

eBay Tosses MCM to the Curb Like a Bad Sofa - karipatila
http://stewf.tumblr.com/post/1426742164/ebay-affiliate-program-partner-network

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patio11
This is kind of the nature of the beast with being an affiliate. You are being
compensated for providing them traffic which converts at a substantially lower
cost that their predicted lifetime revenue from the customers. If those lines
cross, expect to be shown the door as soon as they're made aware of that fact.
It is not economical to work with people to optimize their sites to hopefully
be sending quality traffic again, since that is hard, non-obvious, might be
against the interests or intentions of the site owner, and consumes resources
which would be better spent optimizing the customer's own sites.

For example, a slight change in your keyword mix coming from Google -- not
even a bad thing -- can make your traffic quality as measured downstream go
from Great! to Abysmal! very quickly. Pretend that instead of me being both an
SEO and a software developer the SEO was the affiliate of the software
developer in my business.

<http://www.bingocardcreator.com/stats/conversion-rates>

I was "sending" great, great traffic with SEO, until recently. The people who
joined the free trial were disposed to convert. If I had been earning 25 cents
a trial, both the SEO and the software developer would be pretty happy...
until October.

What happened in October? Halloween happened. And I did fairly well SEOing for
Halloween, and generated a metric truckload of new trial signups and sales...
_but_ the traffic is much lower quality than someone coming in for elementary
education activities. My consolidated conversion rate took a nosedive, because
the conversion rate for people coming from my Halloween sites is below 1%.

If I were paying the Halloween-loving SEO 25 cent CPAs at the moment, I'd be
bleeding money and probably have to cut him, since I don't have sufficient
insight into _his_ business to realize this is a temporary condition and will
rectify itself in another few days (right before it happens again at
Thanksgiving... and Christmas... and Valentine's Day...).

~~~
thesethings
I have a dumb question, and maybe it's because I don't understand how ebay
affiliate stuff works. (Assuming Amazon-esque.)

But even if this site sends really low quality traffic, it's still likely
sales that wouldn't otherwise happen, even if the ratio of visits to sales is
quite low.

What does this cost ebay other than a lil more server juice? (to have a
fruitless visit).

I mean, I know they're paying a cut to MCM, but they would pay that cut with
good quality traffic, too.

It seems their gamble on false positives would not be as risky with other set-
ups (paying out for downloads, trials, etc).

(If anybody wants to school me on incorrect ebay assumptions, that would be
OK. I'm assuming it's basically like Amazon.)

[update: Reread. The author says he gets commission based on a variety of
things including "clicks, new accounts, bids, and wins." It seems that this
whole dynamic could be clear for both sides if ebay only paid out on things
that ended up getting bought.]

~~~
patio11
Affiliates typically work on a CPA basis: cost per action. eBay is a little
trickier, but it boils down to that. They get paid based on conversions, not
based on traffic.

Most people who sell via affiliates have what is called a backend. (BCC does
not.). It means, loosely speaking, any way for the company to increase LTV
[edit: life time value, total economic value extracted from customer over the
entirety of your relationship with them] after the initial sale, which is
typically when the affiliate gets compensated. eBay LTVs are dominated by he
backend: I bought my first box of Warhammer figures for $20 and earned eBay a
buck back in 2000. Over the last ten years, I have been worth north of $2000
to eBay.

It is very difficult to know with certainty that the LTV of the kid buying the
Warhammer figures is going to hit four figures because in a few short years he
is going to move to Japan then drop off your radar for a few years then sell a
hundred thousand dollars of bingo card software using his Paypal account.

So you need to guesstimate LTV for customers, within 30 or 60 or so days of
acquisition, to pay your affiliates. If you underpay, they send you less
traffic and you lose. You probably pay your affiliates _more than the instant
revenue._ If eBay figured my LTV was $1 and paid the affiliate 50 cents, they
would have sent me to another site instead. If Netflix paid only the first
month's revenue, they'd lose signups to other sites.

If you overpay, you hemmorage money.

So you get really, really sophisticated about measuring and predicting LTV.
You understand your business better than any affiliate can hope to. And when
the numbers predict red ink? You drop them like a bad habit.

~~~
charlief
Can eBay pay the affiliates based on the realized LTV? i.e. eBay pays 50 cents
when you're worth $20, and as you increase your value they keep on paying the
affiliates. After all these years, you're worth north of $2000 to eBay, and
eBay has paid out a total of $50 to affiliates along the way.

I can see what the practicality might be like, but it seems much simpler and
fair than estimating LTV and cutting off affiliates if you were incorrect.

