Snowball's Melting Budget Burns AffiliatesSnowball.com, Brisbane, CA, an ad network and provider of online content for 13- to 30-year-olds, angered some of its affiliate Web site owners recently when it sent an e-mail informing them it would drastically cut its marketing budget and would scale back the serving of house banner ads beginning Feb.1.
Many of Snowball's more than 250 affiliates rely on the company's house banner ads for revenue. A number of them had exclusive agreements with the network guaranteeing them fees for a certain number of page views, regardless of whether Snowball sells the ad space. If the space was not sold, the affiliate Web site was served a house ad for another site in the Snowball affiliate network.
But all that changed at the beginning of February. Instead of serving house ads to affiliates' unsold inventory, Snowball said it would not serve anything at all, depriving the affiliate Web sites of much-needed revenue.
In its e-mail, Snowball blamed the policy change on the current online advertising environment.
"With the cuts to our marketing budget, we are looking for more strategic buys on both internal and external sites at a reduced cost," the message read. "When we have a paid or house ad available, we will serve it to your site. Otherwise, you will see a blank space. This blank space will not be counted in your monthly totals because it is neither a paid [nor] unpaid ad."
Teresa Crummett, Snowball's vice president of corporate marketing, said the company slashed its online marketing budget by 90 percent for 2001. She noted that Snowball used to pay affiliates on a 50/50 ad revenue split, but with the downturn in the online economy, that had to change.
"We've been affected just like every other dot-com. We were subsidizing them [the affiliates] with marketing funds in exchange for page views. The affiliate banner program was the last to be cut back."
Snowball, founded in February 1999, runs four networks: ChickClick.com, aimed at young women; IGN.com, a network of entertainment sites; HighSchoolAlumni.com, for high school and college students; and SnowballShopping, a retail site.
However, the editor of one of Snowball's affiliate sites, who asked not to be identified, said this was typical of how the company has treated her and other affiliates from the beginning of their relationship.
"They don't seem to understand how business deals are conducted. If they want to cut costs and become profitable, no one would fault them for that. But every communication we get from them is a fiat, and we can never answer back."
The editor, who runs two Web sites on the Snowball network, said her larger site gets 12 million impressions a month. Her other site, which is not as well trafficked and relies heavily on revenue from Snowball's ads, is being served blank banners.
"I have another site that's going to get killed because of this. "Now they're squeezing off my blood supply. The entire thing is infuriating."
Snowball's Crummett said she realized that the change would anger some affiliates, but that it was unavoidable given the downturn in the economy. She noted that one concession the company was willing to make was to let the affiliates out of their exclusive contracts with Snowball if they wished to sign up with another ad network.
"For some of them there is anger. It's taking away revenue from them. The site owners associate our serving ads to them with revenue. We associate serving ads to them with cost."
The Web site editor said she was not convinced that Snowball's problems were entirely because of its faltering online ad business.
"It's partly the market downturn and partly the fact that everyone they deal with they piss off. Angering the affiliates is just stupid."
Snowball is not the only ad network to draw the ire of its affiliates with a policy change. A recent attempt by Engage Inc. to readjust the commission rates it pays its affiliates was met with similar outrage.
The Andover, MA, ad network said in January that it plans to renegotiate its contracts with affiliates and reduce commissions to 40 percent of the ad dollars generated by serving banners to their Web sites. Engage normally paid 60 percent.
Engage's affiliates said they were being paid increasingly less money, even as its ad impressions were rising each month. The company blamed the policy change on the online advertising economy and its internal restructuring.