To really understand what these networks do, we need to take a closer look at the affiliate industry. There are basically 2 main sides to the game, there are those who have the traffic or know where/how to buy it (let’s call the affiliates), and then there are those who want to sell something to these visitors (let’s call them advertisers).
There are 1000s of advertisers in the affiliate space, some are well established companies with dozens of products, but some are just small operations with 1 or 2 products and that’s it. The funny thing is, that sometimes those with 1 product, know their shit better than a large company, which results in better ROI when working with these small guys.
Technically, you can simply work directly with these small companies and build great relationship with them, there is nothing wrong with this approach. But what if you want to run a quick test with 10 similar products from different advertisers and compare the results. You would have to approach 10 different companies, work on 10 different setups and send traffic to 10 different places. This is still doable, annoying as hell, but doable.
But there is one thing that will stop you from running tests this way – the payment terms. Let’s say you run a $500 paid traffic test with 10 products from 10 different advertisers, that’s $50 worth of traffic to send to each of them. Let’s say you reach -30% overall ROI with this test, so out of $500 you now have $350 spread across 10 places. In reality, the sums per advertiser would be different and it could look like this : $28, $27 $43, $30, $46, $20, $27, $34, $40, $55 … as you can see, some of those offers simply perform better than the others and this is actually what ALWAYS happens in real life.
The only right decision to do now, is to stop sending traffic to the worst performing products, focus on the best ones and keep on testing. But what about the earnings you made with the other advertisers? As you can guess, most advertisers have payment thresholds, they won’t send you less than $100 for example. In such cases, the $ are lost or you can try to get it from them somehow – in some cases paypal works, in other cases the bank fees will be higher than what they actually owe you. One way or another, it’s a waste of time and money.
And this is where Affiliate Networks enter the game. Their job is to find advertisers, negotiate with them, set the terms at which their products will be promoted and also agree on payout levels and payment terms. By doing this, they basically group offers from 100s of advertisers and present them to the affiliates in one platform. This way, affiliates only need to join one affiliate network, in order to be able to promote products/offers from a wide range of advertisers … the need to deal with each of them is gone.
But the biggest benefit is, that the affiliate networks also group the payments, so instead of getting paid from each advertiser separately, you will now get one combined payment from the affiliate network. This is absolutely amazing when testing stuff from various advertisers, you can test 100s and still get just one payment. On top of that, any serious affiliate network will send you your earnings, even if something went wrong with the advertiser – unless, of course, you have committed fraud.
This sounds awesome, right? But as always, there are also drawbacks. First of all, the affiliate network takes a cut too, the % is different from network to network, but the number usually moves between 15%-25%. The good thing is, high volume affiliates will get better conditions, the network only cares about the final profit, not the %, so they will happily give you better conditions in case you can drive a lot of sales, leads, registrations or whatever ….
Another problem is that not all affiliate networks are honest operations, so always perform your own research when choosing a network to work with. There is one more thing you need to realize when it comes to aff. networks, even tho every network works with a lot of advertisers, none of them can have all the offers in their platform and some networks are better with certain verticals over others.
This means, you will still have to work with more than 1 affiliate network, most affiliates end up finding 2 or 3 favorite ones and send bulk of their traffic there. The truth is, you actually need to test several affiliate networks anyways. The reason is the various infrastructure they are using and the different conditions they agree on with the advertisers.
The above mentioned is responsible for different performance of even the same offer on affiliate network A when compared with affiliate network B. Network A can have faster servers, which results in better conversion rate for example. Or they can take smaller %, which again plays in your favor. They can also have exclusive landing pages designed just for them, which impacts the final conversion rates once again.
So the final question is, should you be using affiliate networks, or should you try to work directly with the advertisers?
To be absolutely honest with you, both affiliate networks and direct relationship have their pros and cons. The best you can do is to combine both and use each where appropriate. When starting out, you should definitely use affiliate networks. You will be running a lot of tests, trying to figure out what vertical or niche you actually want to promote … in this case, networks are awesome.
But, as an advanced affiliate, you should definitely start to look for direct relationships. Since you already know what to promote, where to promote, how to do it and how to get best results… you need every advantage you can get in order to slay your competition. Higher payout (no share for the affiliate network) is one of the best competitive advantage you can get in the affiliate industry.
I personally use a combination of them both too, I have my favorite affiliate networks that I work with, but I also have a few direct advertisers that I send traffic to. Again, in par with the proven : “Don’t put all your eggs into one basket!”
Thanks for reading.
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Great info. I am reading all the posts you have written on STM forum.
Thanks, I will definitely be writing more on STM, so stay tuned 🙂
Thanks, I will.
Matuloo – Saw on STM you started a blog! This is great insight for any size affiliate. Always good to diversify. Just wanted to point out Networks can also help group various offers into a single ad campaign to evenly rotate and optimize towards best EPC. Can even apply a weighted distribution towards better performers over time.
I’m using some networks that do this auto optimization, it can work pretty well with generic offers that do not require a lot of angle work. I didn’t have much success with it when promoting anything that requires detailed banner/LP/offer optimization tho, I usually have to optimize these myself and create new campaigns based on the outcome.
Rotating offers that get auto-optimized could a good choice for people with organic traffic. It’s usually quite a mix, so why not let the affiliate network help with some of the GEOs? 🙂
Can you also post your recommended affliate network? I am looking for more ad network that are based on android games offer? Will you suggest me few, which are reputed and attend many of affliate event.
Hi, do you allow guest posting on matuloo.com ? 🙂 Please let me know on my email
Hello, if you write a post just for my blog and it’s a good one, I have no problems posting it 🙂