~~~
patio11
That is not technologically or organizationally _impossible_ , but there are
many reasons to prefer paying based on estimated rather than realized LTV. One
reason is that many affiliates incur non-zero traffic acquisition costs
immediately, or close to immediately, because they use AdWords or similar
methods. (Or, alternatively, because their SEO enjoys being paid money on a
regular basis. I certainly like getting my salary from the bingo business
regardless of whether the business sells a lot or a little in a given month!)

eBay currently extends them money far in advance of eBay receiving it, with
the understanding that if there is an upside eBay will get most of it. If eBay
pays them only after eBay gets money, that will cause many of them to go
cashflow negative, and since they are _not_ billion dollar publicly listed
companies with easy access to capital at low rates, that leads to the firm
either failing or exiting the eBay relationship. Neither of these outcomes
benefit eBay.

There are numerous other risks this exposes affiliates to -- eBay
retroactively changes the rules, eBay becomes unable to pay out the money,
eBay has extrinsic changes in their business which lower payments after
affiliates have incurred upfront costs sending them traffic, etc. All of these
risks make eBay a less attractive partner to do business with.

You can't always have everything you want. There is a tradeoff here: eBay will
pay you substantial amounts of money, up front, absorbing most of the
financing and execution risks. However, in return for this, you agree to
having your business relationship governed by what will appear to be black
magic.

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jacquesm
The real conclusion to me is that you should not base your business on some
other big business that gets a major say in whether or not you live or die.

Try to gain traction independent of google, ebay, facebook or whatever it out
there that you could base your business on. Treat them like the icing on your
cake, nice to have but not the crucial element in your bottom line which if
you lose it will kill your business overnight.

Of course, if it works it is easy money, but once you grow a bit, maybe have a
couple of employees it suddenly starts to look like a highwire act.

Unless of course you've got an in with some big name VC that also happens to
invest in google to protect you from being cut off.

Better keep your independence as much as you can.

~~~
robryan
The problem isn't so much with an individual merchant if your running an
affiliate site, there is enough out there usually in more areas to allow
mixing and matching depending on the deals being offered.

There is not so much option though when it comes to Google, the getting cut
from Google is going to have a major effect for the vast majority of affiliate
marketers, unless you have something like a massive user/email list or have
something big on Facebook.

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robryan
Im not sure of the rates but my cofounder used to send a decent amount of
traffic to ebay through the affiliate system, I actually wrote a fairly
complex system in which live auctions were compared to other retailers prices.

At some point though the affiliate commission rates went from worth pursuing
to not really worth it at all even though we had invested a fair amount of
effort in integrating ebay.

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hewnandhammered
I had been a healthy-earning Ebay affiliate for 3 years under the old
(Commission Junction) system; after seeing Stewf's success with Mid-Century
Modernist, I hired the same developer to build a similar system for Hewn &
Hammered (except in my case, it would present the stream of auction items
right on the front page, alongside the editorial content). The developer
finished, and is going to bill me any minute ... and Ebay just denied my
application without any explanation whatsoever, and said they wouldn't accept
a second application.

(I had to reapply as they've migrated from Commission Junction to their own
proprietary system.)

I have about 1000 uniques a day and my audience is absolutely well-off, 90%
homeowners, interested in collecting Arts & Crafts furniture and the like.
They have money to burn and are interesting in buying.

Oh well. Thanks for screwing me, Ebay.

~~~
jamesteow
Are there other affiliate programs you can use?

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lwhi
I think that a lot of the people who might click on the items featured on MCM
could be classed as 'tourists'.

I could imagine that many site visitors are attracted to an item, because it's
aesthetically pleasing .. and they go ahead and click to view the item,
without any intention of making a purchase.

If this were the case, I'm sure that it would dilute your QCP score.

The items are laid out in a gallery format, and the interface doesn't appear
to be solving any specific 'goal-orientated' problems. I think this might be
part of the reason the traffic generated has been classified as low-quality.

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jamesteow
Damnit, I love MCM. One of the nicest designed sites out there.

