Advertisers are tired of paying Commission Junction for Google-supplied visitors through affiliates. 

Valueclick is tired of operating Commission Junction, allowing Google to pocket the big money.

The operational aspects of Commission Junction’s (CJ) recently announced Link Management Initiative draws attention and concern but there’s more afoot.  Valueclick (NASDAQ: VCLK) has already told us what they intend on doing with their Commission Junction unit and, in fact, where the affiliate marketing segment of Web marketing is heading—cost-per-click (CPC).  One need simply put things in perspective; hence, I posit, they’ve announced their intentions.  They’ve declared war with Google and will now run like hell from affiliate marketing—a novel idea but a colossal missed-opportunity that Google has cashed in on.

Google Envy
In short, I see this as all about VCLK (a company with many direct relationships with advertisers) realizing that Google (GOOG) has it easy.  Think about it this way: At Google, advertisers require no transparency on where visitors come from (upon clicking ads).  Affiliates?  Advertisers increasingly want more transparency on who the affiliate is, where they get their visitors (do they have a loyalty or affinity to the affiliate site or just passing through a link—a.k.a. “affiliate arbitrage”?).  Sure click fraud is discussed but has the fear of getting ripped-off held advertisers back from throwing billions at Google AdWords and that poor excuse for a contextual advertising network, AdSense?  Has it stopped affiliates from successfully reviving the get-rich-quick-in-your-undies-without-leaving-home dream?  No again.  Affiliates have profited wildly forcing some affiliate networks (i.e. the one I helped found in 1999) to become affiliates themselves.  How?  Affiliate-style arbitrage called “search services.”

Buh Bye CPA, Hello CPC
So… what’s Valueclick’s answer?  Their own existing click network?  Not a chance as it’s frozen “TV dinners” compared to Google’s surf & turf (in the eyes of advertisers).  But what about CJ’s network—there are a few diamonds in the rough here. 

I suggest Valueclick is, already, slowly weaning advertisers off of paying a pure cost per acquisition (CPA) / commission structure.  Here’s how: They are boiling all CPA advertising (the “pure revenue sharing” arrangement that powers all affiliate programs) down to an effective cost-per-click (CPC) and, slowly, “moving over” all the affiliates.  This includes their existing Valueclick network (the “old” network + Webclients + Fastclick) which will work on a CPC or a CPM (cost per thousand impressions).

Affiliates & Publishers Are Already Dumping CPA
Why will affiliates change to a CPC model?  Are you kidding?  It’s the dream of all moderately successful affiliates.  Ever wonder what separates a Web publisher from an affiliate?  Visitor traffic, of course, and when an affiliate gets enough traffic they tend to shun “pure commission” deals (money on the come) for the sure bet (cash for every click they send).

More evidence: Affiliates have rushed head-first into the domain industry and the “domain tasting” realm.  The domain industry?  Indeed, there is such a thing and if you’re unaware of companies like Marchex (publicly held, no less) it’s time to pay attention to the hands-down hottest sector in the interactive media realm.  A good place to start learning is DomainNameWire.com or hit the industry’s trade show T.R.A.F.F.I.C. 

My point: affiliates created the domain sector.  How?  By buying domains.  Why?  Take a look at Marchex’s books (and strategy - they buy domain-savvy affiliates!) and you’ll see a clear answer: AdSense and Yahoo! Search/Overture ads.  In short, ”forgotten about“ and/or abandoned or just plain available but not owned Web URL’s (domains) can receive a lot of visitors—all looking for somewhere to go (click).  Let’s not forget everyone’s favorite—mis-spelled URLS for companies or products.  Yes… affiliates know that game well but the game is changing from shuttling visitors through an affiliate link (when they leave the “s” off of 1800flower.com) and on to the URL they were looking for to providing them with a page filled with adds (AdSense and Yahoo Search ads). 

Affiliates want the money not a promise of money IF the visitor converts.

VCLK’s History of Hating CPA
But I said that VCLK is dumping CPA for CPC as if it’s been formally announced.  Indeed… I offer more evidence:

At the end of the day “traditional affiliates” get paid a commission or bounty on the desired action (sale, lead, subscription, registration).  That “pure performance” payment can be boiled down to an effective earnings per click using simple math.  Commission Junction itself calls it (for years now!) EPC (earnings per click).  Hell, they measure the value of their entire network with the EPC metric and have used it as a point of differentiation for years.  Hello!

The Quiet Revolution
Was CJ’s Todd Crawford’s departure a surprise?  Why would it have been.  A look at what CJ has become now should be no surprise considering how they positioned themselves (EPC, refusing to call affiliates anything but “publishers” and marketers “advertisers") prior to the Valueclick acquisition.  In fact, CJ “dressed itself up” for someone like VCLK to come along and buy them, did they not?

In the end VCLK wants to sell clicks, folks.  It’s a much bigger and EASIER (more fluid) business to be in.  Affiliate marketing is, by definition, a project that involves partnerships. 

What’s been the biggest mantra the last few years inside the space?  “Know your affiliates.” Check AffiliateManager.net, Affiliatetip.com, MarketingSherpa and on and on… the message has been loud and clear for a good half decade now—AFFILIATE MARKETING IS WORK!!!

Google Adwords?  Just like the “auto pilot” days of affiliate marketing we’ve seen Google capitalize on advertisers desire to 1) pay on performance and 2) set it and forget it.

Advertisers Want to Set It & Forget It
Advertisers love ‘em and hate ‘em.  Affiliates.  So why are affiliate programs the darling and, as MarketingSherpa and others have documented, concurrently the most under-funded marketing channel? 

In my experience, a majority of advertisers don’t want to know affiliates at varying degrees—they’d just assume look past them (especially those using adware and spam).  Marketing teams are paid to move the needle and blow through ad budget.  As Wayne Porter points out in my interview with him, this does not include detecting what amounts to be ad fraud.  Again—it’s a lot of work to know your affiliates (build relationships) let alone run investigative campaigns on them each week.

Advertisers Leave CPA, VCLK Ready to Help
Search + Incentives = The Affiliate Marketing Sector

CJ has told us that this is true and one need only do simple math to figure out who’s benefited most from affiliate marketing since its inception—GOOGLE.  If most of affiliate marketing is search, incentive shopping and coupon sites then isn’t the need to dump CPA for CPC fairly obvious?  VCLK is simply removing the middle-man… namely Google in a colossal cash-grab.  The implications for Google here are quite serious in my estimation.  Moreover, advertisers:

- Struggle with having to discount themselves (work with coupon and “cash back” sites)
- Hate “sharing loyalty” (partnering with the likes of uPromise)
- Are clashing with affiliates in paid and natural search engines
- Are taking calls from Google reps asking “tired of paying your affiliates a premium for our visitors?”

VCLK’s success has, for years now, been limited AND tied way too close to that of the affiliates in their network—who use PPC search (Adwords) and “natural” search optimization techniques to drive visitors to their sites.  The optimization affiliates are getting whacked by Google (systematically taken out of the index faster and faster).

Are advertisers ready?  VCLK thinks so.  I think so.