Posted by Azam Editorial Team as Affiliate Marketing
I received an email on Thursday from an affiliate saying he wanted to have a white-label cashback site from our client V A C Media because cashback sites “may even wipe out traditional affiliate sites in the future. This is why I want to get on board now!”
It brought to the forefront of my mind yet again something that I was musing about from time to time last year: does affiliate marketing as we know it have a future?
I’d welcome opinions to the contrary, but here are four primary reasons why I believe old school affiliate marketing will be on its last legs in 2008:
1. The Rise of Cashback Sites
If the consumer can receive generous money back by buying a book or television via Site A that gives them cashback and absolutely zilch via Site B, which option is he or she likely to pick? The main thing stopping people using cashback sites is ignorance of their existence, but as the word spreads, there’s no reason why instead of today’s approximate two million members of cashback sites in the UK, there will not be 10 million by the start of the next decade.
Unless something is done, cashback sites may indeed “wipe out traditional affiliate sites in the future”. People will visit an affiliate site with book reviews, but instead of clicking on the ‘Buy this book’ link which sends them to Blackwell books they will visit their favourite cashback site and make their purchase through that.
There are ways to stop cashback sites jeopardising the future of quality content sites – such as setting up different commission rates – but this will not happen because the powers that be in affiliate marketing tend to be reactive rather than proactive.
The only solution will be for successful content portals to switch to other forms of revenue generation, such as sponsorship, CPM advertising and contextual advertising. These obviously do not come under the affiliate marketing umbrella.
2. The Rise of Coupon and Comparison Shopping Sites
It seems that everybody and his kid brother either has or is about to launch a voucher code and comparison shopping site. I find it amusing when a friend contacts me on Messenger to ask me for feedback on his nearly finished comparison shopping site and then 20 minutes later another mate does.
These are valuable resources and benefit the consumer, there’s no doubt about that, but once again they are not the kind of sites that generated the most sales CPS revenue a few years back.
3. The Rise of Google Adsense
Contextual advertising networks have only been around a third the length of time as affiliate marketing, but they have put merchants utilising affiliate marketing and affiliate networks to shame:
The evidence speaks for itself. If you go to forums like DigitalPoint, the most buzzing section is the Google Adsense one and there seems to be a post every three minutes asking when Yahoo Publisher Network will be opened up to non-American webmasters; the affiliate marketing section is lifeless and staid.
4. The Assault on Affiliate Sites by Search Engines
For the last few years Google has been doing its level-best to filter out affiliate websites. Of late, search engines which may have deemed to be more ‘affiliate friendly’ have also began to turn the screws on affiliates. To give just one example of many, if an affiliate tries to send visitors direct to merchant via Yahoo Search Marketing, they are now rejected under the URL Ownership guideline. They get a warning saying: “It appears that you do not own or control this domain.”
Because most affiliates did not create content that added value to the internet, search engines were compelled to come up with technology and guidelines to try to keep them out of the results. The easy ride is over for some and it leads them to spew venom at Larry Page and Sergey Brin on the search marketing forums.
The sad reality is affiliates brought this on themselves by deluging both the natural and paid results with pages lacking unique content. As an affiliate marketer who chooses to remain anonymous explains: “affiliates take five minutes to rewrite the review of a phone on the Vodafone website or rehash something on Wikipedia and call that unique content; that’s not providing something of value!”
This contrasts with the content I write for our and clients’ websites which often takes countless hours to research and write; a thesis I wrote for one of our literary sites is required reading on University courses in the United States and Germany and articles have been linked to from the BBC site.
The unfortunate thing is that search engines now are not only filtering out poor quality and duplicate content but are throwing out the baby with the bathwater: they have become so hostile to affiliate marketing it is affecting affiliates who have always strode to play by the rules and provide truly original content. Googlebot automatically deprecates pages that have a number of affiliate links; it assumes the content will be rubbish.
Search marketing affiliates have also been kicked in the groin from another angle: merchants themselves. Whereas most companies did not have sufficient knowledge about conducting effective SEM and affiliates could attract traffic with their superior skills as recent as two years ago, this is becoming less and less so the case. Merchants and their agencies are now fully clued up about both SEO and PPC, including the need to work on the long tail, and, with their far greater profit margins, can afford to blast affiliate sites out of the results.
