Posts Tagged ‘value’

Your Business is Under Attack

Tuesday, November 20th, 2012
Wow, affiliates, you can’t catch a break!

Hurricane Sandy isn’t the only storm to roll through these past few weeks and impact our industry.  You and your business are under attack from the forces of nature within the insurance industry.  This isn’t the first time it’s happened, and it won’t be the last.  Are you prepared to weather this most recent storm and come out stronger on the other side?

The Storm
In recent weeks a number of large buyers in our industry have been in the headlines, making changes that could severely impact your business if you aren’t ready for their next moves.  Keep reading to find out how and what you can do about it.

  • After months of downward trending results, high agent attrition, and carrier complaints BankRate announced they are launching quality initiatives – cutting more than 500,000 leads/month and promising change to their shareholders.
  • When presenting their most recent quarterly results, Quinstreet, parent company of SureHits and Insurance.com, announced that similar trends within the insurance space contributed to them falling short on their earnings expectations. They are expecting flat revenue and margin performance in auto insurance for Q2 2013 with limited visibility to when they will return to growth.
This ‘move for margin’ might be what Wall Street wants to hear - but what does it mean for you now, and what the hell should you do next?

What History Tells Us
Bankrate and Quinstreet have to deliver on 2 points:

  • Increase the quality of their traffic to retain thier agents and buyers
  • Deliver growth to their shareholders and revive stock price
History shows us that all too often companies resort to trying to control supply in order to accomplish these two initiatives.  The theory being they will have the ability to more closely monitor quality while simultaneously increasing their margin by eliminating the middleman.  Also, down stream they will ultimately be able to force better pricing from their buyers.

So, how does one gain control of supply?  By eliminating competition, reducing subsidization of the marketplace, and increasing direct to site traffic – it’s a strategy that is fundamental to business.  The history books tell us that buyers, especially when they are in a position of strength and market domination, look to this strategy. Often times at the expense of their partners.  Don’t believe me?

  • In 2009 Insurance.com made the decision to all but abandon their B2B and affiliate channel, instead focusing on building their brand and increasing their direct to site traffic.  Their first move was to increase payouts and sign exclusive deals with their top partners to clear competition.   The pay increase was short lived, soon after they cut partner payouts to increase their own margin and limit affiliate growth.  They thought affiliates were so dependent on them that you’d accept it, they were wrong.
  • In 2010, Quinstreet tried to increase its consumer presence by acquiring a number of premier websites including Insurance.com and Carinsurance.com. They have struggled significantly since adopting this strategy; their auto insurance vertical has posted year over year declines in revenue of 15% or more each year since.
  • Now, during the November 1, 2012 shareholder meeting, Bankrate stated, “As previously mentioned, the year over year margin increase is primarily a result of trimming the ratio of affiliate leads compared to traffic to our destination sites in insurance through direct, organic and marketing activity.” They go on to say “we are concentrated on driving consumer adoption directly to our sites.” If we’ve learned anything from history we know there will be fallout from this strategy and you need to protect yourself.
These are attempts to eliminate you, the affiliate!

Your Next Move
Be prepared!  What to expect in the market over the next few months:

  • Large buyers in the space will likely increase your payouts in the short term as they look to build your loyalty and dependence. Make      no mistake, the increased payouts are not sustainable.  It’s a short-term play to grab traffic, and they will soon cut payouts as they need to take more margin to re-coup earnings lost from cutting volume.
  • They may dangle the carrot of greater riches in return for exclusive rights to your traffic. This may seem like a good thing, and it could be.  Just make sure you negotiate a quick out if the relationship or pricing goes sideways, and the ability to send up to 25% of your traffic elsewhere for testing.  Don’t let your business become dependent on someone else, you need diversity.
  • If neither of the above work, there will be threats of losing their partnership altogether if you don’t give them what they want.
Don’t be fooled by these tactics, hold your ground – you have more power than you think. If they could, they would have already eliminated you altogether.  They rely on you.  Evaluate your business, determine your risks and look at new ways to diversify.  You may find that a solid, diversified foundation with maximized conversion and a lower return rate coupled with more feedback and guidance could put you in a better position to grow. Partner with people who are transparent and have your best interest in mind.  Play for the long term, don’t fold under pressure or agree to things that will limit your success.

Explore Your Solutions
Remember, you aren’t alone and you do have options.  Tell us what you need, we will help you diversify and solidify your business.

