidding on for search marketing campaigns”. Why the prohibition?

  • Protection of company’s brand, images, logos and trademarks, and
  • Shelter from over inflated advertising cost (competitive keywords bidding increases keywords cost).

Spend your advertising dollars wisely.

Google Canned Its Affiliate Marketing Program

If affiliate marketing were that lucrative a business, one wonders why would Google put the lid on its affiliate marketing business?

The answer is simple: metrics. The experiment did not yield the expected outcome, Google discarded its Affiliate Network in the interest of its bottom line and its publishers’.

In case you don’t know, most of the affiliate advertising is tantamount to free advertising, which interferes with Google’s Advertising Program, namely Google Adsense. Since affiliate marketing was all the rage, Google experimented with it. It did not pan out, and was therefore discontinued. Rightfully so.

Google Adsense

Google Adsense is not an affiliate program (Cost Per Action), but a Cost Per Click (CPC), Earning Per Click (EPC), and Cost Per Impression (CPI or CPM: Cost Per Thousand Impressions) business.

Most merchants have an ingenious way to create their affiliate ads. Don’t expect just a teaser such as Make Money Now, Click Here. Their names, phone numbers  and internet address will be displayed as well, giving them free exposure, and free name recognition.

If the reader were to go straight to the merchants’ websites, bypassing the click (thanks to free name recognition), or to call the advertised phone numbers (free phone number displayed in the affiliate ad), Google and its cohort of Publishers won’t get any credit at all.

Under a Cost Per Impression (CPI or CPM: Cost Per Thousand Impressions) scenario, Google and publishers would have earned something, be it a pittance (something is better than nothing).

So, in order to protect their Pay Per Click business, and the interest of their publishers, Google had no choice but to discontinue the affiliate program, which is, more often than not, just free advertising for merchants.

To prove our point, let us compare and contrast these two (2) annual results: Advertisement Performance Report Summary vs Affiliate Performance Report Summary

Advertisement Performance Report Summary (1 Year)

Advertisement Performance Report Summary

Advertisement Performance Report Summary

Advertisement Performance Report Summary

Advertisement Performance Report Summary

Advertisement Performance Report Summary

Advertisement Performance Report Summary

Estimated Earnings

Pages Views

Clicks

Page CTR

CPC

Page RPM

$94.91

23393

432

1.85

$0.29

$5.29

Affiliate Performance Report Summary (1 Year)

Affiliate Performance Report Summary

Affiliate Performance Report Summary

Affiliate Performance Report Summary

Affiliate Performance Report Summary

Affiliate Performance Report Summary

Affiliate Performance Report Summary

Affiliate Performance Report Summary

Commissions

Sales

Leads

Clicks

Impressions

EPC

Conversion

$0.00

0

0

1989

19044

$0.00

0.00%

We are not going to interpret every indicator present herein, but we’ll limit our analysis to just a few: Estimated Earnings vs Commission, Pages Views vs Impressions, and Advertising Clicks vs Affiliate Clicks.

Estimated Earnings vs Commission:

Advertisements yielded estimated earnings of about $100 (rounded off), whereas no affiliate commission whatsoever was generated, due to zero sales during the 12-month period.

Pages Views vs Impressions:

Although there is a difference between pages views and impressions, for simplification’s sake, we’ll equate both to exposure. Obviously, both advertisements and affiliates have respectively received a ton of exposure (23,393 vs 19,044), but the deviation, in terms of resulting revenues, is glaring: $94.91 vs $0.00.

The publisher missed out also on Cost Per Mille – CPM

Cost Per Click – CPC vs Earning Per Click – EPC:

Both terms refer to the price of a click or the money earned per click. Once again, the difference, in terms of outcome, is flagrant: $0.29 vs $0.00.

Advertisement Clicks vs Affiliate Clicks:

While the 432 advertisement clicks have yielded about $100 in estimated earnings (granted that amount is a modest sum, but a fortune, when compared to the $0.00 commission earned from the affiliate clicks.), the 1989 affiliate clicks have miserably failed to generate one red cent of income for the publisher.

If the affiliate clicks were paid at a rate of $0.29 per click, the publisher would have earned about $570.00 (1989 x $0.29 – invalid clicks).

