Some 300 merchants have abandoned Commission Junction since it began reporting new ad metrics under a program dubbed Open Marketplace and dropped its pay-per-click programs.
But executives at the Santa Barbara, CA, firm see the exodus of mostly small merchants as a necessary step in the transition from being an affiliate network to becoming a pay-per-performance ad network that appeals to big brands.
Affiliate programs are partnerships in which online marketers pay commissions to Web site owners who send them customers. The most recognizable affiliate program is that of Amazon.com, which claims more than 500,000 merchant partners, or “associates.”
But while Amazon runs its own program, not all merchants have the resources to do so. Hence the existence of third-party affiliate program service providers such as Be Free Inc., which now bills itself as a partner marketing service provider; LinkShare, which still bills itself as an affiliate program provider; and Commission Junction.
Under Open Marketplace, Commission Junction began publishing the results of merchants' ads on affiliates' sites based on earnings per 100 clicks, or EPC — C being the Roman numeral for 100. EPC measures how much commission the merchant pays for every 100 people who click through an offer to its site.
The company chose to measure in hundreds because “one click isn't enough to be significant, and with 1,000, the data can get old,” said Lex Sisney, co-founder/CEO of Commission Junction. “It's relevant because it represents a merchant's ability to turn visits into commissions.”
So what's the difference between an affiliate network and a pay-for-performance ad network? Hard to say. Both pay publishers on a performance basis. However, affiliate programs have a reputation for attracting owners of small Web sites looking to subsidize their efforts any way they can.
And pay-for-performance advertising — where the advertiser pays the publisher for every user who takes a desired action, such as filling out a form or buying something — recently has become more acceptable to big-league publishers in this buyer's market.
What's more, in a variation of the 80/20 rule — which says that 80 percent of sales come from 20 percent of customers — affiliate programs operate closer to 95/5, according to experts.
As a result, many merchants closely manage their relationships with the top 5 percent of their affiliates while neglecting the other 95 percent, figuring that if nothing else, their logos' appearance on the nonperforming sites is free brand-awareness marketing.
Also, many merchants offer high commissions, but the click-to-sale conversion rates are so low that posting the offer is not worth the publisher's effort or space. Merchants also have been known to test offers using their affiliates, knowing that if the offer's a dog, they don't have to pay.
Commission Junction's EPC reporting aims to change all that. It shines a spotlight on the ability of merchants' offers to convert, regardless of the commission percentage they offer. It also helps merchants determine which sites drive quality traffic.
“Up until now, everyone's been kind of stumbling around in the dark. We simply turned the lights on so everybody can make their own decisions,” Sisney said. “If you perform, then you kind of stand out there on top of the mountain, and everybody sees you. But if you don't, there's nowhere to hide.”
And the merchants whose offers have shown low or no earnings per 100 clicks are apparently leaving Commission Junction in droves.
Industry experts are applauding the company — called CJ in affiliate circles — for the move.
“CJ is definitely winning the goodwill game among affiliates,” said Brian Clark, publisher of Revenews.com, an affiliate-marketing news and tutorial Web site. “All of these things are positives in the long run. In the meantime, there are a lot of freaked-out Webmasters and a lot of freaked-out merchants in the CJ network who aren't used to the idea of an open marketplace.”
According to one merchant, the program has resulted in improvements.
“The actual measurable returns are small, but we've been able to look at the numbers and drop some that are dismal, and within a couple weeks, they [the ads] are performing better,” said Robert Sherman, who publishes Quizland.com. “It also gives us ammunition in dealing with agencies and brokers.”
Affiliates' postings in a Revenews.com discussion group also bolster Clark's point.
“I am truly impressed that CJ has decided to pull back the curtain on the truth,” wrote a person identified as Dirk Johnson. “It takes guts, because this move toward Open Marketplace simply accelerates the inevitable — lame merchants dropping out in droves and the top quality merchants cutting off the low-return affiliates.”
Meanwhile, besides aiming to be known as an ad network, Commission Junction also looks as though it is trying to position itself to be more appealing to larger, better-known brands on both sides of the equation.
As evidence of this, Commission Junction has begun calling affiliates and merchants — publishers and advertisers, respectively.
“Hey, try calling Yahoo and saying, 'We want you to be an affiliate for one of our merchants.' They'll never call you back,” Clark said. “But if you call and say, 'Hey, we want to buy advertising, but we've got to do it on a performance basis, and I represent 4,000 advertisers,' that way the ad sales rep returns your call.”
