Fred Wilson: Affiliate Marketing Undervalues The Link | Hacker News Reader

Fred Wilson: Affiliate Marketing Undervalues The Link

avc.com

18 pointsstakent24 comments

Perhaps, but then the value of that link is driven down by the fact that anyone can post it, and that it's no special resource that you have. The value is based on how easy it is to get 500 clicks, not on the potential of those 500 clicks.

Hey I could refer someone to popular store, but if they're popular eventually someone else would come by and refer them if I don't. The store's ability to monetize the customer is not largely dependent on my specific referral. Perhaps that conversion at that specific time was, but converting the customer is a commodity in general.

Some programs undervalue links more than others. I am avtualy quite cool with Amazon's system, but recently got burned really, really badly by eBay. They don't allow you to post affiliate links on Twitter, but we ran Twitter posts about the NIN eBay auctions that drove hundreds of thousands of viewers to eBay. I was lined up to make nearly $2k in commission when I got a notice that all my commissions were canceled because we used Twitter.

I don't understand why that means I shouldn't earn commission for the traffic I drove.

Additionally, I am banned from ever joining again.

Unfortunately the revocation and ban happened while I was (and still am) on vacation to Egypt, so I don't really have time to deal with it.

Yes, affiliate programs take advantage of you. You have to decide how comfortable you are with that, and at what level. It's still better than no affiliation at all.

Affiliate programs generally try to account for click-now buy-later behavior by setting a tracking cookie on the user's browser that lasts for a period of time - 30 days is pretty typical. Provided the user doesn't click another affiliate link (since credit is generally only given to the last affiliate clicked), Fred should eventually get credit for those future purchases. (Edit: I looked into it and Amazon only gives credit for purchases made 24 hours after the click. Ouch! This is abysmally bad for an affiliate program.)

What affiliate programs (and all performance-based advertising, really) actually undervalue is the view. Fred spent all that time talking about that product, but he gets no credit for it unless the link is clicked. That's why publishers with market power sell ad space by the view, not the click, and why the rates brand advertisers are willing to pay are much higher than the number of clicks the ads generate would justify.

Affiliate marketing is more than Amazon and eBay. The vast majority of the industry is built on continuity models that pay closer to $40 for a purchase of a free trial, which usually results in making $2-$3 per click.

Very few people have actually made serious money with Amazon. Successful affiliates get much better payouts. If anything, I think affiliate marketing OVERvalues the link. When you're making $2-$3 a click, you end up raising PPC bid prices significantly, which ends up forcing out anyone other than affiliates.

I've gotten tired of Fred's blog. I really don't like seeing requests made from my browser every other second. I don't like how slow it is because he has every social hook in there, many to his own companies.

He's a venture capitalist, why is he wasting his time with affiliate marketing? In the amount of time it takes him to build the link to amazon, he should have been working on closing a million dollar deal or doing research into companies or finding a better justification for supporting web fraud companies like zynga who make the internet worse like a lot of his investments, bit.ly to name just one more.

I also find him to be a bit hypocritical. He blasts conferences, then blogs all about having gone to them. He's lost a lot of credibility in my book. I don't think he or his investments make the web better.

We all tend to be hypocrites in one way or another and whether Fred Wilson is one, to me at least, isn't relevant. You've just posted a completely ad hominem attack while completely overlooking the premise of an interesting post (granted, "interesting" is a subjective statement). I also don't think it's terribly surprising that he would promote/give a platform for his portfolio companies - that's almost expected.

As for affiliate marketing - why wouldn't he? Aside from a smaller argument that every penny counts, it would seem like it's a useful little experiment which broadly speaking ,suggests a significant opportunity in ecommerce given what he's saying is that it's a mispriced asset. Whether or not it's a mispriced asset that can be monetized is what should be up for debate.

I think in this case, ad hominem is appropriate. He is arguing about mispriced assets while investing in companies that sells more virtual tractors than John Deere.

He's saying, in effect, Amazon isn't paying you enough to waste your time posting links to their books, while making other people pay good money to waste their time growing virtual gardens.