Cookies

Cookies are small text files stored temporarily or permanently on your computer’s hard drive to keep track of your internet sessions at a particular website. We dub them mini e-spies. Merchants use cookies to credit affiliate sales; and the lifespan of a cookie, affiliate-wise, ranges from a stingy 24 hours to a generous lifetime. The longer the cookie’s lifespan, the better.

Cookie Stuffing

Most unscrupulous affiliate marketers resort to cookie stuffing to inflate affiliate sales and to reap ill-gotten gains, at the expense of legitimate cookies. Cookie stuffing is the dropping of tracking codes in a user’s browser without clicking on an affiliate link to override legitimate cookies. When an affiliate sale is made, regardless of the provenance of the affiliate link, credit is attributed to the cookie stuffer.

This abominable marketing technique is referred to as black hat marketing practices (or white hat, depending on your perspective whether black is bad, withe is good, or vice versa) to override legitimate cookies. Cookie stuffing may violate a merchant’s terms of service and land the wrongdoer in legal hot water.

Cookies’ Downside

Savvy and privacy-paranoid internet surfers clean their browsers after each session. Irrespective of a cookie’s lifetime, purchase made through a clean browser (assuming that 5 minutes or so ago, the consumer has just clicked on an affiliate link) won’t result in any credit to the publisher’s account.

The merchant means well, but the client’s finicky web surfing habit kills the deal; resulting in free advertising and sale for the merchant, zero compensation for the publisher.

The Best Affiliate Programs

The best affiliate programs are recurrent and pay lifetime commissions. A customer is referred once, but every time a purchased is made or a service is renewed, the publisher earns a small commission. In an ideal world that is how all affiliate programs should be structured, but the reality is otherwise: A publisher earns a commission once, but the merchant continues to milk that referral for life through repeated business.

The best argument for recurrent affiliate programs and illustration thereof is utility companies (electric, oil/gas, water and telecommunications) as examples: A referred customer signs up once, but is billed monthly for the service. Wouldn’t it be nice if vendors could devise a win-win recurrent affiliate program whereby publishers and merchants alike benefits from ongoing residual income and recurring fees derived from the initial referral?

Luckily, there are a few affiliate programs that offer lifetime commissions. The referred customers are the publisher’s for life. They claim to have solved the cookie issue with multiple and redundant tracking systems: IP address, flash-cookies…. lifetime tracking system, etc.

For all we know, the alleged solution could be just a marketing stratagem to get publishers to sign up, with the illusion of compensation for legitimate conversions, no matter what, cleaned cookies or not. Unless a publisher can independently verify the claim, don’t fall for it. Be skeptical.

A Bird In The Hand vs. Two Birds In The Bush

You would probably level a well-founded criticism at the length of time it takes to earn 100 advertising dollars, when an affiliate sale or two could have generated twice or three times that amount in commissions in a shorter time span.

But the truth of the matter is this: Pay Per Click Advertisement vs. Cost Per Action Affiliate Marketing were, on an experimental basis, on a collision course for one (1) year (see tables); when the dust settled, the former has proven itself to be an uncontested winner, and the ladder an indisputable loser.

Engaging in could-have-been, should-have-been, or would-have-been conjectures, at this point, is purely speculative and pointless. Let’s cherish the bird ($100) in the hand, and forget about the two birds (theoretical affiliate sales and commissions) in the bush.

TV Advertisements

Advertising rates in TV land are based on a number of factors: prime time vs off peak (show time), viewership, events, etc. For instance, the average cost of a prime time 30-second Super Bowl ad in 2014 was about $4 million, a 60-second $8 million, paid for in advance.

What do the sponsors get in return for those hefty advertising price tags? Exposure, brand awareness, name recognition; but no guarantee whatsoever that their advertising dollars will result in increased sales. Whether viewers chose to interact with or to patronize the advertisers, it’s none of the TV Networks’ concern, for they’ve been already paid.

Newspaper & Magazine Advertisements

Even though newspaper and magazine advertising is on the decline, it still costs a king’s ransom to acquire publicity. For instance, a 12-page real estate ad in the New York Times costs about $6,925 in 2015 (Residential Real Estate Homes Magazine – Manhattan). These media outlets do not guarantee any results other than exposure to eclectic eyeballs, and yet are paid upfront for their services.

