If you have visited any of the affiliate-related websites or read any of the various ebooks about affiliate marketing, youve almost certainly seen references to the thorny subject of link theft. Indeed, so contentious is this issue that it is frequently discussed in forums and a whole arsenal of third party weapons has evolved to help defeat it. But is the problem really as serious it is made out to be
As an affiliate, it is almost impossible to quantify the amount of commission you lose through deliberate link hijacking or other, less malicious, forms of commission losses. You can accurately measure the number of referrals you make to any particular merchant or product and your sales stats will tell you what percentage of these referrals result in sales. But you have no way of knowing how many sales occur in a manner that somehow deprives you of your commission.
Even merchants, who see the other side of the business relationship, can only guess at the true extent of commission losses. When a merchant reviews his overall sales stats he will see two types of sales: those on which an affiliate commission was paid and those for which there is no known affiliate. Within the former group, the majority will derive from genuine affiliate referrals, but a percentage will be the result of link theft. Similarly, within the latter group, a proportion will derive from the merchants own promotional efforts and the remainder from other forms of losses, including bypassing. But thats as far as the analysis goes. There is no accurate way of isolating link theft from genuine referrals and, likewise, no way to determine the level of other losses disguised as direct sales. Even a merchant who undertakes no active promotion of his own cannot be sure that all of his un-attributed sales arise out of referral losses. Some of them may come from unsolicited search engine listings or inbound links from other non-affiliated websites.
However, an interesting experiment was conducted by Bogdan Ravaru, author of The HTML Security Report, in which he created the conditions necessary to accurately measure link theft. After launching a new software product, using a newly established ClickBank account, he signed himself up as the sole affiliate. By not publicizing his affiliate program, he could be certain that there would be no other legitimate affiliates.
He then used paid advertising to generate a small but rapid influx of web traffic to his sales page. He was pleased with the sales results - 13 immediate buyers for his product - but was astonished to find that 46% of them were referrals from affiliates other than him. Clearly, 6 of the 13 buyers were already ClickBank affiliates who had used their own affiliate accounts to secure illicit discounts on their purchases.
Of course, this is just one isolated experience. But other marketers have conducted their own trials and tend to agree that the overall rate of commission losses may be as high as 35%. Clearly, the problem is serious enough to have a significant impact on affiliate income.
There is a consensus of opinion among marketers that link theft is worse on products aimed at the online marketing community - the suggestion being that marketers are knowledgeable about the affiliate process and thus better able to manipulate it to their advantage. There are also large variations in theft levels between different types of affiliate programs.
Affiliate networks, such as ClickBank, are much more susceptible to hijacking than standalone programs. This is because of the greater statistical likelihood that any given referred prospect will already be a program member. Few prospects would go to the effort of joining a new affiliate program, merely to secure an illicit discount, but many would be tempted by easy savings from an existing program membership.
Before ClickBank introduced its current hoplink procedure, it was possible for a link thief to misappropriate the commission on a purchase, simply by re-invoking the hoplink process using a manually entered URL. The ease with which a dishonest affiliate could type and steal made it an attractive target for casual thieves.
But this loophole was eliminated as part of a range of security enhancements introduced by ClickBank in August 2002. And referral security was further tightened during the October 2003 upgrade to the hoplink system. Although these measures do not constitute perfect solutions to the ongoing problem of link theft, the progressive enhancement of the referral system is helping to deter the casual hijacker.
Merchants can also play a role in protecting their affiliates against referral losses, both through education and through the use of protective technologies.
A small minority of merchants employs the somewhat drastic step of screening every purchase and validating the referring affiliate (if any) prior to the delivery of the product. The validation occurs in real-time, using a database of registered affiliates. If the referral comes from a known affiliate, the product is delivered in the normal manner. But if the referrer is unknown - as would be the case when a link theft occurs - the buyer finds herself in the embarrassing position of explaining how the referral occurred. Unfortunately, the technical challenges in implementing and managing such a system with ClickBank are likely to exceed the benefits it would deliver.
If all else fails, the affiliate can take her own steps to protect and survive. The simplest of these involves only minor changes to the HTML code used in the web pages containing referral links and other techniques, including the ever-popular link cloaking, are in widespread usage.
But, despite the considerable selection of protective technologies employed by ClickBank, its merchants and their affiliates, none is foolproof. For example, a determined link fraudster can defeat every known defensive system simply by deleting her ClickBank cookie file prior to making a purchase. If an affiliate is sufficiently savvy and committed to gaining an undeserved commission, nothing will stand in her way. Therefore, as with any business problem, we must avoid the temptation to become obsessed with referral security at the expense of our other profit-making activities.
About The Author
Copyright Tim Coulter. All rights reserved.
Tim Coulter is a consultant and software developer who helps netpreneurs to harness marketing technologies.
He is also the author of ClickBank - The Definitive Guide The Ultimate ClickBank Tutorial & Reference Manual.
Choosing the right price for your digital products is one of the most critical, yet difficult, aspects of your business strategy.
Most merchants understand that over-valuing a product kills sales. It is also fairly well understood that under-pricing cuts the unit revenue without any guarantee of a significant gain in sales volume. But few people are aware of a third (but equally important) pricing observation; that compromise pricing can be as harmful as either of the other two blunders.
To understand why this is the case, we need to examine the principles that lie behind effective pricing strategy. In general, merchants adopt one of two key philosophies when they price a product. They either set the price at a low level (which produces a low margin but high sales volume), or they choose a high price level (which trades off volume in order to gain margin).
These two approaches are known respectively as penetration pricing and pricing for profit. The former strategy is typically used by new competitors in a market, or by existing retailers that need to quickly establish a position of dominance after a product launch. The latter technique is favored by established businesses with mature products, where the objective is to earn the maximum profit yield from an existing dominant market position.
It is clear that, whether the strategy is to price low or high, going too far in either direction can be self-defeating. But mid-way pricing is equally ineffective, as it compromises both strategies; it unnecessarily discounts the product without doing so sufficiently to generate a significant improvement in volume.
As a vendor of digital merchandise, you are at a distinct advantage over traditional merchants, since there are no marginal costs associated with your business. Regardless of how low you choose to price your product, you are still guaranteed to show a gross profit on every sale. In contrast, a merchant of physical goods has real fulfillment costs (product manufacturing, damaged and unsold inventory, storage, shipping and handling) that impose a fixed lower price limit below which each sale represents a loss. This advantage affords you great flexibility in your pricing, but even if you use this flexibility to pursue a penetration pricing strategy, you should still be aware of the risk of counter-productive price-cutting.
Some ClickBank merchants use an experimental approach to pricing. Their aim is to establish the most profitable price through trial an error. Although this is understandable, even logical, it can be a customer-relations nightmare. You should think carefully before over-pricing a product and subsequently being forced to reduce the price in order to stimulate demand. Nobody likes to return to a website and see that a product they already purchased is now being offered at a lower price.
The opposite approach is to steadily increase prices from a low level, and is usually less of a cause for concern. Some merchants launch their products with a deliberately low introductory price - a benefit that they emphasize in their sales pitch. The time-limited, or volume-limited, nature of this technique can be a powerful incentive to buy, and it also allows the merchant a trial period in which to observe sales behavior before setting a definitive price to meet his longer-term strategic objectives.
About The Author
Copyright Tim Coulter. All rights reserved.
Tim Coulter is a consultant and software developer who helps netpreneurs to harness marketing technologies.
He is also the author of ClickBank - The Definitive Guide The Ultimate ClickBank Tutorial & Reference Manual.