Is Affiliate Marketing Dead?

I had a question asked of me last week that kind of stunned me. An affiliate friend of mine who used to be one of my top performing affiliates a few years ago asked me "Sarah, be honest with me, is affiliate marketing dead?"

What? I was shocked!

I've watched millions of dollars being made through affiliate marketing programs over the last few years and have seen constant growth year over year. I've seen the level of awareness and interest in the affiliate space boom with no signs of it slowing anytime soon. There are new records of affiliate and merchants joining the space and new tools, resources, networks and solutions popping up to accommodate their needs.

So how could this affiliate, one who's performed so well for so long, think the industry is dead?

Google's Panda and Penguin updates KILLED their business model, that's how. They spent years creating beautiful websites on particular subjects poring hours, weeks, days and years into great content and self taught SEO, only to get hit hard with Panda then killed completely by Penguin. How are affiliates to stand a chance? How can anyone still make any money?

Well, affiliate marketing is not dead. On the contrary, it's absolutely booming. It's just changed. And we need to change with it. As affiliate managers its our responsibility to help affiliates out. This affiliate didn't have the budget or experience to complete in paid search, nor did they have the time or budget (at this point) to compete against the retailers themselves for those coveted first page placements in organic search. It would take several months to recover from what's already happened to this affiliate should they start their SEO work again, let alone risk something else happen out of their control.

My affiliate friend asked many good questions. "Is Google trying to rid affiliates for good?" "Are they trying to make more money by forcing affiliates to use paid search instead of organic?", "If I change my business model and try something different will I get hit again?" "Will another model even work?".

I wish I had the answers to these questions. I let my friend know where the trends are right now: coupon / daily deal sites, mobile, social (including blogging), video and any new technology or traditional offline model that's going online on a performance base.

My friend wanted to know which I thought was her best chance of recovery and longer term success.

My first suggestion? Don't start a coupon site. Affiliate managers are sick to death of reviewing affiliate applications where 80% of the new applications are pop-up coupon sites that are trying to get into the market. If you're coming in now, you're way too late. Merchants do not need 100+ coupon sites. They only need a handful of selected ones to get the job done.

The more advanced affiliate managers hand select a few coupon sites to work with, then decline the rest. They are also starting to value different types of affiliates more than others, giving higher commissions or more credit to affiliates who drive long term loyal customers versus the "whoever has the best deal today and I don't care what brand it is nor am I going to buy from them again if it's not 60% off" type of buyers. Because of this coupon sites do not generally fall into the "high value incremental sale" column.

Affiliate managers also consider the amount of effort needed to find and convert that customer for the merchant. For example did they have a huge following they actively reached out to? Did they create an app that had an affiliate tracking link inside? Did a lot of programming or design need to be put into the effort? Is the sales strategy legitimate and fair? Or did they take five minutes to slap a code together and have results show up for trademark plus terms in the search engines? These are all things a good affiliate manager needs to consider.

From the affiliate side, not only is the coupon market already saturated, it's almost impossible to compete against super coupon affiliates such as retailmenot.com in organic search. If you don't have paid placement budget, then how are you going to get found? Facebook? Maybe. But I doubt you'll get the volume you need in order to drive enough sales through performance marketing to earn a living relying strictly on Facebook as a coupon affiliate.

Blogging on the other hand is a completely different story. People go online to find solutions to problems they have, and generally they need to find information about something so they can make a decision for themselves. This is where bloggers have so much success in affiliate marketing. There are incredibly successful bloggers out there making an insane amount of money through performance marketing because they have found their voice, their niche and a loyal following of people who are learning and buying through their recommendations because they are considered experts on their topic. That, and they have earned the trust of their readers. You can blog about anything and everything under the sun and the cool thing is you can be as creative as you like.

Bloggers use different channels outside of (but not excluding SEO) to drive new traffic and business to their websites and build solid relationships with their readers through shared opinions that are either original, said with conviction or as a proven expert in their field. They rely on building a following through social channels, newsletters or RSS feeds, search, conferences, online and offline PR and even good old word of mouth. All in all, they don't put all their eggs in one basket.

There are lots of tools out there to help bloggers better monetize their websites (future blog post to come), produce content more easily, marketing their sites more effectively and grow their fan base faster.

So what's my point? Affiliate marketing is not dead. Not in the least. It's simply evolved. It's fluid and ever changing so both affiliates and merchants need to be prepared to adjust to those changes and be ready to adapt. You as the affiliate manager need to be ready to support affiliates in their quest for earning opportunities and changes to strategy. That's why it's important for you to stay on top of important topics in the space.

