5 ms·

For those who don't watch the video: This is about his affiliate account. It is surprising, that there is so little competition for affiliates these days. Amaz

by TekMol 3y ago

For those who don't watch the video: This is about his affiliate account. It is surprising, that there is so little competition for affiliates these days. Amazon seems to be almost the only game in town. Sure, there are thousands of other affiliate programs. But they pay surprisingly little. Often affiliates earn only like $0.05 per click (on average). While the same company pays $1 per click on other channels like Google Ads. I am not sure why, but I suspect that it is because companies are so afraid of getting scammed. They trust Google, but not individuals. They pay $1 per click on Google Ads, need 20 clicks to acquire a new customer and are happy with a $20 price per customer because they know the lifetime value of a customer is higher. But to affiliates, they pay 5% of the customers $20 order, so $1. Divided by 20 clicks, that is $0.05 per click. So the affiliate channel is underpaid by a factor of 20. Why is no company tackling this inefficiency in the market?

chrischen 3y ago
The 20 clicks it takes for an affiliate is out of the control of the advertiser, and is determined by the publisher and the source of traffic and the intent level of the traffic they are driving. Google, through their predictive models more or less is promising a certain CPA whereas a publisher may not have such guarantees. So obviously publishers need to be paid on performance instead. Affiliate advertisers still have to compete since publishers have a choice of who to actually publish.
- TekMol 3y ago
  I don't think that the 20 times lower PPC on affiliate links vs Google Ads is due to market forces. From the numbers I see, Google Ads are paid roughly "correctly". The ad spent per new customer is somewhere around the lifetime value of the customer. At least in competitive verticals. But for affiliate links, it is about 20 times lower. Your argument that market forces should drive the affiliate market towards the same equilibrium is exactly my question. Why doesn't it do that? Visit some random website about some random product. You don't see a variety of affiliate advertisers. You almost always only see Amazon. The cases where there are more than just Amazon links, it is often just to justify the site as a "price comparison" site. But reality is that even on those sites, the vast majority of revenue comes from Amazon.
  - stavros 3y ago
    The ad spend is around the customer's LTV? Then why even bother acquiring them?
    - TekMol 3y ago
      LTV is usually calculated as the margin on the future orders of the customer. A customer has many other benefits. Just a few examples: They tell other potential customers about your product. More customers means better and faster a/b tests. More customers means higher stock price of your company.
    - chrischen 3y ago
      Google is very good at harvesting the values out of verticals. Ads is basically their only revenue source.
philipwhiuk 3y ago
There's plenty of advertising networks. How many internet retailers sell the breadth of stuff Amazon do?
shermozle 3y ago
Because affiliate marketing is cesspool of scammers doing scams at scale. I say this as someone who's measured marketing performance of these channels over the years.
- TekMol 3y ago
  That's what I meant with "I suspect that it is because companies are so afraid of getting scammed". What is the solution? How can we build trust between publishers and advertisers?
  - michaelt 3y ago
    Individually negotiated deals. If marketers can negotiate deals for individual youtube videos, they can certainly negotiate deals for individual affiliate websites.
  - hedora 3y ago
    Display marketing. The advertiser chooses which content gets their ads, and how much of a premium that content demands. This has the side effect of allowing reputable / high quality sites to charge more per impression, and is also privacy preserving (since it does not require user profiling).
- EVa5I7bHFq9mnYK 3y ago
  So basically Google, with its smart algorithms, is doing 20x better job at weeding out scammers, than a company can do it itself?
  - bell-cot 3y ago
    I've been away from this area for a few years now...but I'd say "No, Google is not doing 20x better". However - Google is in a "nobody ever got fired for buying IBM" position, and trusted far more than it deserves. And whether you're dealing with small business owners, or C-suites full of suits - there are a whole lot of "we gotta do X!" (even if the ROI looks for-sure negative) human emotions around Marketing. And when you're emotional, and feel that you gotta do something...then "buy IBM" usually feels like the least-bad option.
ricardo81 3y ago
>Amazon seems to be almost the only game in town. IIRC 50% of all shopping searches are done on Amazon. That may be the USA, not world.
- HKH2 3y ago
  People in China tend to use Taobao.
benj111 3y ago
Surely the solution is to pay per purchase, not per click. That's how cashback sites work. it would actually align everyone's interests in actually incentivising sales, not clicks.
- suddenclarity 3y ago
  I don't know about the international market but at least in my country, all companies abandoned PPC around 15 years ago. One reason was that you could pay Google AdSense $0.01 per click while being paid $0.1 per click yourself. It was a money printing machine while the company got worthless traffic that wouldn't generate any sales.
  - stavros 3y ago
    I don't understand, who's "yourself" here? If I'm paying $0.01 per click and I make $0.1, why wouldn't I want that?
    - ricardo81 3y ago
      Think OP may be talking about arbitrage and making a "made for adsense" site. Attract clicks via cheap ads, get ads with a higher CPC for a more generic term. Just presuming.
unreal37 3y ago
They're not "afraid" of getting scammed. They get scammed often. Affiliate marketers often use shady techniques to get the click. It's a tale as old as time. Wasn't there some browser extension years ago that was inserting it's Amazon affiliate link into webpages?[1] A large amount of the spam we receive in our email is ulimately just some affiliate trying to earn a commission. Affiliates don't have ethical rules they need to follow. It's very, very hard to find the "old days" true affiliate that drives any significant traffic. It's way more profitable for affiliate marketers to force users to open a new browser window which drops a cookie without the user having any true intention to buy, with the aim to scoop up the commission any future purchases. I mean if you can trick a million people into clicking a link, you can make money as an affiliate. Or you used to be able to do that. [1] https://www.perimeterx.com/resources/blog/2016/hijacking-users-affiliate-fraud/ https://www.perimeterx.com/resources/blog/2016/hijacking-use...
- TekMol 3y ago
  Shouldn't those activities create patterns which are easy to detect? A million visitors and just one sale -> Something is wrong Mostly repeat customers -> Something is wrong How would a scammer bring in a steady stream of new customers?
  - prepend 3y ago
    > How would a scammer bring in a steady stream of new customers? Spam email campaigns. Or google ad campaigns. Twitter bot spam. There’s lots of ways to get people to click on Amazon links and make money. Especially because I think Amazon gives you the 4% of anything they buy in the next 24 hours or some period. Since a large percent of humans have Amazon accounts and buy stuff pretty recently if you can just get your affiliate cookie on their browser, you could make quite a bit.
    - TekMol 3y ago
      That would create exactly the obvious patterns I mentioned. Low conversion ratio and many repeat customers. With new customers I mean customers who have not bought before.
gusfoo 3y ago
> It is surprising, that there is so little competition for affiliates these days. Still pretty competitive in the gambling and cryptocurrency space IMO.
soraminazuki 3y ago
If I were to summarize this video to those who didn't watch it, it definitely wouldn't be "this is about his affiliate account." Reading further, one would get the impression that this video is about affiliate scams, driving people further and further away from the actual topic of the video. That's not the main topic of the video at all. Rossmann stresses that he isn't reliant on the affiliate program, and doesn't care that it got terminated. What he does care, is the stated reason for the termination. What happened is pretty clear. Rossmann made a video critical of Amazon after they randomly terminated a person's account, made unfounded accusations in a phone call, only to silently reinstate the account weeks after without so much as an apology. Days after the video goes viral, Amazon terminates his affiliate account that he used in his YouTube videos. Amazon, without evidence, states that the reason for terminating the affiliate account is because Rossmann scammed Amazaon by encouraging his friends and family to buy things through his affiliate links. But it's obvious Amazon is doing this in retaliation and the reason is made up to discredit him.

