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Affiliate Marketing Sucks. It's a Scam.

Posted September 25, 2014 in
Last updated: September 14th, 2021

Affiliates do nothing and get commissions. Affiliates steal orders from other channels. Affiliates don’t do real marketing. Affiliates provide absolutely no value.

We do the work, they sneak in at the end and get the sale.

The customers they bring to us are of little value.

Coupon sites and any sites that list offers simply steal conversion from other channels.

Customers through the affiliate channel are all discount shoppers, we don’t want them.

It’s a scam, always has been, always will be.

Affiliate Marketing is on the downturn, it’s on life support.

I don’t need affiliates.

“I hate it, I just hate it.” Getting the picture here? These are things we’ve heard from prospective clients calling us about affiliate marketing. Beside the entire point as to why they are calling us when they have these very emotional (non stastical or data centric) views is a whole other blog post, but I get these questions all too often. I’m sure our colleagues do as well. Sometimes, we simply choose not to address them. It’s hard to fight an battle that is an emotional one and not one based on data, facts, studies, research etc. Our industry has been plagued by bottom feeders that produce all the issues outlined above, and unfortunately they get more publicity than solid performers. I thank the Performance Marketing Association for being the driving force in changing that attitude. Not just to better the space, better the channel’s reputation, but simply, those things are not defining characteristics of the channel, and frankly, they are widely untrue.

Many of them can be easily refuted by data. Data like this:

  • Rakuten LinkShare recently acquired Ebates for $1 Billion Dollars in 2014. You read that right, that is a “B”
  • Rakuten acquires LinkShare for $425 Million dollars in 2005.
  • Forester predicted affiliate marketing spend would reach $4.1Billion in 2014. That’s Forester, and that is a “B”. And that is spend, not revenue.
  • Jupiter research released data that stated shoppers through affiliate links spent on average $7 more than other customers.
  • According to a shop.org study, affiliate marketing is the second top acquisition channel for it’s members.
  • ValueClick acquired Commission Junction for $58 Million in 2003, 11 years ago and it’s value continues to soar
  • MeziMedia, an affiliate, was acquired for $352 Million
  • Conversant, owner of CJ by Conversant, was acquired in September of 2014 for $2.3Billion, again that is a “B”.
  • Our clients average 23% new customers through the affiliate channel with a NC% rate as high as 80%.
  • Our customers’ affiliate programs average 25% of their total online revenue with some as high as 80%.

I could go on and on and list individual program performance or even list all the companies with incredible teams and very smart people who not only have programs but continue to invest more and more in the affiliate channel, but I primarily wanted to show you the actual value of some of the companies engaged in affiliate marketing. Isn’t it interesting that many of these companies were acquired for hundreds of millions (still a lot of money in my book) or even BILLIONS of dollars. Wouldn’t the individuals, wait no, wouldn’t the extensive teams that led these acquisitions use extensive due diliegence to evaluate whether or not this industry is a scam or on the downturn. I mean people get killed for millions, I would assume a $1Billion acquisition comes with a certain kind of research many of us are not used to. Extensive I’m sure.

Maybe you’d prefer to hear from someone other than an industry cheerleader. Totally understand that. Many of our prospective clients prefer, and learn more, by speaking with our clients or other really smart people in the e-commerce space. Fortunately, I know a few people just like this. One is a former co-worker and client and another is a former co-worker and, hopefully, soon to be client. I asked these two individuals a few questions about their continued use and interest in the affiliate channel for several reasons:

  1. These two individuals are super smart and among the best analytical minds in e-commerce. They have amazing pedigrees and have done amazing work at the companies they have worked at.
  2. Both have been skeptical of the affiliate channel and require that the channel produce real, incremental, valuable revenue. If it doesn’t, the channel doesn’t exist. They have no emotional ties to the channel.

I asked them what the value of the channel is, is the channel going away and how do you feel about some of the comments above?

Jamie Loehr, Senior Vice President, E-Commerce Bodybuilding.com (current JEB client).

Prior to his time at BodyBuilding.com, Jamie served as Divisional VP of Business Intelligence and Director of Business Intelligence at Coldwater Creek, and Sr. Research Analyst at Fingerhut.

I really like what we are doing on social channels with our affiliates. It gives personalities in our industry incentive to promote our brand. These are mainly individuals that do not have their own large web site presence but massive social following. Basically incentive for influencers. Facebook, Instagram, Twitter, YouTube and Pinterest is where the everyone is at anyway. This I believe is big part of why affiliate marketing is not going away.

Regarding discounters and loyalty I risk losing business if I am not there to competitor that is. It is also a way to drive a potential cart abandoner to a purchase when they are unsure of the purchase. All the affiliate providers allow for the retailers to identify what transactions are allocated to affiliates. Retailers need to have an allocation model that they believe in and also measure assisted transactions by marketing channel. It is really easy to see and trust the channel if these things are followed. We do this, trust the system and see the value.

Tim Dilworth, CEO Digger Digital

Prior to his time at Digger Digital, Tim served as Executive Vice President of Marketing at Clearlink, Senior Vice President of Marketing at Overstock.com and Senior Vice President of Marketing and E-Commerce at Coldwater Creek.

