Polls
Who is the pretty boy of affiliate networks?
- Jason Baker
CommissionJunction
(26%, 78 Votes) - Lee Griffin
TradeDoubler
(16%, 47 Votes) - James Little
AffiliateFuture
(14%, 41 Votes) - Darren Newmark
LinkShare
(12%, 35 Votes) - Doug:)
Sexy beast
(11%, 33 Votes) - Adam Ross
AffiliateWindow
(11%, 32 Votes) - Mark Walters
AfilliateWindow
(11%, 32 Votes) - Chris Mockford
Buy.at
(9%, 26 Votes) - Tyson Pearcey
Buy.at
(5%, 14 Votes) - Warwick Lambert
Buy.at
(4%, 11 Votes) - Clarke Duncan
PaidOnResults
(3%, 10 Votes) - Giles Parnell
AffiliateFuture
(0%, 10 Votes)
Total Voters: 297
Loading ...- Jason Baker
9
Which PPC affiliate or network will go bust first?
Monday, October 6th, 2008
Simple background of PPC affiliates:
- They buy traffic some times on account and some times on credit cards from google for adwords.
- They send traffic into a merchant and get paid for sales via a network
- A network at the end of each month will invoice a merchant for completed sales that month – lets assume it takes 30 days for this to settle.
- The merchant will settle the account with a network normally in 30 days of the network producing an invoice.
- A network will settle with an affiliate normally 30 days later.
- So from the day an affiliate sends a visitor to a merchant it can be 90 days until they are paid for a sale, that’s assuming that there is no confusion, lost invoices, etc.
Now lets think what happens if a merchant is in financial difficulty.
- A merchant accepts all traffic and take all sales
- A merchant makes up reasons/excuses why they missed a payment to a network
- As a ppc affiliate you assume just an accounting mess up, so you keep sending trafffic
- Lets assume you wait an extra 30 days until you make a decision.
- So for almost 120 days you have been buying traffic and sending it to a merchant assuming you will be paid
- The merchant declares themselves bankrupt
- As an affiliate don’t get paid for the past 120 days of sales
- As an affiliate you have spent ppc for 120 days
- Now some networks will pay the comissions, but in the current climate I can’t see this continuing.
- So a double whammy, you spent the money and got nothing back over a period.
Now lets think a large airline/tour operator, like XL, goes bust. This is only guessing, but here goes:
XL took bookings until the lastminute
- they had a massive affiliate scheme with affiliate future
- so either Af take the hit or the affiliates did?
- niether a large affiliate or a network with overheads can afford to keep this happening
- as more merchants look to affiliacy as a no risk business, how do affiliates and/or networks adapt? Maybe merchants have to pay deposits upfront to reduce the risk for all involved.
Doug thinking
Popularity: 1% [?]
Very true Doug.
A number of the networks who pay affiliates even if the merchant goes belly up do so only because they are sitting on a large deposit (just realised that sounds bad – though I guess in your scenario some could be sitting on a large deposit of a very different kind ;-) ) – as far as I know it’s not often the case that paying the affiliates hits the network financially, which is why some networks refuse to pay if the merchant fails.
There is one major network who is potentially very exposed to the risk you mention though, and as an aside I have heard rumours on the grapevine during the last week of one mid sized network having cashflow problems, so maybe the gremlins are starting to surface.
Undoubtedly interesting times ahead
I don’t think any of the big ones will go bust. This might be a set back for them, but as they’ve go so many millions swilling around in their bank accounts I can’t see them shutting up shop over one merchant going under.
We had a mail go round this morning about being on top of big debts. Some companies pay 60 days after the transaction has occurred and we can run into financial trouble if they do not pay us.
Dougs thinks too much methinks ;)
But a very valid concern and something we’ve been pondering too as we spend quite a bit on ppc for merchants. 3 words: pre-payment-merchants
Very true, I’m worried about this at the moment, if 1 merchant im promoting quite heavily doesn’t pay and the merchant doesn’t pay me, i’ll be out of pocket around £5,500!
How easy do you think it would be for affiliates/networks to get a deposit or pre-payment written into their merchant agreements though? Is that a very common practice at present?
Networks would also have to be trusted/bound to ensure that they pass on the appropriate proportion of any merchant deposit they’re holding to their affiliates?
If I was a large affiliate/network I would be limiting my exposure to 30 days and/or asking for money upront or in escrowe.
Affiliate Window may be slightly different to others so it’s worth giving some clarity. We pay all of our affiliates on any validated transactions twice every month and usually ahead of merchants paying us. This allows us to facilitate the quick turn around of cashflow required for a fast growing affiliate business, whilst also acting as the financial buffer for any merchants who might go under.
Merchants are not required to pre-pay or validate ahead of time as again we act as their buffer to affiliates giving them both time and piece of mind regarding any transactions.
How can we do this? Well, we implemented this system 3 years ago and have always accounted for the advance affiliate payments as a requirement for the business. Our bad debt ratio has dropped year on year and our relationships with our merchants have allowed us to be seen less as a supplier and more as a partner which facilitates faster payment turnaround. Feel free to check out our financial standing or credit rating, I can safely say we are one network that invests in our future, i.e. our affiliates.
Doug, I can’t comment for other networks/affiliates so your thread is still quite interesting.
I’m expecting a big lingerie retailer to go t**s-up after Christmas. Any affiliate putting all their eggs into this basket is asking for trouble?
Who is it – here’s a clue: they never made a profit in the good times, they ain’t going to make on now?