CPA Affiliates Are Pilfering Your Brand Through Paid Search
Big-name companies are currently utilizing this affiliate marketing strategy to drive new customer acquisition efforts either as an isolated or supplemental strategy. Just put the term "Columbia House" in Google and you can see the multiple affiliates leveraging their brand name. Columbia House is just one example of the many companies that are allowing or, at the very least, not discouraging their affiliates to drive customers on their behalf through paid search on their brand terms. It may seem like a good idea in theory if you only pay for new customers and the affiliate absorbs the media risk; but I think the cons can far outweigh the pros for advertisers as it relates to this commonly used strategy with affiliate marketing. This is especially relevant if an advertiser is spending significant money on other marketing channels (print, DRTV, direct mail, etc.).
We have proven through tracking across countless campaigns that a large percentage of people who respond to direct response television commercials do so through the paid search channel. We make sure that advertisers are totally in control of their branded search terms on all of the search engines and are, in almost every case, the only paid listing that appears when their brand is typed into a search engine.
Some advertisers believe that allowing affiliates to bid on their brand in paid search makes sense. Unless you rely heavily on resellers, there are several flaws with this approach. The most quantifiable negative impact from this strategy is a financial one. Potentially, you could be paying double to acquire a new customer in the paid search channel with this strategy (first, through your efforts to build your brand that is searched and second, through your affiliate program to an affiliate that has paid listings on your brands' terms).
In affiliate models, third parties or affiliates receive some bounty to deliver a new customer. If they are driving this new customer through your brand name, they are doing what you could be doing without any competition. Keep in mind that paid search terms are priced on a bid basis. Often I see affiliates competing for the top listings on an advertiser's brand name -- or even worse, I see the advertiser or its agency competing against those affiliates.
If you were to develop and engage in a comprehensive and controlled paid search strategy without the use of affiliates, you could dramatically decrease your costs to acquire new customers through paid search activities and maintain the same acquisition volume. A general rule of thumb is not to let your affiliates take advantage of a brand name that your company has spent decades and millions to make profitable. I assure you that you will be able to drive as many, if not more new customers with a single listing for your offer in paid search by eliminating the use of affiliates. In addition to getting rid of confusing marketing messages in this channel as well as double-click scenarios where consumers must click on multiple listings to find the "right or legitimate" site to take advantage of your company's offer, these changes can dramatically increase your paid search effectiveness.
Secondary issues that arise involve the impact to an advertiser's quality score within the search engines and negative consequences to your brand. After using affiliate tactics in search, trying to overcome the history of a poor quality score can prove to be tedious. These issues will ultimately force you to pay more than necessary to acquire customers through this channel while you rebuild your quality score through improved search marketing strategies.
As it relates to your brand, inconsistent offers and marketing messages can be difficult to rectify in the marketplace. Many times affiliates in paid search are all utilizing different and sometimes contradictory ad copies to drive these new customers on your behalf. Again, they are only getting paid on the end game, so that means they are less concerned about your brand and offer integrity than you would be. Although advertisers often provide affiliates a "Rules of Engagement," this becomes quite tedious to enforce on a daily basis. I would encourage all advertisers to consider implementing a full or partial "Rules of Engagement" restricting an affiliate's use of your brand name in the paid search environment, as well as managing your branded search internally or hiring a good agency to do so.
This leads me to my last point: there's a solution for advertisers who want to keep their affiliate program and enjoy the economic benefits of customers driven through SEM. I will state that with very few exceptions, most advertisers can enjoy significant economic benefits by controlling the paid search channel. If advertisers want to utilize affiliates, then they must control and limit the affiliates' paid search activities on the brand and brand-related keywords.
While this can be challenging, when done effectively by creating and strictly enforcing clear rules of engagement, an affiliate program can provide a baseline of low-risk customer acquisition volume for companies online; however, it should never drive your online acquisition strategy. A company (or its agency) that wants to maximize the volume of new customers at the lowest cost through this channel should develop a clear and controlled strategy for paid search on both branded and non-branded keywords and allow its affiliates to focus on incremental acquisition beyond its brand.