DM CONFIDENTIAL – Our Q&A with Wicks Walker of W4 fame had us, not surprisingly, thinking about the current state of the CPA network and overall performance marketing space. A decent portion of our thinking was influenced by a recent conversation we had with a network operator.
This person doesn’t operate a typical CPA network; rather he runs a more typical ad network but one that many arbitragers and performance marketers use. The world he describes has undergone two rather dramatic changes — a decrease in successful affiliates and an ongoing desire to go direct. We’ll take a look at the second part first.
Direct could be one of the most common and most overused or simply misused word in the performance marketing landscape. There is direct marketing, which often gets used interchangeably with performance marketing.
And then there is the idea of the direct offer. In theory, it means more than an exclusive. It implies either an agency of record or being the advertiser. A direct offer means there are no layers between those who have the offer and the one writing the check.
If a network has an offer direct, then the marketer working with the network is only one step removed. Direct does not mean exclusive, but in most cases, those with a direct offer try to have it be an exclusive.
The quest for the exclusive creates all sorts of unintended layers. If the advertiser is an auto insurance aggregator, they are direct with the agents or carrier. The network works directly with them.
What if the network creates its own landing page and brand, as many do when working with Quinstreet’s SureHits? The network now has its own exclusive that is not quite direct but the most direct they will get.
When that network takes their new private label site and offers it out to others, e.g., another network, is that a direct offer with that network? In some ways, yes, but in the grand scheme of things, the original aggregator would argue no. This private-label traffic that now runs through a different network’s affiliates is now two levels removed.
A network running an ad to another network happens all the time. End advertisers want to see less and less of this though. Ideally, they want to work either directly with the publisher or through only a handful of networks. The ability for the original aggregator to feel in control of the traffic and the quality has become a higher priority than the sheer volume of business that can be done.
Quality is one reason. Data-driven offers need to be able to convert and liability is another. The consequences for screwing up are just too severe to simply turn a blind eye.
A not unexpected consequence of companies wanting to work with fewer partners is a decrease in the overall number of successful affiliates/marketers. If the better offers are more restricted, then there is going to be a larger number of people fighting for the stuff that doesn’t work so well.
Some ad networks like this. During the heyday of continuity you had at most 10 real product manufacturers — probably fewer. Yet, judging by the number of people running acai and then ResV, you might think hundreds of advertisers existed. The landscape, if it were to be drawn with product manufacturers, networks, affiliates all intertwined would look like one of those original Bruce Clay search maps — arrows all over the place but only a handful of originating data.
The other reason for fewer affiliates are the also not unexpected regulations that have shut down many of the advertisers and marketers. We have fewer people trying and fewer people buying because of past actions.
Perhaps the biggest reason of all though is that it has simply gotten tougher. It just isn’t as easy to make money today. We can hear in our heads several people we know absolutely killing it who will completely disagree.
So, we’ll modify that statement. It’s hard to do it legitimately. It’s hard to make money without taking advantage of a loophole or running traffic that you know an upstream advertiser ultimately doesn’t want. Let’s be honest, does any agent or carrier really want a lead from virtual currency traffic? Not at all. None.
Put enough layers in between that data and that buyer (the whole direct issue), and you’ll get away with a percent. We know from past experience that unfortunately, you can stuff bad data disproportionately to the buyers ability to recognize it.
What Does It Mean
To us, what we’re seeing right now is the pause before the new storm. We are ripe for a new flood of performance marketers finding unexpected ways to make money. It probably won’t come from the usual channels but some mashup — not that different from the penny auctions. No one really saw that one coming.
Obviously, we wish we knew what it was. We’re more weatherman, and the problem there is, you know how accurate weatherman tend to be.