Contrast the newspapers’, magazines’ and TV’s method of prepaid advertising vs affiliate marketing’s: if newspapers, magazines and TV networks were to adopt the affiliate marketing’s method of advertising (Cost Per Action) to rake in millions, they would be out of business.

First of all, there is no tangible way to measure the readers’ and viewers’ interaction with the advertised products, unless an advertised coupon or promo code is used during the transaction; then again, based on what you’ve read so far about unscrupulous merchants, there is no guarantee that the merchants would keep their end of the bargain if such arrangements were made.

Second of all, the newspaper, magazine and TV networks would be providing free advertising to the merchants, in terms of exposure, brand recognition, brand name and product searing into the readers’ and viewers’ memory (subconscious priming).

Sadly enough, that’s exactly what affiliate marketers do: they use their platform(s) to provide free advertisements to merchants, hoping that some “action”, which they have no control over, will take place and result in a sale and/or eventual earned commissions. When the “action” does take place and results in a conversion, there is no guarantee that the affiliate marketer will be compensated, if certain stringent conditions are not met.

The only way to remedy that imbalance is for affiliate marketers to demand payment for impressions, in addition to payment of commissions for conversions. It’s highly unlikely that merchants will agree with that policy, since they have grown accustomed to free affiliate advertising in the form of unpaid impressions.

By raising the issue, publishers are given at least the opportunity to evaluate or re-evaluate their advertising policies and to focus strictly on paid advertisements (pay per click, pay per impression – CPM, and long term contracts) on their platforms. A fruitful endeavor, in our opinion.

Let’s Be Clear

If, as a publisher, your affiliate marketing business is lucrative, disregard any argument made herein for strictly paid advertising vs affiliate marketing. Keep doing what has proven to be successful.

If, however, your relentless marketing efforts bear no fruit for one (1) year or so, it’s high time to reassess your marketing skills and reconsider your website’s advertising strategies. Failure to do so borders on insanity. The definition of insanity is doing the same thing over and over again but expecting different results, quotation allegedly attributed to Albert Einstein.

Winners and Losers

Advertising Business.- In the advertisement business model, advertisers, advertising networks, and publishers are all winners: the advertisers get what they pay for – exposure and traffic; the advertising networks, being the middlemen, get paid for matching advertisers with publishers; and the publishers, as a result, earn a share of the advertising dollars.

Affiliate Business.- In the affiliate business model, advertisers and affiliate networks are winners; publishers are losers. Advertisers, under the guise of affiliate marketing, get free advertising from the publishers. Affiliate networks get paid upfront for signing up advertisers.

Publishers, however, will be fortunate if they ever earn one red cent commission from eventual conversions, a process over which they have no control. The prospect of earning a commission is the only redeeming value of an otherwise flawed affiliate business model, from a publisher’s standpoint.

Conclusion

Evidently, in the case of an affiliate business, this publisher has wasted precious time (1 year) promoting products with a zero rate of conversion, and, consequently, no returns on investment of time and intellectual capital are yielded.

Contrast that with the time spent and the intellectual capital invested in advertisements, and the return on that investment: $100 ($94.91 to be exact).

If the website’s real estate, allocated to promotion of the unsuccessful affiliate product(s), were used to sell advertising space, the publisher would have doubled, tripled, or quadrupled his/her online-related income.

Strike a balance, do both: Paid Advertisements and Affiliate Marketing. Dedicate more time to the most profitable of the duo.

If you are seriously exploring the idea of promoting affiliate products, do not rely exclusively on the content of this article to form an objective opinion about affiliate marketing.

Read also opposing viewpoints, and – applying their methods – try to duplicate the results of marketers who claim to have made a fortune selling affiliate products.

If your experience leads to a conclusion different from the rosy picture depicted by affiliate marketers, then, as an intelligent being, you’ll draw your own conclusion.

If you like (or dislike) this article, leave a comment, share it on social media networks, subscribe to the newsletter to receive a free gift and to be kept apprised of the latest exclusively published articles, videos, etc.

Finally, if your experience with affiliate marketing is positive or negative, let us know as well.

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