November 12, 2010

Why Social Media is Not for the Affiliate industry

Ok. I think I might have to take that back, considering I used to work for the affiliate industry for a couple of years. What I mean by saying this, is that making money on social media is not about traffic, but about billing relationships. Naturally, affiliates have no other billing relationship but the one with the client paying for the traffic.

This blog post is perhaps more about how affiliates have to adjust their business models to fit the social media landscape. Most of them have been spoiled by the simplicity of working in an SEO friendly world, however as SEO is becoming increasingly dependent upon social interactions with users, the affiliates who wish to have a lasting life, might just want to read further.

1. Owning the customer relationship

As most affiliates are design to funnel traffic, to who ever pays for top spot in their lists or best words in their recommendations, they are very seldomly focused on building a customer relationship. This is a good thing in many aspects.

First of all they don’t have to deal with customer complaints as they do not have the responsibility for the products and services. Secondly it is a quite easy task to optimize as you promote who pays. Third, they don’t have to think about product development, other than perhaps the development of your own website to increase conversion rates.

The downside of this, is that the world of social media sort of requires that you build a relationship with some customer. It is actually dependent upon that you deliver a promise that you keep. Especially if your focus is on making money.

Thus, short term, traffic funneling business models that aim to push responsibility on deliverance onto someone elses shoulders isn’t a very profitable one. In order for affiliates to own the relationship they have to begin working with:

  • CRM both in social networks and on their own membership websites
  • Develop win back campaigns through e-mail and notifications
  • Give added value in one form or another that requires some kind of sign-up or membership

They then need to think in terms of “owning the market”. Once they have build a sufficient following, the established relationships, with their website members, can be used to direct huge portions of traffic from service operator to service operator. Almost working like a union, or perhaps, like the mafia.

One website doing this very successfully these days is the Expedia owned website tripadvisor.com.

2. Product ownership

If there is one thing which has proven successful in attracting both business and buzz through social media, it is when companies give in to its users. As affiliates own no product, they cannot develop it, and thus they cannot change the experience for their users, into a better one.

Now, some of you might want to argue that the affiliates do have their websites. And yes, the websites are in a way their product. But if the products that the websites are promoting are crap, then it won’t matter how good of a website it is.

The biggest affiliate of them all – Google – should have taught everyone a lesson about this by now. They work with relevance and micro payments rather than high CPO and quality referrals. Although they are working on the latter one, it is more important for them to deliver relevant search results than it is to deliver buying traffic to the media buyers. As I said, they are working on it, but they still have a long way to go, and they are still very much dependent upon the quality of the landing page they are sending the traffic to. Just like any other affiliate.

What affiliates should do in order to gain ownership of product:

  • Create product development groups with the service providers
  • Stop tweaking their toplists and banner areas and let the users decide
  • Increase the comments and review functionality on their websites increasing transparency of intentions

3. Caring

Most affiliates simply don’t care. I’ve presented cases and business propositions for affiliates so many times I think it is written on my forehead.

The main problem I face when talking about social media is that they all care about the last two slides. Ie. where I start talking about making the money. I’ve actually heard, many times, that I “should have skipped to the last two slides right away”.

And that’s really what makes me tic. When people are too ignorant to pay notice to what takes you to the winning circle, and when they only cares about the party they see from a far. They are not willing to put in the investment, but they are willing to drink the champagne. That is what most affiliates do.

And we’re not talking about a huge investment. It is the concept of having to divert attention from the money pile to the future that is the challenge here.

The successful ones, such as Google, put their focus on quality and relevance. This is what most affiliates forget and that is why they aren’t suited to operate in social media. If you want to stay good at what you do, then don’t listen to me. But if you want to become great, then you probably should. Any company can become the next Google. It is just that some neither care or set their bar high enough.

6 Comments
  • Björn Alberts, November 12, 2010 Reply

    Word! I know exactly what you're talking about... ;)

    I have never seen Google as an affiliate, but you're absolutely right about that one. Like it!
    I think that definition actually is what it might take to make a change among affiliates. Also agree on that Tripadvisor is a great (affiliate)service.

    • Jesper Astrom, November 12, 2010 Reply

      Agree. Tripadvisor is one of the best websites out there for unplanned travel.

  • Erik Holm, November 12, 2010 Reply

    Interesting post Jesper.
    /E

  • Theodor Mavrodis, November 12, 2010 Reply

    Interesting post Jesper.

    I agree with some aspects and dissagree with other.

    From my point of view I think that not not all affiliates are destined to do social media. It totally depends on the area you are in. The ones that have a true potential are the ones that have an emotional catch.

    Most business owners have a problem realizing that increased revenues is not a strategy by itself but rather a result of a successful business model. A model that offers value to the users. Increase the value to the users and the end product is increased revenues. Just as Google does and keeps repeating over and over again.

    Thats my 5 cent of thoughts.

    /T

    • Jesper Astrom, November 12, 2010 Reply

      I agree with you. It is just that most affiliates don't think this way. The value proposition is solely based upon the offer given by the service provider rather than in what a membership/relationship with the affiliate itself could bring.

      One industry I think has the potential to earn a lot from social media is "rakeback". Considering rake back affiliates (many times) earn lifetime values from their players, they have to give back a service to the user or he/she will go through another affiliate.

      Considering the volume of open databases available online today, it is not difficult to assemble a service that is in itself a product to be offered "free" or through a "freemium" model to the user. Thus creating a billing relationship, thus having the potential of building customer loyalty over time.

      I don't think social media can be used effectively unless there is a billing/customer relationship, or a product ownership. Trust is built from delivering on promises. If you don't own the product you can't be responsible for product promises. This should be a major concern for affiliates.

      But as I say, there are workarounds and there are ways in which you can do this. Despite the somewhat provocative title :)

      • Theodor Mavrodis, November 12, 2010 Reply

        :)

        I agree with you...lots of agreeing today.
        As an affiliate you are limited since you dont own the product, but as you say there are workarounds. Usually you need to change the business model also, look at pokerstrategy who is an affiliate but with a twist. They are doing exactly what you are saying and are supposedly very successful.

        /T


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