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More Networks Going Belly Up, But Why? – Performance Insider

November 15, 2012
Written by Andrew Bishop at Performance Insider.

In the past few months, three of the industry’s largest affiliate networks – shut their doors, leaving their affiliates high and dry. From the looks of things, many more will follow suit in the near future.  Here’s a look at why affiliate networks fail and what you can do to protect yourself.

  1. No money. This is the biggie. For various reasons, the flood of cash that keeps networks above water slows to a trickle and eventually dries up. Two main reasons trigger this. In some cases, advertisers stop paying their bills. In the interest of doing the right thing and to keep their businesses afloat, networks continue paying their affiliates even though they really don’t have the funds to do so. In other cases, the FTC and state attorneys general knock on the door. The networks are crushed under the weight of legal fees, fines, and insurmountable actions lobbied against them. Expect to see more activity from the government as it cracks down on what it deems illegal online marketing practices.
  2. No growth plan. Eager to turn a quick buck, some networks enter the game whole hog without first creating a long-term business plan. Executives expect the network to grow itself and neglect to actively recruit qualified affiliates. Operating under the assumption that more publishers will mean more sales, they “grow” the network by hiring any and every affiliate that applies. They don’t research the background or performance records of these potential partners. Consequently, their bank accounts and their reputations eventually suffer to the point that the business fails.
  3. No new ideas. Many affiliate networks don’t plan for what will happen when demand for their current products and services wanes. They jump into the market with the latest hot trend and get so comfortable that they stop innovating. They don’t generate ideas for how to move their network forward. When demand dies, they have no backup plan and no direction. Out of desperation to find the next big thing, they partner with companies who have not been vetted and who prove to be unreliable. Over time, the money and resources they pour into these unproductive relationships vaporizes.
  4. No commitment. Some affiliate network executives view affiliate marketing as a way to get rich quick instead of as a long-term business investment. As such, they tend to treat their affiliates as expendable employees and necessary nuisances instead of business partners. They don’t understand the purpose of building positive relationships with affiliates or sharing relevant information. They may pay their affiliates late or not at all. What they don’t understand is that their affiliates have options, and those options are fairly easy to exercise. They also have mouths and social media accounts. As soon as word spreads that a particular network isn’t worth the time, effort, and money, it begins a slow and painful downhill slide. After all, without affiliates there is no network.

Some of these reasons for failure can’t be controlled, but others can. My advice, whether you are a manager or a publisher, is to do your due diligence. If you’re running a network, read up on recent court cases, investigate advertisers and affiliates before signing on the dotted line, and realize the power that your publishers hold. If you’re an affiliate, research the networks you’re interested in, ask colleagues what they know about these networks, and pay attention to what’s going on in your industry. With these actions, maybe we can prevent the demise of another affiliate network.

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