Wal-Mart and E-Bay Experiments a leading indicator?
In the last week E-Bay has stopped displaying ads on Google (not even gonna link to it since every blogger seems to have already written about it…) and just today I see where Wal-Mart has decided to drastically cut affiliate commissions.
Combine that with my recent post about a major company who admitted to me they dont care about their affiliates, blockbusters recent pullback on payouts and I am seeing a pattern start to emerge.
Major name brands do not really need you for traffic, at least they have some data that makes them think that. Ebay does not turn off Google ads in response to a stupid party, they had a well thought out hypothesis that the ads did not pay for themselves in the long run. I suspect that Wal-Mart (which has one of the world’s largest databases and loves to mine it) sensed the same thing. They were paying too much to affiliates for the traffic, that much of the traffic would still come at lower payouts or that they could actually make more from less sales…
People will continue to argue about the logic of these moves, but multi-billion dollar companies are like glaciers. They move slowly. They are not making a rash decision. This was most likely well thought out and tested. It may not work, but they have thought through the downside. Anyone who has ever worked for a big company knows how stupid they are, but it is usually a stupidity from inaction rather than taking action.
When I worked for a Fortune 500 company - worst 9 months of my life - we got a ton of sales from our brand name. We intentionally decimated our affiliate program by not letting others bid on our trademarks, and saw a huge percentage increase in profit from that traffic - we went from paying something like $50 a sale to less than $20 without any drop in sales, we just moved them from one bucket (affiliate) to the other(brand search). Took months to get the change authorized and days to see the benefits.
If you then take the other side of the equation - traffic generation - and look at how hard Google is squeezing people on quality score you quickly realize that the internet is quickly transforming from a wild-west marketplace where anything goes and anyone can make money to a very corporate “brand is king” type of market. As someone who makes my living from affiliate marketing I see 2 outcomes for our breed - extinction (which will be the result for most) and scaling to a level where companies want to work with you and thus give you negotiating power, the status quo is a diminishing opportunity.
Not saying it is ending tomorrow, I just urge all of you out there making a nice comfortable 25k a month from 2-3 verticals to reassess the long term viability. I was once young and making a fortune every month I thought would never end and in the space of 60 days in 1999 everything evaporated. I will not make the mistake of being unprepared again and urge you not to as well.
June 20th, 2007 at 7:23 pm
This post and this statement from an older post of yours have me thinking: “Best advice I can give any budding affiliate marketer - dont be a sheep and follow the crowd. If you are running ringtones or blockbuster or whatever the flavor of the month is, you are not going to be that successful.”
My question for you, and i’m sure you’ve been asked this a lot, is where does one begin? Or even better, if you were starting from scratch TODAY, where would you begin?
August 26th, 2008 at 4:40 pm
“where would you begin?”
He could almost be saying ‘Dont start.’ without really saying it.