The value of the affiliate channel in my mind is all about reach. The internet is a big place, and for brands that aren’t Apple or IBM, we need to find all of the places possible to get in front of customers in a brand-appropriate way.

From a category perspective, coupon/discount sites are going to continue to get right-sized as retailers get more intelligent about measuring incremental behavior. Sites that have solid content and are accretive for the retailer’s brand are probably the best in my mind.

There’s incremental revenue in every affiliate channel. Retailers need to get smart at testing and measuring what the true incremental piece is vs. incurring the affiliate expense and potentially an extra discount. DataLogix is doing some really cool workt o try and measure incremental, it goes way beyond A/B tests.

Affiliate marketing is getting smarter not going away. The more retailers understand their data and their business, they more exact the can measure marketing programs and dial them in accordingly. I don’t think it’s going away, there will always be value for retailers in gaining reach.

It was a pleasure working with these two at “The Creek”. I don’t think I learned more from two individuals in my career. Both only participate in channels that show their value. Both have worked with many different models and looked at things such as channel cannibalization and customers’ path to purchase in determining value and worth of each channel, including the affiliate channel. Both see value in the channel now. But they don’t participate blindly. “Retailers need to get smart at testing and measuring what the true incremental piece is vs incurring the affiliate expense and potentially an extra discount.” If you aren’t doing this, you’ll experience many of the things I outlined at the beginning, and frankly you are doing it wrong.

All the affiliate providers allow for the retailers to identify what transactions are allocated to affiliates. Retailers need to have an allocation model that they believe in and also measure assisted transactions by marketing channel. It is really easy to see and trust the channel if these things are followed.” You really need to know what type of sales are of value and if they are coming through the channel. If you aren’t doing this, you are doing it wrong. It isn’t just about clicks, orders and customers. You have to do it smarter.

Networks and tool providers have made it very simple to get “smarter” about your affiliate marketing. Networks like CJ, LinkShare and Impact Radius all allow you to commission on many different things. They allow for your specifics allocation model. And it works. ShareASale also offers some great technology to help merchants run profitable affiliate programs. I asked Brian Littleton, CEO of ShareASale some of the same questions. He was gracious enough to provide a detailed response:

Clickstream tracking from ShareASale really negates the issue of last-second cart sniping which has been a problem for many retailers over the years. The goal of Affiliate Marketing, and it’s original promise, was the ability to reach new customers, and new customer channels that would otherwise be extremely difficult to reach. As long as an Affiliate Manager focuses on that goal, and uses the technology available to help such as our Personalized Commission Rules, Leapfrog/Clickstream, Mobile, and Coupon Code Tracking, the results can be very productive.

In programs that are implementing the technology we have available, the number of complaints regarding last-second cart sniping are really down to near zero.

I’ve heard a lot of things over the years about Affiliate Marketing, and how there are bad elements and such… there definitely can be. However, it is really just like anything else – Affiliate Marketing is exactly what you make out of it. If you use the tools available, have strong goals in mind, and pay strongly for the exact type of Affiliate AND Customer that you want to get out of it – you’ll likely see success in the channel.

One of the biggest complaints about the channel has been the “cart sniping” that can happen with last click allocation. Brian’s company has solved that very well. Their tools allow our clients to participate in the channel and not pay for these sniped or “stolen” orders/commissions. With one client, it reduced costs by 30%! That has been a huge savings for the program and allowed the channel to show its true value.

So again, you have to do things smarter than before. Are there affiliates who exhibit bad behavior, drive horrible sales and even “steal” orders from other channels? Definitely – but why would you work with them anyway? If you need help in running a program that drives incremental sales, call us. If you have no idea if the acquisitions you are seeing are good and valuable? Call us? No analytics, no information, no testing and no management? Than yeah, you affiliate channel probably does suck. You can do better.

Still think the channel sucks and is a scam? Are you really smarter than Senior Vice Presidents of E-Commerce, CEO’s, Forester, Jupiter, Rakuten, CJ, and hundreds of M&A specialists? Really?

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About the author

  • Jamie Birch

    Jamie Birch

    Founder/CEO

Jamie is the owner and principal of JEBCommerce. His extensive Internet marketing experience includes all facets of online marketing: email, paid search campaigns, customer retention programs, and much more. This wide range of disciplines has enabled Jamie to excel as a business leader and JEBCommerce to realize a great level of success for its clients. Jamie cut his “affiliate marketing teeth” managing affiliate programs for many well known companies before spending several years at Coldwater Creek, a Top 5 nationwide women’s clothing retailer. While at Coldwater Creek, Jamie established and managed affiliate campaigns, email campaigns, and SEO campaigns – an opportunity that allowed him to develop many of the proven processes JEBCommerce successfully employs today. In recognition of his professional leadership, the affiliate marketing industry has consistently nominated him for Annual Pinnacle Awards over the years. In addition to individual accolades, JEBCommerce is gaining momentum within the Internet marketing industry and is experiencing positive, exciting growth. This is a direct result of Jamie’s positive leadership, integrity, and earned respect – from his clients and industry peers. Need a speaker for your next event? I can do that, too!