by TekMol 3y ago

chrischen 3y ago

The 20 clicks it takes for an affiliate is out of the control of the advertiser, and is determined by the publisher and the source of traffic and the intent level of the traffic they are driving. Google, through their predictive models more or less is promising a certain CPA whereas a publisher may not have such guarantees. So obviously publishers need to be paid on performance instead. Affiliate advertisers still have to compete since publishers have a choice of who to actually publish.

TekMol 3y ago
I don't think that the 20 times lower PPC on affiliate links vs Google Ads is due to market forces. From the numbers I see, Google Ads are paid roughly "correctly". The ad spent per new customer is somewhere around the lifetime value of the customer. At least in competitive verticals. But for affiliate links, it is about 20 times lower. Your argument that market forces should drive the affiliate market towards the same equilibrium is exactly my question. Why doesn't it do that? Visit some random website about some random product. You don't see a variety of affiliate advertisers. You almost always only see Amazon. The cases where there are more than just Amazon links, it is often just to justify the site as a "price comparison" site. But reality is that even on those sites, the vast majority of revenue comes from Amazon.
- stavros 3y ago
  The ad spend is around the customer's LTV? Then why even bother acquiring them?
  - TekMol 3y ago
    LTV is usually calculated as the margin on the future orders of the customer. A customer has many other benefits. Just a few examples: They tell other potential customers about your product. More customers means better and faster a/b tests. More customers means higher stock price of your company.
  - chrischen 3y ago
    Google is very good at harvesting the values out of verticals. Ads is basically their only revenue source.

philipwhiuk 3y ago

There's plenty of advertising networks. How many internet retailers sell the breadth of stuff Amazon do?

shermozle 3y ago

Because affiliate marketing is cesspool of scammers doing scams at scale. I say this as someone who's measured marketing performance of these channels over the years.

