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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 lev

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.

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.