Although adult affiliate marketing existed a short while earlier, mainstream affiliate marketing came into being into being at the end of 1994 with a music publisher, Geffen Records, asking CDNow.com to set-up a scheme to remunerate them for sending shoppers to the online store. Affiliate marketing was envisaged as a means for content producers to send visitors to e-commerce sites and be rewarded for referring customers.
There never was a ‘golden period’ when affiliate marketing consisted of affiliates setting up quality content-rich portals to refer visitors to online shops, but it seems that in 2008 we are as far away as ever from the original concept. Unless you are a brand name bidder, cashback portal, voucher site, comparison shopping site, grey/blackhat SEO, or somebody exceptionally creative and talented, it is unlikely you are or will be making a significant sum of money from CPA or CPS advertising in the long term. It is no wonder many experienced reputable affiliates have redefined themselves as Affiliate Managers, Consultants and SEMs.
Of course it is not to assert that a coupon code or cashback site is not an ‘affiliate’ site. They are as legitimate as any other and in many cases involve as much if not more work as the kind of sites that were generating the bulk of affiliate marketing sales in the late nineties and early noughties. But they are not traditional affiliate sites.
Affiliate marketing is now quite a different kettle of fish to how CDNow and Amazon would have envisaged it in the mid-nineties. However, more important than to look at the past with rose-tinted spectacles, is to focus on the future and embrace change. Savvy affiliate marketers have to evolve with the times – or sink.
The internet has always developed at a blazing pace; it is one thing that makes it such a pulsating field to work in. Ten years from now affiliate marketing will have metamorphosised in something else. So, while it may be time to wave goodbye to ye olde affiliate marketing, I’m sure the concept will be as alive and kicking as ever when England hosts the World Cup in 2018.
What do you think?
18 Responses
Rob
January 7th, 2008 at 10:06 am
1Really good post Nadeem – some very interesting points.
I’ve thought for a while that as internet shoppers get increasingly savvy, they will demand price comparison and cashback (unless merchants decide not to support this anymore) as a standard part of their online shopping experience. If that happens, small affiliates may need to become sub affiliates of large price comparison and cashback operations, with them actually becoming de facto affiliate networks.
Max
January 7th, 2008 at 10:08 am
2Interesting blog post nadeem. I do think that cashback could one day cut affiliate marketing down quite a bit the same with voucher sites, as user will end up going to check for a voucher before they purchase etc
Hard to say what will happen in the next couple years really.
Dave Macfarlane
January 7th, 2008 at 12:05 pm
3An excellent, and somewhat depressing post Nadeem. You’re right of course, we just have to move with the times, and if that is away from AM in it’s current/previous form, then so be it. Otherwise we end up running faster and faster just to stand still.
Lee McCoy
January 7th, 2008 at 1:03 pm
4Great post matey!
But …
… I’m not as pesimistic for a number of reasons.
I feel there is a very strong need for content based sites that inform and instruct users. These sites build up loyality in themseleves that I feel cashback sites would find it hard to break down in many instances.
There will be a widget out there that allows content based affiliates to add to their sites that allow them to split the revenue with the cashback sites – just as Adsense does. And just how I add discount codes to my sites to prevent the loss of commissions. Content affiliates will have to get “code savvy”.
There’ll be something after discount codes and cashback sites. As affiliates find ways of making money, merchants will try and remove them as they’re seen as “leakage” – isn’t this already happening with VC and CB sites? It’s starting to happen big time with brand bidding affiliates!
Phil
January 7th, 2008 at 1:04 pm
5A somewhat chilling prediction, particularly for someone like me who is new to AM. I’m very young so should I be carrying on or realising that AM has no future and I should try something else? It sounds almost like the barrier to entry is getting increasingly higher and if I don’t climb over it now, I’ll be stuck for ever wondering what it’s like on the other side.