How can you do this? Be clear on what is working in the industry and not. Be clear on what strategies both merchants and affiliates are using so you can offer fair, honest and useful feedback to your affiliate partners. Be ready to offer helpful tools and tips affiliates can learn more about. The PMA blogs about all kinds of important issues - things that can help prepare both affiliates and merchants for those changes. That's usually a good place to start.

As their leader, be their main resource for performance options. Know the stakes, know the issues, know the best practices. By being knowledgable about things like Google Panda and Penguin, you can help affiliates adjust to change more easily.

Sometimes it's hard to turn away from a business model you've been using for years, especially one you've had previous success with and have stuck to for so long. But this industry changes rapidly and we need to be prepared to change with it.

We don't need to be the rock in the water. We need to be the water itself.

How do you help your affiliates adapt to change?

Roni

11 years ago

How will Google's transition to paid product search affect affiliate marketers? From several articles I've read, Google Shopping has strong potential to cripple affiliate marketing forever.

Sarah Bundy

11 years ago

Hi Roni, thanks for your post. Interesting point. I imagine Google will continue to make changes and improvements to their billion dollar organization, finding more ways to appeal to shoppers and merchants at the same time. They are in business to make money, and their product is valuable, relevant, easy to access information. Will this put the affiliate marketing world out of business? I think it's too early to tell. Regardless, affiliates will need to stay on their toes and adjust their strategies to make sure they are ahead of the curve. They just might have to look for other means such as offline, mobile or new technologies. Further, even if a shopper ends their sale in google product search, an affiliate still might have influenced their buying decision - in which case we need to continue to understand attribution more clearly.

Don Bistrow

11 years ago

I think I came out of the Panda/Penguin assault. I've notice increased traffic from dead, and better placement in Google searches and an uptick in Bing and Yahoo searches.

Unfortunately, Google dumped my Adsense account after I reported heavy bot activity on a separate political blog, provided IPs and explained to them the actions I had taken to stop the problems.

They thanked me by closing my account ($1,200 per month in earnings) and my Google affiliate account went with it. Last year they closed my Adwords account with no solid reason. At first they said I had iframes and I told them Amazon affiliate banners use iframes. Then they gave another excuse. That's all I got was excuses for trying to be honest with Google.

Next up, I don't trust the Ebay EPN algorithm and their new system. I make huge sales and my EPC goes down instead of up. I switched to Skimlinks, attached my EPN account and after an uptick in EPC it's back down after a string of good sales. Try to prove Ebay is corrupt. I can only surmise.
My CJ and PJ ads never sell and Amazon affiliate banners/products don't convert and the cookie is only 24 hours.

So plenty of original content, fresh products, good SEO building traffic on young sites but I believe the affiliates aren't paying for the traffic we produce. I can't do a thing but send traffic, there are too many factors that make or break the conversion factor.

Sarah Bundy

11 years ago

Hi Don,

Thanks for your time and really great feedback from your experiences with Google, Amazon and EBay. The amount of people struggling with this issue is really mind boggling and I'm all ears to potential solutions to the problem. I'm also all ears on how this industry will survive if Google decides to shut it down completely. The power really is in their hands in a lot of ways. But since they don't own EVERYTHING yet, there are still opportunities out there in the social, mobile and offline arenas. There are also a few affiliates who have recovered from both Panda and Penguin and are still going strong. Though those seem to be far and few between at the moment...

Nasdaq7

11 years ago

Affiliate marketing is dead in my opinion. I'm only using it to see how much money I can make. But I've accepted that you cannot build your business or all your income around it. It is just reality. I also believe Google can kill it off completely if it wanted to, make it impossible.

Sarah Bundy

11 years ago

Yes, Google certainly has an incredible amount of power. However there are some good affiliates who are providing exceptional, high quality, authentic information out there, and Google needs that to supply the demand of relevant information to it's readers - people seeking information online. Therefore, the question is IF and WHEN Google will decide to shut it down. and if they do, will we have any of our eggs in other baskets to be prepared for the need to diversify.

Don Bistrow

11 years ago

I've heard mention in the last posts "if Google decides to shut it down." Shut what down? My original, value adding content?

More and more people get to my sites from Bing and Yahoo and Ask. If Google want's to get out of the search engine business, of which I doubt, someone will gladly come by and pick up the slack. What would replace search engines for all the information people are seeking? There is a market and always will be for that. Statistic show the huge and continuing trend to online shopping as well.