Rationale like that doesn't work well for him.

virtual goods is a way for people who play the game to pay for it in a very elegant freemium model.

you are mixing two issues up.

affiliate marketing is about helping publishers/creators of content make more money for the work they do

virtual goods is about helping game developers get paid for building games people like to play without having to charge upfront

Virtual goods are entertainment. Granted, I don't play Farmville or any other game (and I do find all those updates on fb annoying). I assume the pricing is pretty transparent. Just as I find buying tickets to sports games to be a waste of my time (with a particular net negative on baseball), to each their own.

Affiliate marketing however, is where the assignment of value somewhat more arbitrarily/discreetly decided as it depends on actions of third parties. Besides, it's about pointing out an opportunity that exists - and in that light, even if I were take your position, you could make the argument that it's one that he's very qualified to make.

To his credit, Fred donates all proceeds from his blog to charity: http://www.businessinsider.com/2009/1/fred-wilson-makes-3000...

VCs should have hands-on experience with the things they invest in. You can either not read his blog or use browser extensions to blog the social hooks you don't care for.

i am "wasting my time with affiliate marketing" because i want to understand this stuff and possibly make it better.

and zynga is far from a fraud. it's the most successful social gaming company on the web, it has innovated on the virtual goods model and proven that you can build a very large business with that model.

i don't like to go to big splashy conferences and that's what i blogged about. i do like to go to niche conferences where i can meet real people and entrepreneurs.

i'd like to understand why you think the investments we make don't make the web better.

Fred, as someone who felt your wrath earlier today all I can say is that we (the loosely dev/hacker community) feel that Zynga, playfish,et al. peed in the pool by having bad offers in the first place and made it much harder for the rest of us.

We also placed lots of stock in you personally as the older, wiser voice on the Web, and then the shitstorm broke out over "scamville" and you were nowhere to be found on this subject. It hurt to see someone we looked up too as a "grown-up who gets it" not say what you were clearly thinking.

i think you need to understand the limitations of what i can say when our companies get in the news. i can't talk about stuff twitter is doing without clearing it with them first. i can't talk about stuff zynga is doing without clearing it with them first. i can't talk about stuff that etsy is doing without clearing it with them first. etc, etc.

and my wrath is not at you, it's at all the misinformation out there, spread by blogs who did not work and just repeated the misinformation about zynga

Fred Wilson's ability to make great investments is, among other things, a function of his knowledge, timing, network and luck. He's probably tried out loads of advertising and affiliate schemes so he knows what he's talking about and, more importantly, he knows what to look for in investment opportunities.

Adaptive Blue is a company in USV portfolio whose primary revenue source appears to be affiliate links. Fred needs to understand why the links are under valued (though certainly not underpriced- they're much more valuable to Amzon than anyone else.)

This will all correct eventually, and it will be huge for those who are currently getting themselves in position to reap the benefits.

This seems obviously correct. But how do we really measure this? More importantly, how do we value it? What if I click through a link to the book, having heard about it before, and then hear from a friend about the book. It seems like the same problem that valuating billboard traffic - its above the line at some level.

Ads are not only used for conversion, they are also good vehicles for building brand awareness. Sometimes they're just fancy "Spite Fences"; look at the harbour skyline of any major city like NYC, Hong Kong or Sydney; you will see a row of giant buildings, each with an electronic manufacturer's name (Sony, Samsung, Panasonic, Hitachi, LG, etc.) They have the appearance of "head quarters", but look close .. it's most likely a rented spot. Why do they all congregate at that corner? why not spread somewhere else?

A good chunk of advertising, specially billboards, is actually "defensive" in nature.

Yep, I agree. Thats what I meant by the 'Above The Line' reference.

http://en.wikipedia.org/wiki/Below_the_line_(advertising)

I think that $25 for posting a link one time is a reasonable rate.

For Fred Wilson? No it's not. I don't know why he chooses to use Amazon affiliates, but the man's personal brand, the quality of his traffic, and his stature in the "community" allow him to negotiate directly with advertisers in an endorsement model.

His readership is the most coveted in all of the industry. Educated and affluent 30+s. Ignoring the personal brand for a minute, if Amazon wanted to compensate quality publishers with bonuses, it wouldn't cost them anything to see him in their matrices immediately. 40 purchases is very high. He would make bank pushing financial products, even more if he stooped low to gambling.

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