I am going to lay my cards on the table early, but I’ve a gut feeling that AOL’s sale of affiliate marketing arm Buy.at to Digital Window, parent company of Affiliate Window, will end up being bad news for merchants.
Both Buy.at and Affiliate Window are already major players in UK and European affiliate marketing – and between them they represent more household names than any other affiliate network. Add Tradedoubler and DGM and you’ve almost got the UK affiliate market covered.
So, what are the ramifications of a major merger like this, and what does it mean to all involved? Let’s examine each interested group in turn.
The good news:
- One less affiliate network to deal with
- Fewer duplicate marketing emails from affiliate programmes that run through two or more networks.
And the bad:
- No room to negotiate with a network – you can’t threaten to join the same programme on another network.
Merchants / advertisers
- Whole industries of advertisers could be represented by a single network
- The rigmarole of cross-network de-duping sales goes away.
- Whole industries of advertisers could be represented by a single network (!)
- Less competition, and worse deals on price
- Deterioration of service – the network would have no major competitors trying to steal its clients.
It’s almost entirely good news for the networks involved:
- Major benefits of scale
- Servicing more clients with fewer staff and one set of business systems
- Higher returns from larger clients – the networks earn a fee based on the function of their total affiliate commission (usually a negotiable 30% override) so the potential to earn from one high street name is larger than the potential from servicing hundreds of small programmes.
Unless, of course, you are an unlucky network employee:
- Redundancies in the network workplace.
Things are equally bright from the agency point of view:
- One less network supplier to deal with
- Familiarity with the new, big network player
- Billing and reporting consolidated.
Although one of these positives is also a potential pitfall:
- One less network to compare.
As you can see, a mixed bag.
It’s early days yet, but I’m worried that many in the industry have been premature in giving the merger a big thumbs up. Maybe it’s my British tendency to back the little guy, but I can see a combined Buy.at and Affiliate Window having a near monopoly in certain market verticals – a good example is broadband.
Whilst this is good for me as a part-time affiliate – I’ll be able to login to one network’s system and see all the important criteria gathered in one place – I can’t help worry about the merchants.
If you’re a merchant, there are clear benefits of being on the same networks as your competitors (access to the same affiliates), but in a monopoly situation you will have real difficulties negotiating down network fees.
Similarly, in the agency world, prospective clients often ask about conflict of interest – and will say that an agency can’t best service its interests when it represents every other company in the same market.
And while the merger is great for the networks, it isn’t for the companies they represent. In my opinion, not all merchants will be best served by the merger, and should be entitled to end their contract prematurely.
Do you agree?
(Note: I’d like to emphasise that these are very much my personal opinions, and not those of Coast Digital)