Thursday, July 5, 2007

Beware of Self Managed Affiliate Programs

Like many other newly launched website & blog owners, we are struggling to generate enough income to sustain a zero cost environment. Through this effort, we have experimented with various affiliate programs, some which are managed by a third-party, and others that are self managed. Over the past several months, we have joined 5 affiliate programs. Three of these were operated by a third party, and two were self managed. The first three have been remarkably successful, generating considerable cash-flows for us. The last two that were self managed were more than disappointing. Both had promised considerable rewards but failed to define their terms, and denied us of most of their income. Thus, we have concluded that it is best for us to avoid affiliate programs that are self managed because we believe that these companies prey on the vulnerability of young startup sites. The following describes our experience with self managed Affiliate-A (which is very similar to Affiliate-B).

In late February, we were contacted via e-mail by Affiliate-A, stating that they would like to advertise on our website. Their offer was a CPA, cost-per-action, program that would pay us $40 for every new customer that enrolled in their program and purchased their product. Because we were reluctant, they agreed to prepay us for our first two customers, delivering $80 in advance. Upon receipt of this income, we agreed to display their ads. They had also given us the option of receiving 10% of their net receipts, but we declined this offer. They created an affiliate account for us, giving us access to our marketing statistics. We began displaying their ads on March 1st, and within the first 10 days, we had accumulated: 30 unique hits, 5 leads, and 2 customers, covering their prepayment. Excited by this activity and at their request, we added more of their links throughout our site. By the end of March, we had sent: 139 hits, 10 leads, but only had the same two customers, and $52 net revenue. April activity was similar, sending 171 unique hits, 10 leads, 0 customers, and generating $18.50 net revenue. At the beginning of May, we questioned our affiliate manager why we didn't get any more customers, but had leads and net revenue. Their reply was:
  • A lead is a lead.
  • A customer is a customer.
  • You are only paid for customers.
We weren't satisfied with this ambiguous reply, but thought we should give the program more time. Traffic for the month of May dropped, with only 85 hits, 5 leads, 0 customers, and $0.0 net revenue. By June 8th, we had sent 19 more unique hits, added 2 leads, 0 customers, and $18.50 more in net revenue.

At this point we realized that: Affiliate-A did not intend to credit us with another customer. They gave us $80 for two customers, and they credited us with two customers. We were even. Reviewing our traffic statistics, we believed that we sent them a minimum of 7 unique paying customers. We sent them an e-mail stating this, and requested remittance of an additional $200 for the unpaid customers. Their answer was:
  • You only have 2 customers, and you were paid for 2 customers.
  • You are not paid for leads.
  • You can switch to the 10% of net revenue program if you wish.
Not expecting any other reply, we immediately removed all of their ads. We replaced one of them with that of a competitor who belonged to a managed program. Within the first 5 days of running this new ad, we generate more income than the $80 that we had initially been paid.

Our experience with self managed Affiliate-B was similar. In this case, our earning kept accumulating, but when our commissions reached $50, the minimum amount which is paid, the affiliate modified their terms, and our earnings were reset to $3.48.

Lesson Learned and Advice
Having tried different affiliate management programs, we have concluded that the third-party managed programs are the most profitable and reliable. The three which have performed best for us are:
Each of these are free to join. They offer a wide variety of products to market on you site, and their payment terms are clearly defined. There is no ambiguity between leads, and customers; and, they do not change their agreements. We were pleasantly surprised to view our earnings, and receive timely commission checks. We encourage you to visit each of these sites, and join their programs. Once enrolled, you can monitor your hits, leads, and commissions. If you have a payment problem with one of their advertisers, they will be your advocate, resolving any problems, and ensuring that you are paid. After all, if you aren't paid, then they aren't paid either.

We hope that by sharing our experiences to you, you will avoid some of the mistakes that we have made, and that you to become profitable sooner. We hope this helps on your road to success.

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