TekMol 3y ago
That's what I meant with "I suspect that it is because companies are so afraid of getting scammed". What is the solution? How can we build trust between publishers and advertisers?
- michaelt 3y ago
  Individually negotiated deals. If marketers can negotiate deals for individual youtube videos, they can certainly negotiate deals for individual affiliate websites.
- hedora 3y ago
  Display marketing. The advertiser chooses which content gets their ads, and how much of a premium that content demands. This has the side effect of allowing reputable / high quality sites to charge more per impression, and is also privacy preserving (since it does not require user profiling).
EVa5I7bHFq9mnYK 3y ago
So basically Google, with its smart algorithms, is doing 20x better job at weeding out scammers, than a company can do it itself?
- bell-cot 3y ago
  I've been away from this area for a few years now...but I'd say "No, Google is not doing 20x better". However - Google is in a "nobody ever got fired for buying IBM" position, and trusted far more than it deserves. And whether you're dealing with small business owners, or C-suites full of suits - there are a whole lot of "we gotta do X!" (even if the ROI looks for-sure negative) human emotions around Marketing. And when you're emotional, and feel that you gotta do something...then "buy IBM" usually feels like the least-bad option.

ricardo81 3y ago

>Amazon seems to be almost the only game in town. IIRC 50% of all shopping searches are done on Amazon. That may be the USA, not world.

HKH2 3y ago
People in China tend to use Taobao.

benj111 3y ago

Surely the solution is to pay per purchase, not per click. That's how cashback sites work. it would actually align everyone's interests in actually incentivising sales, not clicks.

suddenclarity 3y ago
I don't know about the international market but at least in my country, all companies abandoned PPC around 15 years ago. One reason was that you could pay Google AdSense $0.01 per click while being paid $0.1 per click yourself. It was a money printing machine while the company got worthless traffic that wouldn't generate any sales.
- stavros 3y ago
  I don't understand, who's "yourself" here? If I'm paying $0.01 per click and I make $0.1, why wouldn't I want that?
  - ricardo81 3y ago
    Think OP may be talking about arbitrage and making a "made for adsense" site. Attract clicks via cheap ads, get ads with a higher CPC for a more generic term. Just presuming.

unreal37 3y ago

They're not "afraid" of getting scammed. They get scammed often. Affiliate marketers often use shady techniques to get the click. It's a tale as old as time. Wasn't there some browser extension years ago that was inserting it's Amazon affiliate link into webpages?[1] A large amount of the spam we receive in our email is ulimately just some affiliate trying to earn a commission. Affiliates don't have ethical rules they need to follow. It's very, very hard to find the "old days" true affiliate that drives any significant traffic. It's way more profitable for affiliate marketers to force users to open a new browser window which drops a cookie without the user having any true intention to buy, with the aim to scoop up the commission any future purchases. I mean if you can trick a million people into clicking a link, you can make money as an affiliate. Or you used to be able to do that. [1] https://www.perimeterx.com/resources/blog/2016/hijacking-users-affiliate-fraud/ https://www.perimeterx.com/resources/blog/2016/hijacking-use...

TekMol 3y ago
Shouldn't those activities create patterns which are easy to detect? A million visitors and just one sale -> Something is wrong Mostly repeat customers -> Something is wrong How would a scammer bring in a steady stream of new customers?
- prepend 3y ago
  > How would a scammer bring in a steady stream of new customers? Spam email campaigns. Or google ad campaigns. Twitter bot spam. There’s lots of ways to get people to click on Amazon links and make money. Especially because I think Amazon gives you the 4% of anything they buy in the next 24 hours or some period. Since a large percent of humans have Amazon accounts and buy stuff pretty recently if you can just get your affiliate cookie on their browser, you could make quite a bit.
  - TekMol 3y ago
    That would create exactly the obvious patterns I mentioned. Low conversion ratio and many repeat customers. With new customers I mean customers who have not bought before.

gusfoo 3y ago

> It is surprising, that there is so little competition for affiliates these days. Still pretty competitive in the gambling and cryptocurrency space IMO.

soraminazuki 3y ago

If I were to summarize this video to those who didn't watch it, it definitely wouldn't be "this is about his affiliate account." Reading further, one would get the impression that this video is about affiliate scams, driving people further and further away from the actual topic of the video. That's not the main topic of the video at all. Rossmann stresses that he isn't reliant on the affiliate program, and doesn't care that it got terminated. What he does care, is the stated reason for the termination. What happened is pretty clear. Rossmann made a video critical of Amazon after they randomly terminated a person's account, made unfounded accusations in a phone call, only to silently reinstate the account weeks after without so much as an apology. Days after the video goes viral, Amazon terminates his affiliate account that he used in his YouTube videos. Amazon, without evidence, states that the reason for terminating the affiliate account is because Rossmann scammed Amazaon by encouraging his friends and family to buy things through his affiliate links. But it's obvious Amazon is doing this in retaliation and the reason is made up to discredit him.