Good affiliate publishers provide relevant content first, than offer matching products or services and a secondary feature. If people are looking for good reviews of the ACME XYZ Widget than offer that review and make it a good one. At the end show some real products.

I believe Google was cleaning out the thin sites, the garbage sites and mine have come back in full swing. I ran tests at SEOMoz to ensure my site structures were all in good shape. Traffic is fine, it's the "sponsors" who want us to send traffic who are the problem. They want something for nothing IMHO. We read all the Terms and Services and then we comply but we really never know if we're being treated fairly and our traffic and conversions are being recorded and reported.

I do inner tracking on all traffic sent and Ebay is telling my I've had but one bid out of nearly 1,000 clicks to their site in the last five days. That trend does not compare one iota to the historical trends I've shown. Bad week? That would be a first.

Affiliates need to go for Win/Win or it will be dead and they will have shot it.

Sarah Bundy

11 years ago

These are all great points, Don. Ranking naturally is not an easy task and there are too many people who put ranking first and quality content second. Or like you said, put monetization first and content second.

Google will continue to change it's algorithms and we need to simply be prepared for change, and to continue to put out high quality original content for the sake of awesome content, not for the sake of rankings.

That and there are many other opportunities outside of Google (like you point out here) in other search engines, in the social networking space, in video, mobile, new technologies (like affiliate links in Amazon Kindle books due to HTML5) and even in the offline space.

Thank you for your thoughts and showing affiliates there is still a ton of opportunity out there. The world still needs what we do and in your words "affiliates need to go for the win/win".

Don Campbell

11 years ago

Great advice Sarah - thanks for this article. You're right-on about the coupon sites. As a merchant I don't want to deal with any more sites that are not adding value for the reader. I think the best affiliates are the ones who are blogging about an interest or something they care about. They authenticity of it comes through and people trust their recommendations.

Sarah Bundy

11 years ago

I totally agree, Don (and sorry it took me so long to see this post! EEK!). Authentic content and value do come out but it takes a little bit of training and thought from the merchant side to really understand what impact each affiliate is bringing to the table. As you said, once you've been able to identify which affiliates are brining you good value, you're able to make better decisions on who to approve into your program and not. Thanks for the comment!

Kevin

11 years ago

Great article Sarah!

I understand this article is dated June 2012. Since then (now being September 2012), there has been this huge debate over the Affiliate Nexus Law which has crushed my dreams of being able to make a decent side income through amazon and other merchants. I live in Georgia (Nexus Law has passed here) and Amazon and several other merchants have dropped their affiliates. What do newbies like myself do in such a scenario. I have not lost any money since I was on the verge of creating my site & starting my affiliate business. However, where do I go from here? What other ways can I make money online legit way? Please help.
Thanks.

Sarah Bundy

11 years ago

Hi Kevin,

Good question and sorry to hear you are one of the thousands who've been affected. Some people have moved out of state to other locations they are free to promote products in. Others simply pick and chose merchants who work with affiliates regardless of their location. This means you still do have earning potential with merchants who want to work with affiliates in all locations. I wonder if those merchants could stipulate more clearly who they are.... I'll think about how I can communicate that more. The other way is to create your own product or service and sell it online. There is still money to be made in that arena as well. Finally, if you're really stuck on the affiliate site of things, you can also look to make money through google adsense or through sponsored listings if you have a site that generates enough targeted traffic. Don't give up if this is a dream. You will find a way to make it work if you really want to 🙂

ELTED

11 years ago

Well written article - i think affiliate marketing on both sides of the Atlantic has changed. One of the things that we have to note is that affiliation seems to be becoming a redundant term. The deals i strike are paid er performance, but they are more convoluted than previous years. you can no longer cater for affiliates the way you used to, and in a sense the majority of top affiliates have changed into - well traffic drivers using mixed methods, payments etc...

Another factor is that affiliation has become much more cut throat at all levels since there is so much choice, meaning its harder to establish long term relations - which are key. At business level affiliation is now competing on basis with other channels that have easier access such as PPC search and display, these are less layered and easier to access for advertiser.

Affiliation is no way dead - its just a lot harder and a lot more complicated!

Sarah Bundy

11 years ago

Hi Ted, Love your comments! Thanks for sharing your thoughts. You are so on the same page as me with the changes in even the use of the TERM affiliate marketing. I have a post coming out next week about the difference between performance marketing and affiliate marketing. Do stay tuned. I would love your thoughts on that post once it's live too. Best!

