How Many Middle Men?
Sep 2nd, 2008 by msdanielle
I think the first time I heard about affiliate marketing was when I was recruited for my first job as PPC Manager. “They’re making how much money?!” was my initial response to finding out how affiliate marketing worked, and how much money was going into the company of my soon-to-be boss and mentor. At that time, there were a handful of affiliate managers we worked with, along with the major search engine platforms and a few ad networks. Nowadays it seems like there are as many affiliate companies and ad networks as there are merchants.
Now I’m not claiming to know how many affiliate companies existed in 2006 versus now, since I don’t know that number. All I know is I’m continually learning about more and more. Last week I ran across an article at adotas titled “Can 314 Ad Networks Really Thrive?” which touched on a recent concern of mine. Author Michael Sprouse addresses the growth of the internet advertising management space and wonders if the number of networks will scale down in the near future. His conclusion is No, which for the most part I do agree. However, the one thing that wasn’t addressed in his article, which is a growing concern of mine is, How do we manage the growing number of networks that were born out of our need to scale down management?
My conclusion is that we will need middle men to accomodate the middle men. In other words, let’s say I am a publisher trying to push sales to Merchant F. That makes me an affiliate, or a middle man. The affiliate company, Network C, tracks my data and dispenses the proper commissions to me on behalf of their client, Merchant F. That makes Network C a middle man.
Now, there are an endless number of publishers and an endless number of merchants (or advertisers, in the case of ad networks), both sides of which are growing exponentially every day. How can a small business attempt to manage a large scope of merchants and/or advertisers with the growing and ever-changing landscape of the networks. In the grand scheme of things, they are still in their infancy.
When thinking of the magnitude of online advertising and affiliate marketing, there are so many networks out there that are succeeding that, as Michael Sprouse says, “As long as there is still opportunity for networks to exhibit a fuller value proposition, then fast consolidation … is not necessarily a certainty.” In short, we’re going to continue to see more networks because there’s no reason why we won’t. I believe that beyond that, we will see an additional layer of middle men emerge from this same need that created networks, which is basically a need for additional management. Sprouse notes that “networks were born out of demand in the marketplace,” to which I add, network management companies will also be born out of great demand. It looks like this in my head:
The Norm Now
The Future
In an age where segmenting and growth is as infinite as it is possible, I think this growing class of middle-middle men will be born out of need. Affiliates and publishers will need management companies for their networks, since one company alone might need multiple affiliate networks, ad networks and exchanges to maximize ROI. How many middle men will this industry see? Only time will tell.
[Tell us what you think about the growing nature of online advertising and affiliate marketing. I find it absolutely fascinating!]
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Ms. Danielle,
First of all, thanks for reading my article on Adotas - and for writing your comments above. You raise some very interesting points, many of which I agree with. Many networks right now do act as network managers already, lending credence to where you think things will go more and more in the future. For instance, if a network themselves cannot fulfill the merchants’ requests or needs (as you illustrate above), they likely will turn to other networks to fulfill them (better that option from a network’s standpoint than in having the merchant work directly with the other network). In short, you are correct in stating that there are middle men who manage middle men who manage middle men even to some extent now, and if the number of networks doesn’t drastically decrease (as I predicted it wouldn’t anytime soon), then you’ll see this more and more to your point. There will come a time when there will be a handful of “power” networks that do not need to turn elsewhere to fulfill a merchant’s needs, because they will have many more capabilities (built or bought) in-house - but the industry isn’t there yet by and large, except for a few companies that do offer a wide range of competencies.
Mike
hi mike, thanks for dropping by and leaving your comments. you address a good point…how many network are really out there, and should we expect that number to go down or up. i’d like to be able to envision these “power networks” in action. i wonder who might be putting a business plan together these days to take the middle man to the next level
Interesting take on affiliate networks. Where did you work when you managed PPC campaigns.
i was working for a small firm in LA. this is just my thoughts on how i see the industry … food for thought …
Nice take on affiliate marketing. When I saw the title Middle man … I thought this would be the review of OIO Publisher …
When there’s too many middle-men involved, it messes with the entire marketing campaign. First of all the costs increase and takes more time as it prolongs the procedures.
I don’t like that there are all these different networks. It makes it difficult for a part-time small-scale publisher to compete because of the amount of time that needs to be spent learning about signing up for and making use of the different networks. Not to mention then checking stats on the different ones and making minimum payout levels for different networks.