  • Do you need help fulfilling extra legs of a lead?
  • Are there buyer relationships you need help obtaining?
  • Is there a technology solution you need access to?
We believe in you and it has always been our philosophy to do whatever we can to help your business succeed.  Let us help you navigate this storm, call us today and tell us how we can help you. Don’t let anybody control your future but you!

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How to Navigate the Waters of an Exclusive Deal

Thursday, June 23rd, 2011

Welcome back!  I was overwhelmed by the emails I received in response to last week’s post.  It definitely tells me that many of you are ready to do your part to help get our industry back on track towards appropriate lead pricing and generating more value for not only the customer but the lead buyers as well.  Keep those questions coming!

The topic of this post is one that several of you have asked me about in the past several weeks:  Exclusive Partnerships.  If you believe in the power of a free market, then exclusive is not the way to go.  However, when you are trying to make sure your kids can go to college, the stability of an exclusive deal can be very appealing.  Let’s walk through the landscape and at least get you ready for these conversations.

From an industry perspective, the click marketplace companies have certainly started to put the pressure on affiliates to sign exclusive deals.  And, from what I gather, the carrots being dangled are pretty big and juicy.  So, what do you do with it?

Before you start negotiating an exclusive deal, I want to warn you that I have never believed in exclusives.  It is counter-intuitive to driving better products to market, forcing more accountability from providers, and continually getting you the best pricing.  Also, given the extreme amount of flux in the current lead marketplace, I’d advise against any type of exclusive deal on a lead basis.

That said, the market has been riddled with fraud and quality issues.  Locking in exclusives helps the click providers to guarantee good quality revenue while flushing out the poorer quality.  That model could help rebound pricing by re-establishing carrier confidence, allowing them to start paying actual value for your click rather than current market value.  So the current situation is a bit of an anomaly.

The good news is the click providers need your quality clicks, so that puts you in the driver’s seat for negotiations.  Historically we had one true click fulfillment company.  Recently, several companies have put legitimate products into the marketplace and much of the quality has been diversified.
The click marketplace has done a good job of putting checks and balances on quality algorithms, so if they are approaching you, you are doing something right.  Here’s how you negotiate good pricing without betting the farm:

1. Make sure the exclusive you are signing is the best performer for your traffic.  Before entering into the deal, be sure to test your different options to make sure you are maximizing EPC for your traffic.  While the terms of the deal may be sweet, if the performance isn’t there on the back end, the terms won’t matter.  You need to know if conversion makes a 90% rev share on a $5 CPC a better deal for you than 80% on an $8 CPC.

2. Don’t get caught with your pants down.  There’s a lot of fluctuation in the market and if your exclusive provider has issues, you don’t want to scramble to find a new solution.  That will leave you dealing with unknown economics, and very little leverage in a short-notice negotiation.  Instead, negotiate the ability to diversify 5-25% of your traffic.  This will provide your partner with the volume guarantees they need, but the protection and diversification you need.  The best way to do this is to ask your click provider for their weaker states and send your traffic elsewhere in those states.

3. Make sure your partner is accountable to an ever-changing marketplace.  Keep your termination agreement/notification as short as possible, 90 days with written notification is typically a good duration.  It allows you and the provider ample time to prepare for changes, as well as extra time to negotiate a new deal that works with the dynamics of the market and your reality.

4. Be careful of what you are locking yourself into.  Sometimes these deals look like a bill in front of Congress, meaning the package is a little bit more extensive than what you have verbally agreed to.  Make sure that once the exclusive period is over, you have the right to work with any advertiser you want.  Definitely have your attorney review the agreement to make sure you aren’t getting more than you bargained for.  It can bite you later.

5. Make sure the contract allows for future negotiations and price matches.  For example, if another partner comes to you with a better deal you need to have the ability to:

  • Test the new offer to make sure it is accurate and sustainable
  • Give your exclusive partner the opportunity to match pricing or let you out of the agreement.

6. You don’t know what the future holds, things change every day.  Make sure you aren’t held to volume minimums, future monetization models, etc.  There’s a lot on the horizon that could revolutionize our industry, make sure you are allowed to get on that bus when the time comes.

7. Last, but not least, make sure the contract delivers what they have verbally promised.  I know it seems like common sense, but sometimes when reading contracts people only focus on major red flags and forget to read the basic language.

Remember, when you ask for these things, you are asking for the provider to give a little.  So you need to be ready to give a little back too.  Negotiations are give and take. The provisions above should allow the provider to achieve their goals, while giving you some safety and consistency without keeping all your eggs in one basket.

If you choose the exclusive path, good luck negotiating!  As always, let me know if you have any questions and I will do my best to answer them.  While I don’t believe that exclusives are a good solution, if that is the route you need to take at least you are armed with information to help protect your business.

