NextCard Raises Affiliate Bar

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NextCard Inc., one of the most ubiquitous pay-per-performance advertisers on the Internet, has caused a ripple in affiliate circles by, among other things, restricting the types of leads for which it will pay.


The development comes on the heels of an Oct. 31 announcement by San Francisco-based NextCard that it would be "significantly undercapitalized" after banking regulators put restrictions on its lending because of mounting loan losses.


In the same announcement, NextCard said it had retained Goldman Sachs & Co. and put itself up for sale.


In a Nov. 9 e-mail to members of the segment of its affiliate program administered by Commission Junction, NextCard said that as of Oct. 31, it would no longer offer unsecured VISA cards. It also said it would limit credit approvals to people with a FICO, or Fair Isaac & Co., score of 680 or above, meaning only those with average credit or above.


"This change will substantially decrease the number of Lite bookings and, to a lesser extent, the number of Classic bookings," the letter said. Platinum bookings would probably not see a "marked impact," the letter added.


In its letter to Commission Junction affiliates, NextCard also assured them it has enough cash to honor its obligations.


"You will get paid as you normally would," the letter said. "Checks and direct deposit payments will continue to be processed through CJ.com on their normal schedule. This includes all commissions for October 2001 and future commissions that you earn."


Earlier this year, it was estimated that at any given time, NextCard advertisements were running on as many as 100 major Web sites.


NextCard reportedly gauged the effectiveness of its ads using a so-called Internet database marketing system and used it to slash customer acquisition costs.


NextCard declined an interview request.


"We're not conducting media outreach at this time," said Sue DeLeeuw, a spokeswoman at NextCard Inc.


However, it is a safe bet that the NextCard affiliate network has been shrinking since Oct. 31.


"I would imagine people are abandoning them just out of caution," said J.D. Ashcraft, Web site manger for Revenews.com, a content and discussion site dedicated to affiliate programs. "People have been burned by so many other programs."


Indeed, one post on the Revenews site said, "Taking a NextCard deal in light of these events would be in a high risk category. I would recommend stopping any NextCard campaigns immediately and attempt [sic] to collect payment."


Under affiliate programs, online marketers pay commissions to Web site owners that send them customers. The most recognizable affiliate program is that of Amazon.com, which claims more than 500,000 merchant partners, or "associates."


Pay-for-performance marketing deals online have become a hot topic lately.


With the bottom having dropped out of online advertising, publishers have been more amenable to such deals out of necessity, but they have also been grousing about them.


For one thing, publishers say, pay-for-performance deals put all the risk on their shoulders. If the advertiser's offer or creative approach is bad, for example, the publisher wastes valuable inventory to find this out and the advertiser has lost nothing.


What's more, publishers claim, many advertisers use pay-for-performance deals to test creative approaches and offers knowing they will not get penalized for those that fail.


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