eBay’s Temporary Insanity at Affiliates’ Expense

Bad affiliate programs shouldn’t be bad economics for those not responsible for them. But eBay is making others pay for its mistakes.

eBay’s affiliate program was launched with good intentions. It would pay affiliates that referred visitors who registered and/or bid on eBay.

The program could have worked if eBay had hand-picked affiliate commerce sites with good customers. Instead, the online auction site made the fatal mistake of opening the program to every affiliate everywhere.

No Way It Could Have Worked

Countless affiliate programs are fully capable of trafficking millions of people to anyone’s site, given the right (read: wrong) reason: the incentivized per-click game. It’s a recipe for failure for all but a few savvy marketers (who all work in porn, anyway).

eBay recently pulled the plug on reward-based affiliates, whose referrals were generating tens of thousands of dollars in bids per month. This because visitors some of the affiliates sent over were low-balling bids on eBay to earn incentive points for each bid. They had no intention of purchasing anything.

Affiliates, of course, knew this would happen. Offer something for nothing, and there are always takers. For a short while, visitors sent from these affiliates’ sites turned parts of eBay into a free-for-all. They bid with no intention of paying. They raced in and out of auctions, looked at everything, and placed even more bids.

More bids, more points. That’s what happens. Ask any affiliate consultant about CPC programs, and you’ll hear laughter. This is no place for rookies or a naive belief in hard-working affiliates diligently qualifying customers. It’s the real world. Incentivized affiliates did what they do. They sent tons of users who take tons of actions for tons of points. Period.

When eBay figured out what was going on, the company notified some reward-based affiliates they wouldn’t be paid commissions for their traffic.

If programs make their affiliates pay for their own bad decisions, what’s the value of their contracts? Nothing in eBay’s agreement with affiliates prohibits this practice. Something does now, and eBay is trying to enforce the clause retroactively.

Learn From the Past

eBay didn’t understand the most fundamental premise of affiliate marketing: You get the traffic you pay for. In performance marketing, it’s your job to build performance into your affiliate program.

Many of eBay’s incentivized visitors weren’t customers. They were folks rewarded for registering and bidding. The reward (incentive) was points for a CPC and cost-per-action (CPA) program. Anyone who has ever done any research on affiliate programs (or made a few phone calls to ask around) could tell you eBay’s program would fail. It’s not rocket science, just common sense.

Mix CPC and CPA into an incentivized blend, and you have a recipe for disaster. Should affiliates pay for a program’s ignorance? Nope. A company of eBay’s stature has little excuse for ignorance.

Extraordinary Delusions and the Mob Mentality

The continuing naiveté of Internet marketers, especially in the affiliate/CPA space, is amazing. Doesn’t anyone else remember the MyPoints deluge of unresponsive Internet traffic back in 1999, when dot-com craziness was at its peak? Who could forget the totally insane CPA affiliate programs in 2000, when companies would spend two dollars and more for a name and more-likely-than-not fraudulent address?

It was the game of leads, and it burnt out quickly. CPC is a landmine. So is CPA, if not treated like a true reseller channel.

Sift among the masses for qualified customers. That’s your job as the affiliate program owner. The affiliate’s job is to get people to take action, hopefully in a way that works for both of you. Often, it doesn’t because your interests and their interests differ. You each have different definitions of success.

Reward a user for taking action with no economic value (e.g., registering or bidding for points), and you get nothing in return. They’re loyal to the reward.

eBay should pay its incentivized affiliates what it owes. Next program, it should do its due diligence and not open the program to problems easily avoided.

The fault lies not in its affiliates, but in itself. Paying for your own mistakes pays in the long run.

By Declan Dunn, The ClickZ Network