Let me tell a story on a related theme first …
Listening to one entrepreneur’s business plan as an advisor a couple years ago, I really liked what I was hearing. He was a great pitchman and he had a solid skillset for developing corporate identities; websites, business cards, advertising, etc.
And then he said something that blew it all out of the water. He’d been burned a couple times and had his design work ripped off by customers without being paid. His solution was to collect a fee from potential customers … before he showed them anything.
This is not how business is done. At least, not in advertising. In advertising, you have to make a presentation first. There are other ways to protect yourself, but trying to collect a fee before a company can see if you even understand who they are or what their brand means is a tough sell for a small and new company.
Luckily, he understood what we were saying and we helped him structure a better solution.
Google Referrals 2.0 is Crashing Hard
Google has opened up an interesting door with their referrals 2.0 program. The possibilities for publishers and advertisers with this affiliate sales platform are huge. The platform is a lot like AdSense …
And that’s the problem.
When it comes to affiliate sales, this is not how business is done. And although the problems are being viewed by some as “technical issues”, they’re not. They’re systemic. The system doesn’t work the way an affiliate platform should work.
Let’s look at the main issue:
Advertisers can specify a budget. Just like in AdWords. When their budget runs out for the day, Google starts showing other ads from other referral advertisers.
Affiliate sales are all about the landing page. If you build a landing page around a deal you’re promoting and some other offer is showing up, or nothing shows up, it completely destroys the whole process for publishers and users. And it sure doesn’t help the advertisers look very good either.
Google and the advertisers they bring into the referral program have to understand that CPA means Cost-Per-Action. And that action has to be able to support the cost of acquisition (paying the affiliate).
There can’t be a “daily budget”. When a publisher chooses an ad, that ad has to be served for as long as the advertiser is running the program and the advertisers landing page has to be built with one goal; getting the action that pays the affiliate.
Or else there won’t be any.
Innovation is important. It’s necessary for success. But you still have to do business the way business is done.