Unveiled: How Affiliate Networks Exploit D2C Brands

and here’s how you can avoid that, while increasing efficiency and ROI of your Affiliate campaigns

Plot

So you are working for a D2C brand, and here’s the problem which you are most likely facing:-

1. Rising CPA
2. only reliance on Google, Facebook or maybe Snapchat ads for acquisition

Now how do you look for new channels to drive people to your site and eventually buy your product. To solve for this you are approached by a Affiliate Networks, there are a lot in market, who promise the world to you by doing the following :-

1. Billing on CPS Model – You get billed only on delivered orders, you don’t pay a dime if order is returned etc.
2. 15-20-30% Commission on each order (lucrative if your blended ROI is 2-3x)

Now this does seem lucrative, given most new brands operate at a blended ROI of 2-3x or less. So if you pay a 25% commission to affiliates on CPS model, you easily assume it’s a good deal. But…

If it sounds too good to be true it probably is

Now given the deal you are happy, the affiliate network is sending you monthly reports with number of orders, and revenue they bring to you, but you haven’t seen any improvement in your numbers (Blended ROI), despite affiliates as a channel now bringing in a decent chunk of your revenue, and given the % of revenue they now bring, you are not in a position to end ties with a vendor who supposedly is bringing you new orders at a better ROI compared to FB, Google etc.

So where did you go wrong?

Most D2C brands working with affiliate networks go wrong in these 4 areas

1. Malpractices
2. Attribution
3. Terms of Agreement
4. Selection of Inventories

Malpractices

Affiliate networks after taking their cut, pay their publishers (publishers are websites, apps which promote your site) for sales they bring on your site. Now to get more income from affiliate networks, a lot of publishers resort to malpractices, which could include following :-

• Brand bidding – Here a publisher runs a PPC ad on Google/Bing Search, targeting your brand keywords, and since purchase intent for users coming to your site via brand keywords is usually high, these ads yield a decent ROAS to affiliate partners at the cost of your Google Brand Keyword campaigns. This makes the publisher take attribution of the sale which usually would have been attributed to your brand keyword campaigns or Organic.

Here’s an example of a well known affiliate network’s publisher doing this for the famous D2C Brand Wow Skin Science (Now we do not know the minute details of the agreement between affiliate network in the video, and whether brand bidding is allowed or not but it’s clear how it’s the brand which is on the losing side.

Attribution

A lot of affiliate vendors have their own pixel code to track conversions, some use Google analytics, and some use third party tools like Affise, Trackier to track conversions. An ideal way to track irrespective of the tool you use to track conversions is to ensure the following, so that you get the best ROI (This is with respect to D2C brands) :-

1. Negotiate on the attribution model whichever suits your goal, and gets you the best ROI (always cross check these numbers with your GA, Backend data, you need to ensure that there is no under/over reporting of numbers in case of a third party platform). Ideally have the same attribution model which you use to track ROI of different channels (FB, Google, Organic, Referral etc.) In my case having last click attribution works the best.
2. Ensure cookie duration is <1 day (if you are using a third party tool like Affise/Trackier, a lot of times third party pixels place a cookie whenever a user visits affiliate inventory, these cookies pass on attribution of any conversion which occurs during the cookie period to the affiliate vendor, irrespective of whether it was last click, did the user even performed any action on vendor’s inventory or not). This article about Cookie Hijacking is worth a read.
3. Regularly check for brand bidding activities, most affiliate networks/publishers are smart people, they know where your office is of course, so they would ideally run a google ads search campaign excluding your city, state. You need to have an eye always, and make sure to penalise vendors with a penalty on their commissions if and when they are caught.

Selection of Inventories

When working with affiliate networks, make sure which inventories you want your campaigns to run. For D2C brands I have worked with, affiliate networks tie up mostly with cashback and coupon sites which bring majority of revenue.

Now this is worrying since coupon sites are not a place where you acquire customers, these are places where customers who originally came from your Facebook/google ads try to find a coupon/offer so they get the best price, this makes orders get attributed to these sites whether or not they used a coupon or not.

Now you can obviously avoid users who come to your site look for coupon codes on a coupon site by just showcasing various offers/coupons which are live on the site.

Here’s an example how coupon sites exploit SEO strategies and Google ads to get attribution and commissions from your orders.

If you run an offer of 30%, they will run a PPC of 35%, for high AOV products they might even offer 80% off in the ad, but you know this is just to get people visit their site, and then come back to your site (taking away the original source of attribution), irrespective of whether the coupon codes work or not.

Solution

Easiest solution is to tie up with only major legit cashback sites (Like Cashkaro, Flash), directly to get a better deal on your Comissions.

Another alternate route to scale up your affiliate program would be to collab with other D2C brands in a different category, and find ways how you can distribute your coupons, vouchers to their consumers and vice versa.

An example: D2C brand A gives out miniature samples of their product along with a QR code to D2C brand B which integrates these as free gifts for their customer, and vice versa. Doing this not only gives your customers the chance to try something new, but both brands benefit.

Other good inventories could include banking/credit card/NBFC partners, commissions on these inventories is super low, and these also help you boost your prepaid orders.

If you still want to work with an affiliate network, best way would be to onboard only one network instead of multiple networks, and make sure to have a check on what campaigns they are running, since most networks work with the same set publishers, and inventories.

Hope this article helps you as someone working for a brand improvise on your affiliate campaigns, and improve overall efficiency!