The important thing is I love what I do and I’m evolving with everything I learn. Of course, this could all be another scary story as is the way of the internet. The fact is, millions of people still use the High Street for their shopping despite the internet, so perhaps cashback sites etc won’t have such a high market share in several years time.
Paul Johnson
January 7th, 2008 at 4:40 pm
6Oh come on, Nadeem… it’s not all doom and gloom! 😉
Many of the coupon/cashback sites out there already are, to be frank, rather appalling. Not only does there need to be a singificant increase in awareness of these kinds of sites but there also needs to be growing trust in them. Whilst both are likely to increase over time, I still think there’s a lot of scope remaining for those affiliates that focus on providing good quality, helpful information with affiliate revenue as an add-on to that offering.
Paul
Ian
January 7th, 2008 at 11:57 pm
7I have to agree with Lee’s comments. There will allways be a place for content sites, but they will have to evolve and start to add voucher codes and cashback deals to prevent leakage.
My first prediction for “the death of affiliate markeintg” is the doom and destruction of pure voucher sites. It can’t be too far off for the big players in the cashback arena to add voucher code functionality and give visitors the best of both worlds. Why bother using two different sites when you can get the best voucher codes and best cashback rates under one roof. It’s much more difficult for a voucher site to integrate cashback functionality. Goodbye MVC et al?? Quidco gets great % commission deals because of its size, so why not the best % off vouchers.
My second prediction is for the doom and destruction of the major cashback / voucher hybrid sites. Once major brands take a real good look at their stats and run some customer surveys, they’ll realise how many sales they would have received anyway, and how much profit they have thrown away in commission and vouchers. It’s already started to a certain degree with some of the big insurance brands moving away from cashback genre. The backlash seems to have lost momentum for now, but I’m sure it will pick up again soon.
What are we left with??? Content site affiliates, and merchants increasing commissions to get those all important incremental sales.
Russell Beech
January 8th, 2008 at 2:08 am
8You could take the discussion another way..
It could be that its not long before the merchants, papers and public turn on cashback sites.
If cashback gets too big and brand A is having to pay for all its media exposure and are then paying a cashback site a % for nearly every sale it makes because people stop purchasing direct that can only lead to price increases as the CPA for the merchant will rise.
Its the same as brand bidding on PPC – as soon as merchants realise they are cannibalizing their own business by paying for customers they would have got anyway they’ll look for a way to kill off the cash back sites.
Directline are already setting a precedent for this on TV. How long will it be before others follow suit and the press starts to turn on cashback sites?
It could be that their success in the short term ends up killing them off!
Nadeem Azam
January 8th, 2008 at 4:08 am
9Thank you to everyone for their comments.
I haven’t got time to give my two penny’s worth about all the interesting points, but I’ll respond to above post by Phil and the comments on his blog here.
Phil, I wasn’t intending to scare anybody off affiliate marketing and certainly not people new to the industry. I have voiced the opinion more than anybody else I know that AM is in desperate need of fresh blood. And it is not just platitudes that roll off my tongue: I must have helped a 1001 newbies with their websites and search campaigns over the years. It gives me more satisfaction than anything else. To give just two examples, last year I was the only person who spent hundreds of hours writing a free tutorial series on affiliate marketing specifically to assist people new to the industry and I also arranged a SEO course in London which was primarily attended by people starting out in the field; instead of charging a few hundred quid as others do, ours was completely free. So you can see that I am proactive at trying to bring people into the industry and help them build some momentum: fresh blood makes it a more dynamic, exciting industry to work in and keeps everyone on their toes.
I’ll address your point: “Firstly, how many people actually have cashback accounts?” Both Quidco and Greasypalm have over 500,000 members each, as far as I am aware. That is not an insignificant number. Like I was saying in the polemic above, based on the growth patterns at our client eDealsUK.com’s site (their own sites are acquiring members at an astronomical pace and we have launched over 30 new white-label cashback sites in just three months), I wouldn’t be surprised if there were 10 million members of cashback sites at the start of the next decade. That’s a sizeable chunk of the UK adult population. Don’t you think that will impact on the number of people buying via affiliate links that don’t reward customers with cashback?
