 | What Is The Affiliate Cost Of 100% Cashback? |
Networks love cashback sites! Some merchants love cashback sites! Consumers love cashback sites - especially those that offer 100% cashback! One of the most well known (or the only known?) 100% cashback site is championed by a network representative in a reply on Moose on the Loose, but what is the affiliate cost of 100% cashback?
Cashback sites operate by offering consumers a cut of the affiliate commission generated from sales and leads. The amount of cashback offered varies from site to site, but in general the consumer gets around 50% of the commission earnt, whilst the cashback site retains the other half. 100% cashback sites operate slightly differently. The consumer gets all the commission whilst the cashback site charges the consumer, say £5, when they withdraw their earnings.
The winners here are obviously the consumer! The merchant is getting sales (most tend to be happy about this!) and of course the network is happy too. Plus there’s one happy affiliate - the 100% cashback guy who’s earning from withdrawals from his ever expanding userbase.
However, there’s a cost! And that cost is to other members of the affiliate community.
Recently one of our users highlighted a fantastic offer from Play.com (Hot UK Offers) . The commission on a £17.99 MP3 Player isn’t that much, but even so when the initial message appeared on our site it was followed by the immortal words “don’t forget you can get x% with….”! That’s great news for Mr 100% Cashback, but how do I run my business on fresh air if every offer or promotion is hijacked in this manner?
Ok, so we delete the links (and yes not all users will use cashback) and remind them that the wonder that is duckland does in fact cost money to run and those commissions go towards my retirement fund keeping the site running, but there’s still users who will alway always always want everything for free AND have their cashback too. The reality is that for every promotion an affiliate puts together, for every PPC campaign you run, for every SEO page you develop, for every newsletter you send out… you will lose commission and sales to Mr 100% Cashback! Lose too many commissions in that direction and you seriously have to start questioning whether it’s worth writing copy, developing websites and putting up offers.
So how do you compete with 100% cashback? Keeping a website up to date 7 days a week costs money, so taking them on on an equal 100% cashback footing isn’t an option (nor is it viable)! Anything less than 100% cashback though means you’re not competitive either, and the cashback arena is already crowded with high quality services.
So what are the answers? Do other affiliates have any suggestions? Are you concerned by 100% cashback? Do networks and/or merchants think that 100% cashback is good or bad for the industry?
Here’s a few ideas:
1. Better deals to non-cashback affiliates! This does happen, but I’d like to see a much bigger commission difference on offer to non-cashback affiliates. Also, allow affiliates to offer “cashback” based on different commission levels (as mentioned before on this blog).
2. Restrict Cashback Percentage? This will never happen, but it would have been a nice idea so that the 100% ceiling could never be reached. It’s not like 101% cashback is the next option available?
3. List Merchants who don’t work with cashback sites! Some merchants dislike cashback affiliates and prefer not to work in that space. In recent weeks a number of merchants do seem to be pulling out of the sector, or at least introducing tighter controls. Networks should highlight these merchants as they may well get preferential treatment from other affiliates.
4. Develop other revenue streams! Not an easy one if you’re using affiliate marketing through networks as the basis of your sites, but it’s important to look for other sources of revenue where you know your content and community efforts will be rewarded and not result in sales heading off to Mr 100% Cashback.
No one can deny that Mr 100% Cashback is a consumer’s dream and are an affiliate marketing success story. However, when it comes to 100% cashback there is a cost to other affiliates in the industry and networks and merchants should be aware of this! As SEO/Content and Community affiliates we have to just get on with things, keep on truckin and at times work away from the networks. There are still sales to be made and commissions to be earnt so it’s not all doom and gloom, but it can be very frustrating at times. Don’t you just love affiliate marketing!
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on August 29, 2007 at 10:27 pm Morley Mouse » A merchants point of view - Cashback wrote:
[…] up and now has one of the UK’s most popular competition sites. However his most recent post here points out that hes becoming lightly concerned about cashback sites and how he can […]
on August 30, 2007 at 11:22 am Kevin Edwards wrote:
Hi Jason,
You raise some very valid points and I’d like to think we educate advertisers on both the pros and cons of cashback/loyalty affiliates.
I’ve always been an advocate of affiliate marketing as a thoroughly flexible medium; therefore advertisers shouldn’t get too hung up on the idea of a fixed commission rate- it’s whatever activity (and this can be multiple types of activity) costs in for them. So it is entirely feasible to offer different commission rates based on who the affiliate is.
Some advertisers (increasingly so) are integrating their ‘new customer acquisition’ target into their affiliate campaign. This has an obvious consequence for incentivisation of traffic.
