The two primary players in any affiliate marketing arrangement are the content-creating affiliate and the product-selling merchant. But as affiliate marketers know, networks such as Commission Junction and LinkShare are key components of the “ecosystem” as well. Just as many sites that monetize via display advertising attempt to establish direct relationships with advertisers and cut out ad networks, successful affiliate marketers may wonder about eliminating networks and working directly with their merchants.
In this article, we’ll explore the options for affiliate marketers looking to cut out networks entirely and establish affiliate relationships directly with merchants who will compensate them for any sales generated.
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To understand the potential value in establishing direct relationships with merchants, a quick refresher course on the economics of affiliate marketing may be useful. We like this visual as a way to summarize:
What the chart above doesn’t show is the role of the affiliate marketing network (e.g., Commission Junction or LinkShare). From the publisher’s point of view, the affiliate network is involved very early on in the process, generally supplying the ad creative and affiliate links used to refer traffic. They’re also involved at the last (and most important) step in the process: a portion of the commission earned by the affiliate goes to the network who matches them up with merchants and handles the various administrative functions.
Whenever there’s a network in the middle, the payout to the publisher will be diminished by the “cut” that player takes. So there is an opportunity to make more money in affiliate marketing by cutting out the middleman network and keeping the entire commission intact for the affiliate (publisher).
But establishing direct affiliate marketing relationships is extremely challenging for a number of reasons, which we’ll get into below. While there are certain instances when a direct relationship makes sense, most affiliates will be better off accepting that networks are part of the equation and focusing on finding the right merchants and maximizing referrals.
If you’re attempting to establish direct affiliate marketing relationships, it’s important to fully appreciate the value that networks provide. To over-simplify, the network exists to:
Match up merchants and affiliates;Handle the administrative aspects of an affiliate-merchant relationship;Protect affiliates.The “matchmaking” service–offering access to a pool of merchants–is the role of a network that likely comes to mind first. But the administrative workload handled by networks can’t be overlooked; they handle all the tracking, reporting, and payment processing that arises during the steps shown above. While that might not seem like much, it can add up to a significant amount of time each week.
Affiliate networks also offer a certain degree of “protection” in the sense that they ensure revenue you earn is properly attributed and paid out. When you start establishing direct relationships, you put yourself (to some degree) at the mercy of the merchants you’re able to land as partners.
There is a reason why many major merchants prefer to utilize affiliate marketing networks instead of setting up their own infrastructure. Just as the administrative burden can become overwhelming for publishers with multiple relationships in place, it can be too time consuming for merchants as well. Maintaining direct affiliate relationships involves building out an infrastructure to track referrals, calculate commissions, and process payments. While that may sound like a relatively straightforward process, it can become a major investment with plenty of potential complications and liability issues.
Even eHarmony, one of the Internet’s largest affiliate merchants, uses Commission Junction to power its affiliate relationships:
Many other major brands that use affiliate marketing take a similar approach and let one of the big networks do the heavy lifting for them: see DirecTV (CJ), Best Buy (LinkShare), and Overstock (LinkShare).
Many major merchants use multiple affiliate networks in order to maximize their reach. HootSuite is one such example; they’ll work with affiliates through either Commission Junction or ShareASale:
Of course, there are some companies out there who run their own affiliate programs without the help of a network. Below is a list of just a few of them:
(We have a forum thread going with a list of direct affiliate programs; if you know of another, please add it there!)
If you want to uncover more merchants who partner directly with affiliates, just keep your eyes open. When you see affiliate links, do a quick search to see if the related merchant runs their own program. (We came up with the list above by reviewing a few of the bigger affiliate marketing blogs and investigating the most prominent affiliate links on those sites.)
Direct relationships between merchants and affiliates will generally develop in two (very different) scenarios:
An affiliate generates a huge volume of monthly sales and commissions; orA merchant has a small operation and a very limited number of affiliates.Let’s start with the first scenario above. Suppose an affiliate is generating $100,000 in monthly revenue for a merchant, and getting $25,000 in monthly commissions. In this case, the network between the two may be taking $10,000 a month for its part in the process. In this case, the merchant may attempt to go around the network and set up a direct relationship with the affiliate–perhaps with a 30% commission.
Note that merchants reaching out to establish direct relationships with affiliates will only focus on the “whales” who generate the most revenue. While it’s possible to run a few affiliate marketing relationships directly, opening up this benefit to everyone quickly becomes overwhelming.
At the other end of the spectrum is the small merchant who is only willing or able to work with a handful of affiliates. In this case, the merchant and affiliate may come to an agreement and utilize a “low tech” solution to determine commissions earned (e.g., a custom referral path and an earnings statement powered by Google Analytics). This type of affiliate relationship will typically develop when there is a logical affiliate relationship between two parties, but the merchant isn’t interested in opening up the affiliate program to a wide range of partners via an affiliate network.
The vast majority of affiliate relationships are run either through networks or through custom platforms established by merchants. There’s a reason for that; these types of arrangements are the easiest to manage, and allow scale for both merchants and affiliates.
But there will be instances where an ideal merchant isn’t active on an affiliate marketing network and doesn’t have their own platform in action. There may be instances where a potential merchant partner doesn’t even know what affiliate marketing is.
If you have identified merchants for whom you think you could generate substantial revenue through an affiliate marketing relationship, there’s no reason not to attempt to set up a direct relationship. There’s also not much magic to pursuing this type of arrangement; if there isn’t a pre-existing relationship, start by reaching out to your potential partner and telling them a bit about your site.
From there, it’s some good old-fashioned business development. A few tips / pieces of advice:
Gather as much information as possible about their current marketing plans. How are they generating sales / leads now? Do they have any affiliates? Are they open to more?If you’d be the first affiliate, make it as technologically simple for your partner as possible.Be prepared to explain exactly what affiliate marketing is, and how it can benefit them.In some ways, trying to establish a direct affiliate marketing relationship with a merchant is a lot like trying to get an advertiser to run a campaign on your site. But there is a major difference here that you should consider when reaching out to establish direct relationships: the biggest hurdle to overcome from the perspective of the merchant isn’t a cash payment (as it is with advertising) but rather an administrative burden.
In general, affiliate marketing relationships will fall into one of three categories:
Facilitated through a network such as ShareASale, Commission Junction, ClickBank, or LinkShareRun on the merchant’s in-house affiliate platformCustom deal set up directly between two partiesThe vast majority of affiliate marketing relationships will be established either through a network or through the generic, impersonal interfaces of the companies who have established their own platforms. While the opportunity to generate additional revenue exists if networks are cut out of the picture, the substantial benefits they offer, including administrative responsibilities, makes them a pretty vital part of the affiliate marketing ecosystem.
When opportunities to establish direct relationships and negotiate customized commission deals exist, there is likely already a relationship between the two parties. The biggest hurdle to overcome here is generally the administrative and technological burden, since there are no payment required unless revenue is generated.