John Cheshire

11 years ago

Thanks Sarah for your article about affiliate marketing not being dead. I see you mention Google updates and competition from the coupon sites but this in my opinion is not the big story today that is killing affiliate marketing. The thing that really is killing affiliate marketing is the web browser toolbar.
There is the Nectar toolbar in the UK and the Shopathome toolbar in the USA. Whichever online retailer you are affiliated with it is very likely that they are members of these.
How do affiliates earn money once they manage to get click throughs on their affiliate links? With tracking of course, but what if a toolbar is present that prompts the customer to get some cash back by clicking to shop via Shopathome/Nectar. In this case the affiliate sends the customer but Shopathome or Nectar get the commission.
Shopathome and Nectar are hoping to earn commission on the majority of online shopping,
whether the shopping was referred by another site or not and with no regard as to whether
the shoppers simply visited a bookmark on their web browser, clicked a non affiliate link,
typed the domain name ro found the domain in a search engine. Over 50% of online shopping in the UK is done through Nectar now. I'm sure there must be very similar figures for the USA equivalent.
Yes, affiliate marketing is dead except for the toolbar operators who now take commission for the customers they refer and customers other affiliates refer too!

Sarah Bundy

11 years ago

Hi John, GREAT point and one worthy of a blog post of it's own. It's an extremely important topic and one that not many merchants are even aware of. There is lack of knowledge about how toolbars work (both by users and by advertisers) so the challenge will be educating people on the pros and cons. Merchants tend to think SAH and Nectar add value in the sales process because they see sales, however they need to measure the COST of those sales and understand the profit margins and risk of them as well. Thanks for brining up this point, John. It's absolutely worth mentioning.

John Cheshire

11 years ago

Thanks Sarah. You are absolutely right in saying the merchants need to be educated about how the toolbars are trying to turn the majority of their sales in to affiliate sales for the toolbar operator.
If I was a blogger I would have posted a blog about this myself but found your site searching to see if anyone was blogging about it. I did not find anything but thought this was a good place to start discussing it. I am investigating cookie behaviour and contacting merchants and affiliate marketing companies such as Linkshare and CJ. My findings probably do need a blog of their own.

Linkshare stated;
"We are sorry to know that you are facing issues due to the toolbars used by other affiliates in the network. However, note that the toolbars used by publishers in LinkShare are approved by LinkShare network to make sure they do not violate any LinkShare policies. Please note that toolbars are first tested by LinkShare before being allowed to use. We do not limit or in anyway restrict affiliates success provided they do not violate our policies.
We are sorry for the inconvenience caused."

Part of my reply;
"If you allow a toolbar to hijack my referrals so that the toolbar operator gets commission for my referral then that is exactly what you are doing. You are restricting my success and the success of all affiliates impacted by the toolbars."

An Online Marketing Executive for a UK/Europe website that runs their own affiliate platform told me
"I've just spoken to our technical team and it does indeed look like we
pay out the commission twice. Once to affiliates like yourself and then
again to Nectar who are an affiliate via another platform we use. We
could 'correct' this so it only gets paid out once but then we'd have
uproar from affiliates as the money would be paid to one or the other
and fairness comes into it."

I ran a cookie test to see the effect of the SAH toolbar on my links to a major sheet music supplier in the USA. Without the SAH toolbar a cookie named "affiliate" is set to my affiliate ID number. If the SAH toolbar is enabled the cookie contents are changed to the affiliate ID number of the toolbar operator - and that is just having the toolbar enable, not even clicking on anything in the toolbar to collect cashback.

Affiliate marketing companies such as Linkshare and CJ are complicit in the toolbars' actions. This is because in an ideal world for Linkshare and CJ most online purchases would be affiliate sales through their network and this is the ideal the toolbar operators are working towards. Linkshare and CJ get paid more because of more affiliate transactions and they have no reason to care that affiliates are having their referrals and commissions hijacked.

I really hope affiliate marketing is not dead. I feel it is essentail for affiliates to lobby their merchants to say that 1. toolbars are unfairly hijacking their commissions and 2. don't the merchants realise that the toolbars will cause them to lose thousands of links from affiliates who drop them and cause direct visits to merchants' websites to become affiliate sales.

