The Horrifying and Dark Side of Affiliate Marketing
The word is spreading, rumors are going around and the landscape of affiliate marketing may never be the same. The truth is we never know what the next week will hold in the world of affiliate marketing. Unlike traditional jobs where you show up and put time in, you are paid. As an affiliate, we spend our own money to generate revenue and leads for affiliate networks, then we usually get paid a week or two later. With the risk comes great rewards, but there is also a huge trust issue… while the risk is always in question.
With recent articles on the future of affiliate networks and how many of them may soon be non-existent, there is plenty of reason to worry about where your next check is coming from. It’s not only an issue of networks finally realizing that they can’t pay affiliates on a net 5 basis, then hope and pray all of their advertisers pay within the next 30-60 days. There are plenty of scammy companies out there, and even if you are working with the best and most trusted companies around, it doesn’t mean they are doing the same.
While many of us focused on the evil side of rebills and how bad it was for the customer, it was actually destroying many affiliate networks at the same time. With networks paying out $30-$50 for a lead to an affiliate, then only making a few dollars on each lead, is not a preferred and viable business plan for most. If just one or two of the largest rebill vendors go bankrupt or simply choose not to pay the network, guess who gets screwed. The affiliate was already paid by the network and the rebill company already made and spent as fast as possible… leaving the affiliate network eat up the loss and possibly die.
Let’s quickly do some math. Say a network is getting $40 per lead from the rebill advertiser. The network than pays $35 per lead to the affiliate. The network ends up pushing 10,000 leads within it’s first month. This means the rebill advertiser owes the network $400,000. The affiliate network is probably going to pay their affiliates within 30 days, while some networks receive payments from their advertisers withing 30-60 days. If the rebill advertiser ends up screwing over the affiliate network, the network is now $400,000 in the hole. Even if the network DOES get paid, they still end up making only $50,000 with the huge risk of dealing with these shady companies. Keep in mind, this was just a quick small scale concept of how it works, but many of these networks and rebill companies were more in the million dollar figures, versus a few hundred thousand.
Another sign of the dying affiliate networks is the drastic amount of networks slimming down and simply cutting out their referral programs. Any network that was able to successfully pay out 5% commissions on referrals was simply doing this to gain attention and try to rise above the competition. With so many networks now in the game, margins are super thin and nearly all networks are at a 2% referral rate (with many limitations), or simply abolished or cut down their referral terms to nothing. The sad part is, I’m sure the best affiliate referrals come from other affiliates… yet networks continue to blow money on parties, wasted schwag or just bad advertising.
Names won’t be mentioned, but it’s only a matter of time before we will all the complications and disaster that is looming behind the scenes. The affiliate network game is no longer the same, and now more than ever you have to know who you are working with and where your next change is coming from… or isn’t!
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