Screwfix has done this for the past few years and as a consequence hasn’t worked with any affiliates who incentivise at all. They are an excellent merchant with a massive, active base of affiliates so don’t suffer for this loss of income.
Also cashback can be abused by users on lead based programmes. We’ll always advise advertisers of the danger of this. That’s not to say they shouldn’t work with them, but they could in this instance adjust commissions accordingly.
Therefore where is the value in cashback?
Where cashback sites come into their own in my opinion is in the pushing of bespoke offers and deals. Securing space in newsletters and blog entries can result in that particular affiliate returning many multiples of their existing sales for a given merchant. The key is to find out how best to work with incentivised traffic to ensure there’s a ‘value add’ for the client. We recently launched a no brand mobile phone reseller who had a compelling launch deal but little online publicity to support it. By brokering one specific partnership this reseller pulled in very significant phone contract numbers, far more than could have been expected.
The client had spoken to the affiliate, brokered the deal and secured a premium on site slot. There is obvious value in this type of relationship.
And lets not forget cashback/loyalty sites have built brands in their own rights. Increasingly they find themselves in a position to leverage this power to develop partnership deals.
Finally, the users of cashback sites tend to be highly engaged and I believe motivated by the trigger of saving the odd pound here and there. When presented with similar deals a well optimised campaign can make the difference between your merchant receiving the sale or not.
Advertisers who tap into this mentality whilst keeping a close eye on the incremental value of the deal stand to gain the most.
on August 30, 2007 at 5:56 pm hero wrote:
Hi Jason,
I’ve posted my thoughts on cashback sites on Dan’s blog post.
Generally, I like these sites and the services they offer, both to customers and to merchants. However I don’t believe they are a threat to any other affiliate, especially discount sites. Let’s not forget that these sites require you to register and part with your personal details and shopping habits, which can be marketed to and possibly sold on. With this in mind, a lot of customers will not sign up to their services.
Personally, I think there is room for all types of affiliates; trends is what makes this market stay alive. A few years ago no one was thinking of search arbitrage. When it came on, everyone was saying it would be the end of content sites. When price comparison came in, everyone thought people would no longer shop around but go to a comparison site. With incentive sites on the up now, there is a fear they will push over other affiliates; I doubt this will happen either.
When I am the customer, I always prefer to see my discount in my order, not wait for it to be given back to me in cash or prizes to choose from; I want to save money right the moment I’m about to spend them. I’m sure there’s more people likeminded.
on August 31, 2007 at 9:31 am Matt Bailey wrote:
Hi Jason,
I do agree with some of your points and it must be frustrating for an affiliate who spends time and money generating unique content to play a part in a sale only to see the consumer research on your site and then at the last minute switch to a loyalty site to earn their cashback.
However from a network point of view we are always looking to add incremental volume to our clients. If we are simply bastardising traffic that would have gone to them anyway or taking from one affiliate to give to another then the relationship we have with the merchant is not going to last long.
As merchants become more and more savvy about online and the affiliate channel in particular then we are under more and more scrutiny to deliver this incremental volume and by making the most of the cashback sites USPs then we can do this. For merchants offering similar products, the difference between winning a customer and losing a customer could be the offering of 5% cashback on their purchase.
Let’s not forget that the cashback sites do invest a great deal of time, effort and money in marketing themselves and that in turn showcases our merchants brands. They have large and loyal member bases and for smaller merchants this can provide a means of showcasing them to a large number of potential customers.
All in all, I understand the concerns of other affiliates but feel that loyalty sites and 100% cashback sites in particular do have an important part to play inour market going forward.
Matt
on August 31, 2007 at 11:25 am jason wrote:
Hi
Thanks for the responses. I realise that we have to work around these sites, like I said they’re loved by networks and some merchants. I fully understand why, and as business models I’m sure those involved have worked hard etc.
But, from my perspective, regardless, they will always be a big pain in the butt - perhaps even more so when you see via your own community sales heading off elsewhere.
Other affiliates, who may not be as close to their userbase as we are, may not be aware of this - and so hopefully can use their ingenuity to work around these things.
I hope you’re all right in what you say, but I do have a feeling that they do squeeze the market place plus they do make life a little more difficult for established and new affiliates.
Jason
on August 31, 2007 at 12:35 pm Moose wrote:
Let every shopper become an affiliate and existing affiliates can refer these shoppers to networks who offer override to affiliates signed underneath them or a workaround of something similar. Food for thought or too many slip-nips