The Niching of the Networks

As many of you know, I am involved on a daily basis with many large CPA Networks. And in my workings with them I have noticed a trend that is only now beginning to emerge, but am hoping that it continues to catch fire.

In my conversation with one network regarding their exit strategy, I reminded my good friend that CPA networks do not (for the most part) have any physical assets other than the relationships they have with their publishers and advertisers. To this he agreed, and then went on again about how someone would be willing to pay 6+ figures for their network based on the strength of those relationships.

And this set me to thinking about what exactly could raise the value of a CPA Network? CommissionJunctionLinkShare and even Kowabunga have attracted buyers who have seen value in their business models, network reach, proprietary software and both publisher and merchant relationships. But where is the value for a CPA Network? Aren’t CPA Networks just (to use Rosalind Gardner’s word) super-affiliates, on steroids?

Think about it. A network has collected all of these downlines (publishers/affiliates) by making the process of finding relevant offers easier for them by aggregating them by verticals into their site. Giving the publisher (at least the newer ones) a sense of security that the Network has negotiated the best deal they can with the advertiser/merchant and that the publisher, and should they want to go to the advertiser or merchant directly; they would get no better deal. Furthermore, the network will pay them faster than the merchant would in many cases. (that is a whole other blog post). So in essence, this is the value they initially bring to the publisher. And, if you think about it, this is what a super-affiliate does, except for the payments.

But, there are some changes afoot. There is proprietary software in the future for a few networks. THINK Partnership, Kowabunga’s new owner and already a player in the CPA network world with Primary Ads, has opened a new division that aims at servicing merchants better. The service is called SecondBite and it sniffs out cart jumpers and either emails them or calls them to see what went wrong and close the sale. They have even taken one rate for organic, non Affiliate ID associated traffic, and another rate for when an AID is present. This is a start to begin to offer something more than a great party and quick payouts.

There are also those networks who have been built from the strength of their own proprietary offers, Matt Frary at ROI Rocket is one of those. He built Survey Club and then attracted a large number of affiliates based on that program. He then built out a few other offers and his then affiliates began promoting those as well, and so it grew organically from them owning several of the offers that they promoted. In addition, they also have a ready email base because they own the offers and are able to help advertisers identify strengths (and weaknesses) as well as test offer copy and creatives with it. That goes a bit beyond your typical data management agreement with most networks.

There are others signs of hope. Some networks are giving themselves an exclusive only makeover. Jennine Rexon at RexTopia has gone to running only all exclusive offers. Rextopia is only accepting offers that will run exclusively on their network. For that, Jennine feels she can offer advertisers more loyal affiliates and attract a better class of affiliate/publisher.

These strategies are hedges against the networks who still feel that arbitrage is their best option. Unbridled arbitrage is often more of a merchant/advertiser driven phenomena than the networks themselves, in as much as the merchant/advertiser allows the offer to be placed on several networks rolls at the same time with no hard street price level set. Without penalties built into Insertion Orders for networks who offer the lead or sale above the set street price, arbitrage will continue to rule the day and offer no incentive to networks to become better liaison’s between the publisher/affiliate and the merchant/advertiser. What will happen (IMHO) is that CPA Network margins will erode and eventually the network will not be able to meet overhead and come to rest comfortably in the cease to exist/this URL is for Sale file.

So why is niching the networks going to make all of this different? It isn’t going to overnight, that is for sure, but what it will do is force CPA Networks to provide value to both sides of the equation. By making their offerings more niched and identifying with particular verticals, a network gains distinct advantages over those which do not. These include:

– increased number of affiliates that have expertise in that vertical

– increased market knowledge of that particular vertical’s unique marketing tactics and successes

– increased ability to work with exclusive advertisers because the merchant can feel that the network is attracting all of the truly relevant publishers

– increased data management contracts that allow for greater cross promoting of the offers they have on the network

All of these benefit both the advertiser and the publisher by giving both more access to better targeted campaigns. The advertiser will be willing to pay more if they know the leads or sales from this network will stick better than the arbitrager’s network. The advertiser will also continue to give exclusive blessing if the network consistently delivers. With a hodge podge of offers a network can only get so deep into any one vertical before they have to concentrate on their entire portfolio.

As I said at the beginning, this is just an emerging trend. One that I hope will continue and eventually help to add more legitimacy to performance marketing.

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Jim Lillig, is an accomplished online marketing professional and entrepreneur. His eclectic assemblage of companies and projects gives a new insight into eCommerce tactics and strategy. A pioneering online marketer, Jim has pushed the envelope and found the edges of online marketing to be fertile ground for those who are willing to be bold and set a trail of success. He has authored many performance marketing articles as well as being a featured speaker and panelist at some of the industry’s largest events. Uniquely qualified with over 20 years of online marketing experience and 35 years of brand marketing know-how, Jim delivers innovative fresh approaches for both B2B and B2C clients.

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