Is There a Market for Affiliate Marketing in China?

I had three very interesting phone calls last week from completely different people asking me about affiliate marketing in China. One, a US based investor asking my opinion about the potential of affiliate marketing in China, another, a Chinese branding company looking to do business with us and the last a New York based Chinese Affiliate Network focused on US product sales in China.

I asked a few questions to get a better understanding of the marketplace and their understanding of it.

Chinese Affiliate Network: ChinadGateway

I was really intrigued when these guys called me because they were looking for US based companies wanting to advertise to a Chinese market on a performance base. However when I asked how affiliate marketing worked in China, they said Chinese affiliate marketers generally worked on a CPM basis only. They do not work on a rev share or CPA model. When I asked why, they said Chinese internet marketers wouldn’t take the risk because Chinese buyers don’t generally look at unknown brands or products. Chinese online buyers want only recognized brands of products that are not manufactured in China. I saw two big problems with their model in targeting US advertisers.

• US based advertisers would likely not take the risk of doing a CPM model if site traffic is unlikely to buy. Why would an advertiser buy on impressions that are not going to convert?
• So many products in the US are made in China, so unless you have a recognized brand and it’s made somewhere else, like Italy, Canada or on home turf, you’re also not likely to convert. This just leads to very expensive ad buyers that will likely produce a negative return.

A conversation with a friend from a Chinese branding company added another issue to the mix:

• Everything in the major metropolitan cities where people CAN afford to buy stuff is within arm’s reach. There is nothing you can’t get immediately going downstairs into the shops in your office building or walking across the street. If it’s a need, they already have it. If it’s a want, the only want they would have from US based retailers is something they can’t already get in person.

US Based Investor

Strange that this man called me after I had spoken to two Chinese owned companies looking to leverage the US Marketplace and asked what the potential was in the Chinese marketplace for affiliate marketing. After filling him in on my calls and my thoughts on the potential road blocks listed above, he too agreed that unless he could create a marketplace where Chinese buyers could easily purchase high quality products by international brands made in first world countries, the likelihood of success with traditional affiliate marketing was limited.

BUT, there lies an interesting opportunity here as well. If a niche affiliate network focused on only top level brands made in “first world” countries, would the world jump at the chance to market them? I think so. The challenge would be accommodating different performance models that are acceptable within the countries marketing the products while making them mutually beneficial and profitable to the sellers.

Maybe it’s not for those countries to change their models but for us to find ways to accommodate how they do business while making it profitable for us as well. Mutual win-win.

At the moment there is no “affiliate network” that does such a thing that I’m aware of. However ExactView (founders of Buy.at) has a model that is closest to this and might benefit from keeping these cultural differences and new market potentials on close watch. Who knows, maybe it’s time for a new Global Performance Network that will focus solely on filling this void.