It’s 03:55 now and I can’t address all your points, alas, but I do believe AM a bright and rosey future, with lots of money swimming around; my argument was just that there will be changes, and it won’t be the AM that some of us knew and loved.
I’d like to end by wishing you a very prosperous 2008 in which you make megabucks from AM.
Steve D
January 9th, 2008 at 12:31 pm
10Great post as usual Nadeem.
Unlike some of the other replies, I see your post as mostly positive.
As someone that started as an affiliate in 2007 and went full time the same year I can honestly say there is loads of scope for new affiliates. I, as well as many other affiliates, have a list as long as my arm of sites I’d like to build but will never get a chance. There is an ever increasing variety of products and services available and merchants are crying out for people to help market those.
We need to just be creative and build good quality sites around sound and good volume niches
Affiliates, get your fingers out, start thinking new and adapt or die, simple as that.
Kevin Edwards
January 9th, 2008 at 11:04 pm
11I find the whole debate around the death/decline of affiliate marketing somewhat baffling.
Let’s strip affiliate marketing back to the bare bones: it’s a CPA deal, a fixed cost for a sale; it’s payment on performance; it’s a phenomenally popular business model and usually rewards for the hardest action. In other words an easy sell.
What this debate is really about is who is driving sales for advertisers; in other words the evolution of different types of affiliates. Yes cashback/voucher coding is the flavour of the month but PPC affiliates have pretty much dominated for years, only recently dropping off, and affiliate marketing was borne from an assumption that content was king.
Inevitably as the web develops other affiliates will emerge but be under no illusion that CPA as a concept (in other words affiliate marketing) is in rude health.
Senthil
January 10th, 2008 at 5:44 pm
12While it is a sensational title for this post, I do not think there are valid reasons for affiliates to slit their wrists yet 😉
I think the market is evolving, getting better and growing. Not dying.
Cashback sites:
**Atleast 39 out of 40 online shoppers DO NOT know ANYTHING about cashback or other forms of incentive shopping**
(Figure based on our Market research, official figures, surveys we conducted and running 40+ cashback sites)
The number of people signed up to a cashback site does not reflect the actual number of people who continue to use the site on a regular basis.
There is still PLENTY of room for existing affiliates and newbies to grow in the market. As with any growing market, competition is stiffening and people have to work harder to earn their money. Simple as that.
Search Engines:
I think SEs are just weeding out useless sites. They only hate THIN affiliate sites with little unique content. There still is, I believe there always will be, a place for quality, niche, well SEOd content sites. I can give many many examples of our content sites in no.1 spot in google, outranking the big price comparison portals, manufacturers etc for competitive terms.
DougS of carrentals.co.uk
January 18th, 2008 at 4:02 pm
13We run a large comparator site and we do think cashback can be an issue, but we are finding several things that are happening:
Some merchants are offering one price if you click out from our site and a different pice if you land directly. Simply put it means they are using differential pricing to push volume when hey are in a price war. Many times if you go direct and use a voucher or cash back site, it is still more expensive than if you came direct from us.
I believe merchants will more and more start doing differential pricing, depending on the channel. The issue with normal cachback sites is that they never deliver enough volume to any single merchant, hence the comparators have more power to negotiate with merchants.
Another thing we are seeing more and more of in our industries are that people are becoming less brand loyal, and hence we know of merchants who ar launching white labels with discount pricing on comparators. These white label offerings have no voucher codes, cashbacks etc.
Doug
http://www.carrentals.co.uk
Arjun
February 12th, 2008 at 7:45 pm
14I think Doug has a valid point above for the differential pricing that merchants will have to adopt, because practically, the kind of traffic generated by affiliates can never match direct traffic to cash back sites. Overall, a great discussion!
Tinh
October 23rd, 2009 at 7:37 am
15Thanks, great post. I love the image most. Tinh
Internet Nail
October 3rd, 2010 at 1:19 pm
16The quality work will never die and the affiliates who do a great job, helping people, distributing good stuff around will live forever in my opinion. Other than that, rubbish sites that are created in a few minutes with the sole purpose of making money will disappear soon or later.
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