P.S. – If you are looking for a click marketplace and aren’t interested in signing an exclusive, ask  us about testing our click product – Moss Marketplace.

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If you wouldn’t survive in a mall- you’re not going to survive online

Thursday, June 25th, 2009

Hope everyone is doing well. I want to take a moment to talk about how this business works to some of you who are new- and remind some of those who have been doing this awhile.

INTRODUCTION:
First of all- Affiliate Marketing can be a ‘get rich quick scheme’ or you can actually create value. Some people try to utilize it like a get rich quick scheme- and they are the same ones who buy the boat and the house and then are out of business before they know it.

Let’s take for example the Pet Rock and the Rubik’s Cube. Both hit the market in the mid-1970s. Both inventor’s got rich but let’s talk about the different ways. First the Pet Rock – he provided absolutely no value other than a brief laugh- and sold 5MM pet rock’s in 6 months. So he made $15MM in 6 months- and the product quit selling. While $15MM is a lot- but take that amount, tax it and spread it over 35 years since launch- and it is an average of $278K/year. I’m not saying that is terrible- but it is a huge exception and clearly not the rule. The other problem is that his “salary” gets more and more diluted every year that he walks on this earth.

Now, let’s take the Rubik’s cube. It was an actual puzzle. It could provide value to the user in the form of hours and hours of entertainment. Since the 1970s it has sold 350MM units with 2008 sales at 15MM units. In year 30 the creator of the product w/ value is making more than the ‘flash in the pan’ product pet rock inventor did in year one.

You have a choice when you are affiliate marketing. You can go for the flash in the pan marketing scheme- and hope that you strike it big enough while the iron is hot… or you can go for the long term, more sustainable method. Or you can try both and diversify your risk. I am not suggesting either- but I do want to discuss both.

THE FLASH IN THE PAN MODEL:
You see these offers everywhere, Government Grants, Loan Modification, Reversatrol, Acai Berry, As Seen on TV. And yes, even the smartest of us get sucked into these from time to time- some are legit- and some are downright crap. These are offers that you promote the hell out of while they are hot- and then distance yourself from them as quickly as possible when they die. The people who succeed in these offers are the ones who get there first- and then everyone rides the coattails until the consumer finally understand that they are crap- and the offer is dead.

With the internet going so viral and feedback loops in abundance- these offers have a much shorter life cycle than past products such as the AbDoer and Jelly Bracelets. So, if you take this approach- be careful and if you make money stash it away. Do not buy a boat- and do not assume you will continue to make these dollars. You will be relying on a lotta luck and a little skill.

THE SUSTAINABLE MODEL:
This is the model that takes some time to build- and some differentiation- but is sustainable long term. Doesn’t mean that you can fall asleep behind the switch- but it does mean that once you set up you are dealing more with tweaks than massive overhauls like above.

These products range from Insurance, Commercial Business Services, Coffee, etc. These are the products that stand the test of time- and while they may fluctuate w/ the market- they will be around for years and years.

However, when you are dealing in these products- you have to create your own unique value. What is the niche, value, or differentiation of your site? Why should a consumer visit your store front versus someone else? Let alone the search engine algorithms seeing your site as valuable. If you are just putting up the same content as everyone else- consider yourself sunk- unless people happen to find your store front first.

Tie it back to brick and mortar… Malls have existed for years and years. And, within malls- there are several stores that sell similar products and all right next door to each other. However, stores within the mall put different twist on their marketing or window displays despite carrying similar products. Some stores are expensive- some are cheap- some are conservative, some are for teeny boppers. You have to think about your website as a store front in a mall w/ similar products. What is going to draw people into your store vs the others?

Once you find your niche in the business- develop it and then exploit the holy heck out of it. Advertise it, scream it from the mountain tops, let every customer know when they come through your door they are going to find exactly what they need for “Texas Auto Insurance” or “Comparison Insurance Shopping” or “Luxury Car Insurance”. Otherwise you are selling the same product w/ no differentiation. You wouldn’t last that long in a mall- and your not going to last long online.

CONCLUSION:
First- figure out what type of affiliate program you want to run. Once you decide- commit. Don’t get down if things take awhile to launch and differentiate. It’s not an easy process to actually create value and differentiation. The pet rock guy came up with the idea in one day- where the Rubik’s cube inventor worked on his toy over years and years. Both were successful- on totally different scales.

Good luck. Take cookie cutter successes- and then create your own value. In the long run you will be far better served.

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