Change to one of Web's top affiliate programs could pave wave for others to do the same.
EBay has made a big change to its affiliate program, replacing the cost-per-lead and rev-share approaches typical of affiliate marketing with a scaling cost-per-click model.
Beginning in October, existing affiliates in the eBay Partner Network will be assigned a unique daily per-click price, based on the incremental revenue their traffic delivers to the company. The goal is to simplify the program and to reward affiliates that provide the most long-term value, according to Will Martin-Gill, eBay's senior manager of Internet marketing.
EBay's approach was already unique. Whereas, most retailers pay affiliate publishers either a percentage of sale or a per-lead fee, the auction giant has been paying both ways. Its pay-per-lead structure is built on a sliding scale from $1 to $50, depending on the lifetime value of the referred customer. Meanwhile sales commissions are 50 to 75 percent of eBay revenue.
Martin-Gill said the combined approach is not changing with the new system. The difference is that both compensation models will be factored into a single click price that's revised daily. For instance, a Harley Davidson-themed blog that refers 1,000 clicks to eBay auctions for motorcycles and parts might be paid $0.17 per click on Monday based on the recent and long-term revenue derived from its traffic. That earning per click (EPC) figure would remain the same for the whole day, but could change to, for example, $0.19 per click on Tuesday. EPCs for each affiliate are calculated on the day immediately following the day those clicks happened.
"We're moving to a per-click system, but the key to it all is that it continues to be a performance-based system that primarily rewards the revenue driven on eBay," said Martin-Gill. "Just like we did in the past, we'll calculate the revenue driven by our affiliates."
In another change to the program, eBay will more generously attribute revenue that comes in the first few days after a click.
"Revenue that comes in long after the click -- we'll still value them, just a little less," he said. "We want to reward the guys that are bringing higher value sales more -- and the guys bringing less valuable sales, less."
The model has been in testing since late last year, when eBay brought its affiliate program in-house. The goal with that move was two-fold: first, to better understand who its top affiliate publishers were; second, to have closer relationships with them.
How much can affiliates expect their earnings per click to fluctuate? EBay believes the new system will tend to smooth out variability caused by the daily changes in sales driven by any given publisher. "Because we take history into account, we're not paying based just on transactions you drove yesterday," Martin-Gill said.
If there are losers in eBay's new affiliate structure, they may be the smallest affiliates. For those publishers delivering fewer than 20 clicks a day, eBay says it is unable to accurately calculate the value of their traffic. Therefore traffic from those low-volume partners will be pooled, and a single click price will be assigned to all. Some will do better than they had been, and some will do worse.
EBay will provide limited data into the precise factors that figure into a given affiliate's EPC. That's because the company doesn't want them to game its system, according to Martin-Gill.
"This is one of those challenges where, at the end of the day, if you hand folks that exact algorithm, people may find ways to beat certain variables rather than what they should focus on, which is trying to get people to buy more stuff and creating value," he said.For new affiliates, the regime will take place immediately. Existing affiliates will have access to reports showing what their earnings per click will be under the new system. On October 1, they'll be switched over, too.
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Until March 2012, Zach Rodgers was managing editor of ClickZ's award-winning coverage of news and trends in digital marketing. He reported on the rise of web companies, data markets, ad technologies, and government Internet policy, among other subjects.
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