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  1. #1
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    ad network fees reduce my commissions
    From my understanding, the merchant pays their ad network 25% of my commission rate. If I negotiate for myself an increased commission, the ad network gets an increase too (without any work on their part)! These additional ad network fees reduce the amount of profit the merchant can share with me in our the next negotiation. Are there any ad networks that only charge based upon standard commission, not on custom arrangements? Do you have any other thoughts?

    Thanks.

    [fixed 5 typos]
    Last edited by Adam Ward; July 8th, 2006 at 12:10 PM.

  2. #2
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    add network? what's it?

  3. #3
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    MYAP / Kolimbo

  4. #4
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    Sorry for the confusion!
    add network = affiliate program bank / clearing house

    I didn't intend nor do I want to to help the 'bank' take money off the table!

  5. #5
    AM Navigator Geno Prussakov's Avatar
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    Quote Originally Posted by MrFriendly
    add network = affiliate program bank / clearing house
    Meaning affiliate network?

    G.

  6. #6
    AM Navigator Geno Prussakov's Avatar
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    Quote Originally Posted by MrFriendly
    From my understanding, the merchant pays their ad network 25% of my commission rate...
    If it is affiliate networks you're talking about, then the % is normally charged (to the merchant account) on top of your commission and does not effect your commission at all. It effects what the merchant ends up paying to the network; not what they are paying to you.

    Geno

  7. #7
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    Yes - affiliate network
    Thanks Geno.

    Yes, I meant affiliate network.

    The % charged to the merchant account on top of my commission DOES effect my commission. It may influence the merchant to walk away from using me, saying that the total advertisement fees are too high. Also, the increased fee paid to the affiliate network reduces the merchant's remaining profit, meaning that it will be harder (maybe even impossible) for him to give me future raises.

  8. #8
    MasterMike HardwareGeek's Avatar
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    I wonder if you can possibly set your commish to 0% and just track the orders etc via the affiliate network. and charge the merchant seperatly.

  9. #9
    Affiliate Manager Allen Nance's Avatar
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    Is someone adding a network?

  10. #10
    MasterMike HardwareGeek's Avatar
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    what if there were a service.
    That allowed you to invite a merchant to it and pay you a higher comission.

    The merchant would be charged lets say 1000 dollars a year to sign up for that serivce. Do you think merchants would do it.

  11. #11
    AM Navigator Geno Prussakov's Avatar
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    Quote Originally Posted by MrFriendly
    ...Also, the increased fee paid to the affiliate network reduces the merchant's remaining profit, meaning that it will be harder (maybe even impossible) for him to give me future raises.
    True. That is why a merchant is to work out his/her initial/default commission rate in such a way that it allows for his/her negotiations with affiliates that may bring in considerable difference but will also agree to work only on a special commission.

    What I'm saying is: I don't think it's about the network. It is totally about a smart affiliate management from the start.

    Geno

  12. #12
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    Geno: Sorry... I don't understand what you said.

    Are you saying that the merchant should negotiate with the affiliate program in advance to only charge a flat percentage fee based upon sales revenue and not on affiliate earnings? Do you know of any affiliate programs that would permit this?

  13. #13
    OPM and Moderator Chuck Hamrick's Avatar
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    MrFriendly,

    If your customer (the merchant) is that slim on margin that you have to fear keeping your job as the affiliate manager then I would consider walking away. If you fear for the relationship now follow you intuition. It is obvious that they do not understand the channel and will only drive you nuts. Just like asking how much we will make on a new launch in the first month with no track record, they are focused on the wrong things. Like developing a long term growth channel to go beyond their existing marketing.

  14. #14
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    I dont have a problem with that. The Network needs to make money. Sure, you might get a little less to chew on...but it's less to chew on as opposed to nothing. I've taken from Peter to pay Paul myself. It's a good thing. I don't mind being on the "losing" end in return as well. It's how the system works. Exploitation, Capitalism...getting something for almost doing nothing. Personally Im all for it.

  15. #15
    Affiliate Manager Alan Hamilton's Avatar
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    Taking the podium for a business 301 speech.....

    Considering the service and convenience offered to both the merchant and affiliate by a good network, I don't feel their percentage is unreasonable to merchants.

    Of course, a merchant (any good business manager) whether online or offline has to factor in the fees charged by the networks along with all other cost of sales and business maintenance such as support, credit card processing fees, customer service, after sale support, S & H, in house payrolls, leases, returns, etc, etc, etc.

    Logically all of these costs are directly related to the merchants affiliate program, so they are going to be factored in to determinine price points and commissions. That is where the products offered are so important. If the merchant offers a product that is generally purchased one time, such as non essential goods, the options are a bit more limited.

