Every single time I see an affiliate with a positive bottom line I see that the first thing they try is getting rid of intermediaries at every phase of the process and especially on the buying side. I can not blame them — it is a rational way of thinking from many points of view.
Firstly, it creates a moat around your castle (your business) that will make the life of your competitors much more difficult while conquering your business vertical.
Secondly, it grants you additional control over your business. You know where the traffic coming from, you know whom you are selling it to. And it is not only fair from a business perspective. You can also have more technical control over how you run things — no random redirects, not unreliable tracking software, etc. Having control over something means paying for your own mistakes, not for someone else’s.
Control is good, but it is worth nothing if the business you control does not generate profits. “Your margin is my opportunity” as Jeff Bezos allegedly said once, describes it all in one sentence. So the third and the most obvious reason to start buying directly is to get rid of the network’s margin and by doing so — to generate more profits.
The networks are notoriously greedy due to the margins they collect, yet they thrive. Among all the reasons to work directly, this one seems the most obvious and even existential. The problem is that we found it to be erroneous as well. Let’s try to figure out why.
Fill rate
“Pay 3 percent interest on deposits, lend money out at 6 percent, and tee off at the golf course by 3 p.m” This is what bankers say. Sounds easy, but the reality is never easy. It is rare for the networks to sell 100% of their inventory. The ones who manage to do it should turn down a big chunk of publishers with suspicious traffic and be very very selective about who they accept into their network. Selectiveness is good for traffic quality but not for business growth. It is not easy to onboard the publisher, especially with good traffic, so the good network better learns how to monetize all traffic. On the other side, advertisers do not want to buy traffic they do not like. The networks bear the burden of dealing with junk and fraud on their shoulders. They shelter you from buying big amounts of low-quality traffic and this is how you can test a spot you like and apply only the targeting options you need. No need to spend more than 50 dollars. At the same time, a network has to deal with the whole spot.
Product variety
It does not matter how good your funnel is, it can not be good for every targeting option at once. The network’s biggest power is in the number of media buyers. When you launch your campaign — you normally launch a lot of variations of it in order to see what converts best. Imagine that thousands of affiliates do the same. The traffic is being distributed based on the auction bids and the one who pays more for this particular targeting combination — receives it.
Some discover that android users in the US work for them and some received a bump from the danish advertiser and can bid twice as much in Denmark. It is a perfect competition for the inventory which allows generating the best possible conversion rate for publishers. It is very hard for one to compete with thousand therefore it is very difficult for a single affiliate to negotiate a profitable deal with the inventory seller — the publishers expect thousands of affiliates working on the monetization of their website — not the one.
Frequency cap
This one is closely connected to the previous item, but it is a different aspect I would like to mention here. When a user is on the website and sees the banners — he can not see the same one over and over again. In reality, he can not even see different banners for the same product. It will kill the conversion rate especially for returning customers. It is very hard for humans to imagine random numbers and create different things. It does not matter what you do, the way you promote your stuff will be similar in some way and the user can feel it. While your style might work for some users it will not for others. You risk losing such customers because there will be no one to create converting promo material for them.
Conversion drop
Sometimes products convert worse than usual. Sometimes they completely stop converting. I remember a case from my personal experience when the whole vertical stopped working over a night because of the processing problems. We had a pool of active direct deals where the bids were high. Of course, we tried to redirect traffic to a similar vertical, but the conversion rate was way lower than we expected. We have lost a lot. In affiliate craft, you should always expect that you will be losing money after you earn it. It is an inevitable process and it is closely connected to human psychology, we can not pause the traffic the same day it stops converting — we will be looking for some ways to improve it. We can not even be sure that it stopped working until we see some solid proof and the proof will be days with poor CR.
It is even worse with direct deals — we literally can not stop it. Sometimes publishers require 3 months commitment. It can be a hundred thousand dollars deal. Sometimes even millions. When the deal is negotiated it is the current conversion rate that is being taken into account, not the possible conversion drop, not the human psychology that forbids us to stop it all at the moment we see a conversion drop and move on. Networks allow pausing traffic immediately saving us a big amount of money. Having the army of affiliates buying traffic from them they will have someone who will find a good fit for the publisher’s traffic with no stress whatsoever.
Publishers attitude
The affiliate market is wild. Sometimes people forget to pay for the traffic and publishers know this. It is often much more comfortable for them to work with well know networks knowing what to expect that engage in questionable cooperation with an affiliate and earn 20 percent more. Guess what those 20 percents are? Correct, it is the network’s margin. All this creates a prejudice towards direct cooperation and elevates the price and makes the whole idea look unreasonable.
Well, but direct buying exists?! This means that it works and that would be correct, but you should be wise when entering this wild market. In the next article, I will explain when direct buying is a good idea.