The promise and perils of affiliate marketing

To supplement their advertising revenue, publishers often consider turning into affiliate marketers and drive traffic to eCommerce sites. Is it as viable as it looks? And how does one make it work? At the recently concluded Digipub World, a two-day convention for web publishers, a panel discussion was held to discuss the promise and perils of affiliate marketing.

Nitin Mathur, co-founder, 91mobiles, Tarun Sinha, business head, Olx Group and Vikas Gupta, founder and director, 9.9 mediaworx were the panelists at the session moderated by Anirban Roy Choudhury of afaqs!.

Tarun Sinha started the discussion by making it clear that he sees more perils than promises when it comes to affiliate marketing, “As a publisher, we experimented with affiliate marketing a few years ago but I am more on the side of perils. There is a line between marketing and sales, and so I would say I do not know what the future of affiliate marketing is and how strong it goes from here,” Sinha said in his opening remarks.

Vikas Gupta, whose platform rakes in about 10 per cent of its revenue through affiliate marketing, was of the opinion that with advertising going away, affiliate marketing is here to stay. However, he thinks it puts the integrity of the publisher in question. “At some point as a professional, you need to make a choice - are you going to be a publisher that creates high-quality content devoid of any bias or are you going to be a successful shopkeeper of a shopkeeper. I think there is going to be a clash of interests if you try to be both because by definition the shopkeeper wants you to push stuff that necessarily does not sell well,” said Gupta.

“One of the reasons why it does not sell well is probably because it is not a good product to buy. Now, as a publisher one needs to decide whether to push that product or not in order to remain a good publisher and create content for the readers,” he added.

Nitin Mathur, who has been running 91mobiles successfully for a while despite working with affiliate partners, was asked to counter Vikas Gupta’s question of integrity. “Four years ago when we were scaling 91mobiles, our philosophy was - forget affiliates, we will not even allow Google Adsense (programmatic) on our website. We will only sell premium inventory at Rs 150 CPM. The market has moved in such a direction that for most people that is a laughable thought now. For most publishers, it (affiliate) is as essential to do as any other form of advertising,” Mathur opined.

Countering Gupta’s point, he said, “I am sure there are challenges, conflicts of interest etc, but depending on who you are talking about, you can do 10 to 35 per cent incremental revenues using this channel.”

The question, therefore, arises that for 10 - 35 per cent incremental revenue, should one compromise with integrity and editorial ethos of staying unbiased? Or, is there a way one can be both, as Vikas Gupta termed it, a good publisher as well as a good shopkeeper?dd

“It is not a question if you can be both as we already are,” replied Mathur. He asserted, “The fact of the matter is we all are. About 25 per cent of our revenue comes from affiliate. There are questions of conflicts of interest, yes, but they are there in advertising too. In advertising, if a mobile brand puts an ad on 91mobiles, then it is a conflict of interest as we are also reviewing phones from that brand. By that logic, you should not be running banner ads on your website. To run a business, you need to work around those things and maximise your revenue options,” he said.

After the initial debate, the moderator went back to Tarun Sinha and asked why Olx opted to stay out of affiliate marketing after trying its hand at it. “It is not that we are completely away from performance. As a large player in the market, I am resisting selling inventory on a cost per sale basis. I work on CPM optimised for CPL but the way the auto industry is, you cannot stay away from it. I have had conversations with CMOs and CBOs where they have asked me to sell their cement bags, so performance is the hit word and there is no questioning that. We have been fortunate to have a lot of first-party data and on the back of it, we managed to resist it, so about 90 per cent of our business is about brands and sustenance and 10 per cent is performance.”

Mathur intervened and said it would be interesting to observe if Olx’s stand remains the same after two years as the entire market is moving in that direction. However, he added that in India, if a publisher bases its model only on affiliate, it is quite likely to be a losing proposition as 90 per cent of the business comes from two partners. “The moment you rely heavily on two players for most of your business, you are not sleeping peacefully. The question for publishers here in India would be - is it worth trying to generate 10 - 20 per cent or is there an additional 20 per cent you could generate and what would it take to do that?” Mathur pointed out.

Gupta added to the list of perils. “It is a fairly random relationship,” he said. Sharing one of his recent experiences, he said, “Recently, we discovered that one of the two partners (either Amazon or Flipkart) reduced our margins by one-tenth of what they were giving the previous month. If you got a phone sold on their site, you received only Rs 10 (while you were expecting Rs 100) as they decided to change the commission structure without even consulting with us. So you cannot manage the whims and fancies of the other person and that is a big problem,” he said.

Sinha ended the discussion by saying that he would prefer to stay away from it as long as he could, as it is a Flipkart - Amazon duopoly in India and the commissions are going down.