Sarah Bundy

11 years ago

John, I love your ideas here and the research you did on this. It definitely deserves a post of it's own. I just sent you an email so we could connect - let's do a post together so people better understand this issue. 🙂

Rob

11 years ago

Personally, I feel that affiliate marketing will never die regardless of what Google does - Because Google is not the only traffic source in the world. I work directly with the vendors as their main affiliate because I push around 1,000 - 1,500 leads per day - vast majority of the leads being on advertising platforms other than Adwords. The only way I see affiliate marketing coming to an end is if there is some sort of Governance of the Internet by the United Nations - or something freaky like that. As long as there is advertising platforms with great inventory, the right affiliates will never let the industry fade away. My primary point being - that SEO or Paid Placement (PPC / PPA / Media Buys) will never "die". It's out of Google's hands!

Sarah Bundy

11 years ago

Hi Rob,

I love your thoughts on this and totally agree. It's interesting to watch the multitude of new opportunities that are coming up as technology advances and the social and mobile space expand - further the international landscape allows for further reach. I agree, Google does not own the world, and people will continue to be innovative leading to continued incremental value through affiliate marketing. Thanks for commenting!

Dave

11 years ago

Affiliates have a bigger problem and it is called Adsense.
The affiliate that gets the commission is the last one the customer clicks on and then IMMEDIATELY buys.

If someone clicks my link and does not buy right then.
The very next site the person goes to that has Google Adsense etc on it will be shown ads from someone else for the very same thing I am promoting.
If they click the ad then my affilaite cookie is gone.
Now if it takes someone 5-7 times seeing the same product before they buy which research shows then affiliates are spending money for nothing. Except on the rare occasion when one buys immediately after clicking your affiliate link.
So really your bigger problem is how Google places ads and tracks where & what someone is looking at.

Sarah Bundy

11 years ago

Hi Dave, interesting point. the only way this would be disadvantageous to the affiliate is if they are using Google Adwords to drive traffic to a page that has Google AdSense on it, which is not a profitable strategy. Generally affiliates who have AdSense on their pages (to earn from clicks) use a variety of free methods to drive traffic to that page. Otherwise, if they are using PPC to drive traffic to another type of affiliate link, such as a CPA offer or PPS (pay per sale) product, especially in a direct linking situation, the affiliate can be profitable. If I understand your point point and other affiliates are reading it, please don't use PPC to drive traffic earn money on adsense. The math just doesn't add up and you will likely take a huge loss.

Dave

11 years ago

You do not understand.
If a person goes to a site for "Widgets" through my affiliate link {direct link or not} and does not buy the Widget right then.I'm screwed because
Google who tracks their searches and any product sites they visit {regardless of how they got there} will on the very next site they visit that has Google on it they will see ads for the same product my affiliate link took them to.
Problem is the text/banner they then click on at the new site will not be my affiliate link but rather.
It will be another affiliate's link or the product owners link thereby overwritting mine.
So i can spend thousands driving traffic and be wasting money.
As you should know a consumer has to be shown the same offer several times before they buy.
Google has screwed the industry over the last couple years and most affiliates,networks and AMs do not realize this serious problem.

Ian Strange

10 years ago

Dave makes a very valid point. If I visit each of my websites in succession (all are different topics), the Google ads tend to stick with the topic of the first site, presumably trying to get me to buy by repeating the same ads through my period of browsing different sites. I've certainly seen my affiliate income drop off dramatically in the last 2 years. Some free applications that folk download, install software to hijack affiliate banners. Meanwhile, merchants have become better at marketing themselves online without the need for affiliate help. I also believe that Google tends to 'ban' certain practices, to clear the way for them to take over where the competition has been suppressed. Affiliate marketing isn't quite dead, but it's getter tougher all the time!

Sarah Bundy

10 years ago

Great points, Ian. The industry is certainly becoming more complicated and challenging, which is why it's good to have people and companies out there who can help make better decisions and keep you up to date on what needs to be done for your particular program, as not to get left behind.

Yanco

10 years ago

I'm glad I found this article! I was thinking of going into Affiliate Marketing and this article and discussions below completely turned me off of the idea. Thus saving me at least weeks if not months trying to build something that probably wouldn't work anyway.

You saved me a lot of time/money, for that I thank you!

Sarah Bundy

10 years ago

There are people who are getting into the industry who can still make some good money with great content, a solid following and / or an angle or technology not yet matched. The market is growing every day. Competition does increase, but so do the opportunities. If you're not ready and willing to put in the time or effort without seeing immediate return, affiliate marketing is probably not the best place to start. Thanks for your comments!

Sarah