Have you heard of affiliate marketing? It can be the best of times and worst. Basically all it comes down to is that a website owner wants traffic to their website, so they make an offer that says, hey if you send me traffic that makes my money, I’ll give you X amount of percent. (let’s say 10% of the sale price). So it’s a way that a website owner can share in the risk of internet marketing.
Really they are just paying for performance, and saying “You want to send me traffic that makes me money, well I’ll give you a cut”. There is no risk the website owner, he doesn’t pay you anything unless you bring him a sale, think of it as a finders fee.
This is how it plays out. So USUALLY what happens is that the company sees how much they are paying top affiliates and gets greedy. They think it’s too much money and reverse engineer what the affiliate is doing and want to do it themselves. This is standard issue company learning from affiliates, then cutting them out, it that happens across the board in almost every affiliate situation. Done right you hire your top affiliates to train your internal people or you announce that the affiliate deal is over, giving your affiliates time to get out and for delayed leads to still count until the last day.
I’ve just ran into a new situation where a company pumped and dumped the affiliates! It’s a pretty impressive scam.
Here’s how it went down:
- Collect registration and sales data on your network (not really even that much needed)
- Calculate that the average time from account creation to the actual sale (due to bank verification, processing delays, weekends, etc…) is 7-21+ days
- Realize that you have affiliates spending money TODAY on leads that they expect to get in 7-21+ days. (this is key)
- Raise the bounty from $25 to $75 near the end of August to get everyone spending a ton of money cranking out leads for September.
- Wait until 5pm Sept 30th to email all your affiliates that the program is being reduced from $75 to $10, effective ASAP. So effectively all your leads over the last month that were coming due in Oct would be worth 86% less then what you had planed.
- Profit from the fact that your affiliates made advertising budget decisions on $75 leads that are paid for today and come to be paid 7-21+ days….because now they are earning $10 for all that work in September.
- Profit on the fact that you know it takes serious affiliates a few weeks to really dial in any campaign and that by the end of Sept you would have the spend the least amount in affiliate payouts per lead.(basically hitting the peak of sales/profits)
- Profit by showing the VCs that gave you over $100,000,000 in funding, that you had a nice spike in signups for Sept and the average cost per sale went down.
- Profit again by saying that you have a new strategy for Oct where you pay the customer $10 and the affiliate $10 to make it look like you are really paying out $20, down from $75.
- Profit lastly by reverse engineering what your affiliates did during that boom month of Sept. (ah back to normal greedy affiliate action, full circle!)
Folks, that is how you pump and dump an affiliate program, to review…all you need to do is jack up the bounty price and get tons of business, then change the terms so you don’t have to pay. What’s critical is you need a product/service that takes 7-21+ days from initial signup to purchase…otherwise the affiliates will instantly turn off traffic and your profit will be very minimal. Enjoy the scam and hope you enjoyed the sarcasm!