The Adtraction Blog

Why has affiliate marketing created barriers to entry?

We work with a lot of new and growing e-commerce companies taking their first steps in affiliate marketing. A key challenge that we help these companies overcome is the financial, technical and operational barriers to entry that make affiliate marketing a low priority for growing businesses.

Google Ads and Facebook Ads are the two most popular digital ad platforms for a variety of reasons, not least ad-targeting and reach. But one of the reasons is without doubt their ease to use and low barrier to entry. Consider what both have in common:

  • No upfront costs or access fees
  • No fixed term commitments
  • Campaigns can be ended at any time
  • Campaigns can be set-up from a web-based platform

This easy-access model is incredibly popular with growing e-commerce companies. These platforms are low risk, accessible and easy to manage because there are zero financial and contractual commitments. You can set them up, turn them on, trial them, and easily pause them if they don’t work for you.

It’s the kind of low-risk online marketing that the cost-per-action (CPA) model should provide for the affiliate channel. But doesn’t.

Let’s consider the terms and accessibility of affiliate marketing next to those important plus-points of Search and Paid Social.

Google Ads and Facebook Ads

  • No upfront costs or access fees
  • No fixed term commitments
  • Campaigns can be ended at any time
  • Campaigns can be set-up from a web-based platform

Affiliate Marketing

  • Affiliate networks charge as much as £5k for set-up. Most networks also charge a monthly access fee
  • 12 month agreements are standard for new advertisers joining affiliate networks. 24 months is not unusual
  • As with many B2B contracts, auto-renewal is common (something that has thankfully become rarer in B2C agreements and banned by law in sectors like Utilities)
  • 95% of affiliate marketing campaigns need human interaction to launch and manage

Why is a marketing channel that should pride itself on being low risk for advertisers and a proving ground for new business models so difficult and costly to set-up?

One answer could lie in the CPA mechanism itself. It has concentrated the channel on lower-funnel traffic and made it an easy target for advertisers intent on not paying Affiliate unless it can be proved as vital (or ‘incremental’) part of the user’s purchase journey.

Spooked by this threat to its business model, affiliate marketing hit back with a strategy of fixed fees and customer lock-in.

For new and growing brands, affiliate marketing is seen as an expensive risk and normally one they are reluctant to take without two-years of Search, Paid Social, Google Shopping and even Display under their belts. Most won’t earn back their start-up and monthly costs in the first six months of running an affiliate programme. Some are so put off by the year-long commitment they eschew affiliate marketing altogether, or use plug-in affiliate technology that has little to no reach with potential affiliates.

At Adtraction, we’ve been driven by this issue to see affiliate marketing differently. We believe affiliate marketing should be a low-barrier to entry marketing channel, made simple and risk-free by ultimate performance-metric - CPA. We also believe client commitment should be earned and not inked.

Whether entering affiliate marketing for the first time, or a veteran of the channel, we always urge advertisers to understand the commitments they are being asked to make to the affiliate channel. Thoroughly check contracts with affiliate networks before you sign them, and don’t be forced into long-term commitments and high fixed fees because these are presented as the industry’s status quo.

Affiliate marketing should be as accessible and simple to operate as any other online marketing channel.

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