    On the other hand, if a merchant offers products that are consumed and are therefore reordered by the customer on a regular basis, s/he has many options in the form of added bonuses, long term return, repeat income generated from a new customer over "x" period of time, and other considerations in establishing a sound commission program regardless of network fees.

    In 30+ years of offline and now online business management, I've observed that products that tend to be one time purchases (no residual income to merchant or sales force) generally pay a higher one time commission. But products that require ongoing repeat orders (consummables) generally offer a much more lucrative long term revenue for both the merchant and the sales force (affiliates).

    Those (merchants and affiliates) who have long term aspirations undoubtedly prefer getting paid from previous customer acquisitions over and over again as opposed to making one larger commission - one time. (long term solid growth versus hand to mouth).

    As for the networks and the fees they charge to the merchant for their services, I think they are worth the cost and we are happy to pay them without adverse effect to our affiliates commission structure. But that is because we have a high repeat order product line. Merchants that offer one time purchase items and affiliates involved with such products may look at it differently. Either way, free enterprise is a life long learning experience!!
    Join the Spicy Aprons Affiliate program on ShareASale Visit us on Facebook www.facebook.com/spicyaprons Follow us on Twitter @Spicyaprons

  16. #16
    AM Navigator Geno Prussakov's Avatar
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    Quote Originally Posted by MrFriendly
    Geno: Sorry... I don't understand what you said.

    Are you saying that the merchant should negotiate with the affiliate program in advance to only charge a flat percentage fee based upon sales revenue and not on affiliate earnings? Do you know of any affiliate programs that would permit this?
    What I said, MrFriendly, was this: a smart merchant would set their default commission at such a level that would allow them to negotiatiate with affiliates that are worth the negotiation. Not only this is necessary for "negotiations", but also for running time-sensitive commission increase offers, various contests and bonus campaigns.

    Geno

  17. #17
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    What Alan said about residual income...

  18. #18
    Influencer Marketing GravityFed's Avatar
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    I think MrFriendly makes a good point. Network fees based on the Affiliate's payout can discourage merchants from bumping up their Affiliate's commission.

    Merchant's have been attracted to our standard commission on each transaction. It's a fixed, flat payment. We're not taking a percentage of the Affiliate's commission, so if a merchant wants to bump up their Affiliate's payout a couple of points, that's all the extra costs a merchant pays. The hope is that merchant's will reward their Affiliates with less hesitation when it comes to Affiliate commissions...knowing they won't have to factor in larger network fees as well.

    Oh and AvantLink also does not charge any minimums nor any hidden fees of any kind. Once the merchant is integrated the only cost thereafter is a flat commission to the network on top of what the Affiliate earns.

  19. #19
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    Econ 101 - tax is friction on the system
    The merchant's standard commission is 10%. The affiliate program's fees are 25% of our earnings or 2.5% of sales.

    We negotiated a 25% commission. The network now earns 6.25% of sales (25% of our 25% commission).

    Our raise was (25% - 10%) / 10% = 150%. But the affiliate program's raise is (6.25% - 2.5%) / 2.5% = 160%.

    The affiliate program profits relatively more than we do even though they contributed NOTHING to the negotiation. Yet the value they provide remains the same! (BTW, it took A LOT of work to negotiate that commission rate. The reason I'm *****ing is that I foresee much resistance in trying to negotiate a further increase. And the affiliate network's fees make the thought of doing so very scary. I don't want the merchant to tell me to go take a hike!)

    If we generate $1000 in sales per day, the affiliate program receives $65 per day instead of $25. After a month, they've taken an additional $1200 off the table - money that is no longer available to help build additional sales, for example by the merchant being able to offer further discounts or by the affiliate receiving that money and plowing it back in to search engine referral ads.

    Where's the added value provided by the affiliate program? They're serving the same accounting without contributing anything else in the slightest. Do you pay your accountant based upon your income? No, you pay him based upon the effort / value he provides. No extra effort, no extra value, no extra fees should you have to pay! I'm surprised that affiliate programs can get away with this practice! Until they wise up, it seems to me that the newer affiliate programs can use this defect as an incentive to draw away customers from the older programs.

  20. #20
    AM Navigator Geno Prussakov's Avatar
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    When you say "we negotiated a 25% commission" - what exactly do you mean? Whom did you negotiate it with?

    Geno

  21. #21
    Influencer Marketing GravityFed's Avatar
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    Quote Originally Posted by MrFriendly
    Where's the added value provided by the affiliate program? They're serving the same accounting without contributing anything else in the slightest. Do you pay your accountant based upon your income? No, you pay him based upon the effort / value he provides. No extra effort, no extra value, no extra fees should you have to pay! I'm surprised that affiliate programs can get away with this practice! Until they wise up, it seems to me that the newer affiliate programs can use this defect as an incentive to draw away customers from the older programs.
    I Agree.. that is if you mean 'Affiliate Network' and not 'Affiliate Program' in that quote.

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