Comments on: What about affiliate networks: are they in the same situation as ad networks who are starting to lay off people? http://www.GeekMBA360.com/what-about-affiliate-networks-are-they-in-the-same-situation-as-ad-networks-who-are-starting-to-lay-off-people Career Advice At The Intersection Of Business And Technology Fri, 12 Mar 2010 22:51:26 +0000 http://wordpress.org/?v=2.9.1 hourly 1 By: Gates VP http://www.GeekMBA360.com/what-about-affiliate-networks-are-they-in-the-same-situation-as-ad-networks-who-are-starting-to-lay-off-people/comment-page-1#comment-131 Gates VP Sun, 16 Nov 2008 00:37:52 +0000 http://www.GeekMBA360.com/?p=291#comment-131 Seems to me that the affiliate-style marketplace is an ideal place to put dollars in a down-turn. I would expect affiliate to thrive and grow in this market. Yes on the one hand, hesitant companies will be tempted to simply allow for traffic from "natural" channels. But that's a very defensive stance and horrible place to be. In a lagging economy failure to be aggressive is akin to waiting to die. If everyone is waiting for pocket pairs, it's time to start betting your suited connectors. From a fundamentals standpoint, I think this might actually be a mistake: <i>As a result, retailers will pay less to affiliates.</i> What other advertising channel actually guarantees sales? From a friend in the business: "CPA isn't going anywhere. If I can spend $5 to generate $10 in profits, why would I stop?" And flip it around, imagine that you have $1M to spend on generating sales. You know that the economy isn't great, and you're seeing lots of misers everywhere. You can either pay some agency a bunch of money for some form of "display" campaign, with no guaranteed return or you can pay for conversions. Don't get me wrong, I believe the some form of display is still essential to long-term business success. But really, this sounds like a market where you want to raise the value of conversions, not drop them. Sure it eats up some GP, but it also steals from dwindling market share. Heck, steal the money from less performance-driven parts of the sales budget. I mean, why not spend money where you know you're making money? If you're expecting less conversions and you drop the value of those conversions, you're simply going to aggravate your situation. Less money = less interest = less affiliates = less conversions. Maybe my math is wonky here, but if you figure that your market has just shrunk by 20%, shouldn't you be upping your conversions by 25% to compensate? Heck doesn't it make sense to be the first to push rates? (especially with a crappy Holiday season looming?) Seems to me that the affiliate-style marketplace is an ideal place to put dollars in a down-turn. I would expect affiliate to thrive and grow in this market.

Yes on the one hand, hesitant companies will be tempted to simply allow for traffic from “natural” channels. But that’s a very defensive stance and horrible place to be. In a lagging economy failure to be aggressive is akin to waiting to die.

If everyone is waiting for pocket pairs, it’s time to start betting your suited connectors.

From a fundamentals standpoint, I think this might actually be a mistake:
As a result, retailers will pay less to affiliates.
What other advertising channel actually guarantees sales? From a friend in the business: “CPA isn’t going anywhere. If I can spend $5 to generate $10 in profits, why would I stop?”

And flip it around, imagine that you have $1M to spend on generating sales. You know that the economy isn’t great, and you’re seeing lots of misers everywhere. You can either pay some agency a bunch of money for some form of “display” campaign, with no guaranteed return or you can pay for conversions.

Don’t get me wrong, I believe the some form of display is still essential to long-term business success. But really, this sounds like a market where you want to raise the value of conversions, not drop them. Sure it eats up some GP, but it also steals from dwindling market share. Heck, steal the money from less performance-driven parts of the sales budget. I mean, why not spend money where you know you’re making money?

If you’re expecting less conversions and you drop the value of those conversions, you’re simply going to aggravate your situation. Less money = less interest = less affiliates = less conversions.

Maybe my math is wonky here, but if you figure that your market has just shrunk by 20%, shouldn’t you be upping your conversions by 25% to compensate? Heck doesn’t it make sense to be the first to push rates? (especially with a crappy Holiday season looming?)

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