Why Aren’t More Affiliate Schemes In House?

I appreciate this would be a big project for most companies but there are also some big potential benefits :

  • Take SEO benefit from the affiliate links which should boost the merchant  sites organic rankings.
  • Lower costs – cutting out the middleman but still offering affiliates competitive rates.
  • Faster to communicate special offers, new products etc to affiliates – again cutting out the middle man.
  • In a better position to capture feedback from affiliates on usability and conversion issues of  websites.
  • More control when it comes to managing fraud etc.
  • Potential for new income from managing affiliate schemes for other retailers.
  • Can offer affiliates option to take your products as payment instead of cash.

Very few companies have run a successful in house programme (ebay, amazon have!) and many probably start out in-house and then end up going to a network to chase some volume. Here are some of the downsides :

  • Take SEO benefit from the affiliate links – Some affiliates will hate this.
  • Sucks up management time.
  • If you switch from network to in-house, will lose some affiliates that can’t be bothered with yet another login.
  • Might still need help from agencies e.g. in specific country markets or with affiliate recruitment.
  • Your in-house staff need to be really clued up to prevent fraud etc and also they should be well networked to help with recruitment.

Any other thoughts ?, please let me know by adding a comment.

Comments

  1. Matt Bailey says:

    Hi Rob,

    I don’t think it’s any surprise that the examples you’ve named are huge multi nationals with significant affiliate campaigns.

    I would argue that the costs are not lower. You need to be of a certain size in order to gain economies of scale and save yourself money. Let’s have a look at what needs managing if you take your affiliate campaign in house.

    You need technical resource to ensure extremely limited downtime, as a loss of tracking is not conducive to a strong affiliate campaign.

    You need finance resource to pay all of the affiliates. Very time consuming for the merchant and the affiliate.

    You require account management resource. Good affiliate management talent is pretty scarce in the market and you could be up the creek if you’re established affiliate manager decides to leave.

    Networks provide access to additional tools and technologies that help in driving sales that would not be available if you ran direct, for example ShopWindow.

    Networks provide reach across large numbers of affiliates and attract new entrants to the market.

    Also if you choose to whitelabel the technology, I have not really seen any technology that is as robust or easy to use as network tracking, so it is often a harder job to manage things in house.

    There is definitely an argument to do it in house, but many have tried and failed. You need to have the scale to make it worthwhile and in the UK at present, there aren’t many candidates that fit that bill.

    Matt

    • Well it depends on how you look at it. I presently work in the online gaming sector (and have for the last 4 years) and in gaming it is common to have an in house affiliate program. In fact, I cannot think of any gaming merchant who does not have an in house. Many use networks also, including ourselves (Mecca), but more as a supplement to our own affiliate program.

      I agree with Matt that it’s hard to find, and even harder to retain, good affiliate managers, and this is a challenge companies with in house schemes do face. So getting the right, well networked, people is certainly a big issue if you wish to succeed.

      But at the same time, in terms of technology, there are good and robust affiliate tracking/management solutions available for an affordable price so that should not have to be an obstacle.
      And there are the benefits as mentioned by the original poster such as competitive rates, direct contact with the merchant etc.

      Maybe it’s the nature of the gaming sector and the fact that revenue share is the common commission method but in this sector in house programs are the norm. I have often wondered why it isn’t in other sectors. If your business has the size and the capital it could be a good thing to do. But it’s not a small task.

      Jasper

  2. Why Aren’t More Affiliate Schemes In House?

    Affiliate marketing is relatively new compared to traditional marketing, so the experience to run in-house operations just isn’t there. The same goes for infrastructure required to run the program, i.e. tracking servers, database servers, link servers, not to mentions backup and redundancy systems.

    Even if you manage to get all that sorted, you need to have finance systems, and people in place to manage the payments to affiliates. add to this the man hours required to manage all the erros and questions that payments generate.

    These are just the things you need in place before Day 1. In House programs do not have acess to the affiliate email lists that the networks do, so you;re at a disadvantage from day 1. Even if you overcome all of these hurdles, you’re buggered when the affiliate manager wants to go on holiday for a couple of weeks. Who looks after the work?

    All of the above takes money in trms of kit and people. I doubt the cost involved in setting up in-house outweighs the network override costs, especially when you take the advantage of the networks email list, and sick/holiday cover.

  3. Some well made points gentleman.

    Affiliate Marketing is a (relatively) new part of the overall mix, and viewed by some merchants with a degree of scepticism. With a limited talent pool, it’s an easier option to pass affiliate resposnsibility to a network, who have the contacts, the knowledge and the technology to turn a programme into reality.

    Setting one up from scratch in-house is a risk if the merchant has limited knowledge, and some would want to base their objectives on previous experience. The safest option for many would be to run via a network, get a good handle on volume, revenue, costs, profit etc then look at setting up in-house. However moving affiliates from a network to a direct model will only work if the affiliate generates significant income from the merchant, or if the in-house offering is as good as, or better than the network solution.

    For us we work with affiliates directly as well as through a network. There will always be affiliates who have a preference for one over the other. In our experience the security that comes with a network – regular payment, real time results with accessible reporting and the ability to see other programmes and their offering, will always be a draw. Similarly, there will be those that like the close relationship with the merchant.

    The key is to work with affiliates in a way that suits both parties, but ensure that the aims of both parties are achieved.

  4. I’m not that experienced in affiliate marketing but I have been there or there abouts for the last few years poking in and out of programs trying to see if I could get it to work. It’s only in the last 6 months or so Ive really put more itme into it.

    Anyway, with regards to going in house, perhaps it is due to my inexperience but I am always a little cynical/skeptical about merchants who run in house programs because I do not seem to trust an in house program as much as a one ran by a network.

    I currently am part of an inhouse insurance program and I have to chase them for my stats. They have no login interface and when they tell me Ive sent x amount of visitors but generated no sales, I find it hard to swallow without suspicion.

    Perhaps if the merchant’s in house program was very very transparent this would reduce this feeling for me personally but I think for the time being, because I am so new, I will stick with the [apparent] security of a network…

  5. i have just signed up with the amazon affiliate program and i am still not earning a good deal of cash from them.-*`

  6. Just discovered the site and the blog post. Might be late to the party :).

    Anyway, from the affiliate’s perspective, another draw for the network solution is that (s)he gets one payment instead of several ones – provided he can make it to the payment threshold. And getting there is again easier with a network.

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