Affiliates Beware – You may be next

The Affiliate Marketing Industry has long been an industry of positive friction. Traditionally, there have been three hands in the pie – the Affiliate, the Affiliate Network and the Merchant. Recent months have shown the Affiliate Networks beginning to go direct and cutting out the Affiliates. Many a Merchant, as well as the big 3 affiliate networks (Linkshare, Commission Junction and DoubleClick Performics) have built their businesses with the blood and sweat of the affiliate marketer. However, the Affiliate Networks insatiable need for more top line revenue is forcing them to look to, or around, their Affiliate “Partners”. The networks as they exist today will be not be recognizable in the years to come as they own more and more of their distribution.

For sake of this discussion, I will use our company as the case study but you can begin to see the Affiliate Network wanting to own the affiliate distribution channel. In the “cutting out” scenario, those Affiliates that are particularly vulnerable are the small-to-medium ones. Big ones, will get bought and that is a great exit, but if you, the Affiliate, don’t get big enough, fast enough – then look out.

Quick Case Study

Background – In November of 2006, struck a deal to provide coupons to MSN Shopping. We were fortunate enough to win this relationship with our industry expertise and network. We undertook a compressed development timeline and were able to provide the fully functioning feed in time to capture the Christmas 2006 selling season.

Fast forward to Shawn Collin’s July 27, 2007 post sharing the email from Linkshare announcing their “new” relationship with MSN for coupons. Ok, so Bargainbetty was cut out – big deal, we will have to find more distribution partners.

The negative impact to our business is not the point. What is more relevant to the Affiliate Marketing Industry is the dynamic of the traditionally three way relationship. This dynamic is changing and Affiliates and Merchants will have to choose their partners wisely. The former “three-way” pie is rapidly consolidating to just two hands – the Affiliate Network (soon to be renamed as simple a “Network”) and the Merchant. I tell you what – if I were in charge of Business Development for Affiliate Network upstart Avantlink or Share-A-Sale, I would use this as a major selling point to further consolidate their position with the thousands of small to medium sized Affiliates. Where the Affiliates go, the Merchants will follow. This is a classic case where a fragmented market and some dilution of the power held by the “big 3” would be good for business – at least for the Affiliate and arguably for the Merchant.

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This post was written by DEP Ecommerce Consultants