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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On top of that google and facebook are ready to clean the game, credit cards and shopping cart merchants too. The new game is and will be creating your own legit product. Affiliate marketing is fun and lucrative but you have zero control.
They definitely are clearing out the affiliates and shady methods they have allowed for so long. Those who make the effort to adapt with their own quality products or sites will clean up as well, financially!
Yep, it's a matter of adapt or die. Run clean and you will prosper!
I think it is important to draw a distinction between CPA networks and traditional affiliate networks.
Definitely, this makes sense. Networks like CJ, Shareasale, Linkshare and ClickBank for the most part have funds in advance before paying out to affiliates. This model is the safest bet for networks, advertisers and affiliates.
Gayest shit I ever read.
Knock off scaring the newbs. This is hurting the industry.
Good Post Brosif!
I would to meet the famous Zac… Are you going to Ad-Tech? If you are feel free to drop by the Barman Party which have entertainment by Dirt Nasty and other D-LIST rappers like Shane Dollas, White Cracker and Iyaz
I won't be at AdTech San Fran this year, but should be at NY later in the year.
At PeerFly we try to work with advertisers that we know and trust. Obviously this isn’t always the case, but we haven’t really gotten burnt by any shady advertisers yet (knock on wood).
Although it does slim our margin, we do have a 5% rate for referrals. Most networks have moved to 2%, but by keeping ours at 5% and working hard to provide quality service to our affiliates we’re trying to stay ahead of the competition.
Just because Facebook and Google are cracking down does not mean you cannot be a successful affiliate marketer. One of the most challenging parts of the game is adapting and being able to profit off of any traffic source. True super affiliates know how to do that and that is what makes them so much money.
@:
I like your network and even though it’s new, the 5% is nice. I am not worried about Google cracking down, like many have said already, if you stay clean there is a lot less to worry about. Good luck!
So are you crying because you are not getting paid as much to refer MMO noobs to aff networks? Is that your issue? ROFL
Is that what a “super affiliate” is?…a guy who refers new publishers to aff networks? ROFLMAO!
hello…real world????
AL
Referral revenue from this blog is not a significant number vs my affiliate/business numbers. It's a matter of stating the fact that most networks are cutting back on referrals programs, which helped many of them become the size they are today.
Lulz
Yeah there is too many networks.
The weak will just get bought out or die.
Dark Side is wrong though because its just an economy thing.
Affaliate marketing isn't going anywhere, the major CPA players are not going to fail. It's the 300 bullshit networks that will tank. Shady shit like rebills may affect many networks but the good ones work with advertisers with a solid reputation and have enough in their bank roll to cover an advertiser backing out.
Plus rebills only account for a relatively small percentage of CPA revenue. Just because the FTC is taking out rebill advertisers doesn't mean the end of everything CPA.
To think that I haven’t started on affiliate marketing. Now that I have read this I think that it would be safer if I owuld jst stay with cpc and cpm.
Well put there Zac. I think intense competition has led to this madness.
This is exactly why I am always hesitant to deal with any new affiliate networks. It is too easy to get caught up in bad financing practices with shady companies. Instead I prefer to deal with established networks who actually know what they’re doing.
Those are certainly some worrying prospects. I guess it comes with the territory, but hopefully things work out alright for all of us.
Till then,
Jean
Well there is many other options if some of the cpa networks cut down on the referral leads. Many it will improve in the future again.
It’s gettin harder and harder to get ahead because of shady advertisers. Instead of cleaning up the networks the advertisers need to bend over and spread em!
Glad that there are still some really honest affiliates out here. Great Blog by the way…
The affiliate party is over, and it is time to get serious and realistic about making money by the looks of it. I personally would not want to be in the stuck-in-the-middle position that the affiliate companies find themselves. I really wish for all of this to work out for the best of all parties involved.
Its a truth, to make affiliate marketing again in business, I suggest to make a registry just like domain registry, where each affiliate website need to register and people who are going to join any affiliate website can register their self with the same and declare that they are affiliated with xyz site. if any xyz site is closed or not paid the affiliate it should be sue by law. i think CJ and other should start taking such action.