6 ms·

eBay Tosses MCM to the Curb Like a Bad Sofa

72 points by karipatila 16y ago

robryan 16y ago
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.
patio11 16y ago
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 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...).
- qq66 16y ago
  wow, very insightful response.
- thesethings 16y ago
  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 16y ago
    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.
jacquesm 16y ago
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.
- deleted 16y ago
  [deleted]
- robryan 16y ago
  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.
jamesteow 16y ago
Damnit, I love MCM. One of the nicest designed sites out there.
deleted 16y ago
[deleted]
lwhi 16y ago
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.
hewnandhammered 16y ago
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 16y ago
  Are there other affiliate programs you can use?

72 points by karipatila 16y ago

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.

patio11 16y ago

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 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...).

qq66 16y ago
wow, very insightful response.
thesethings 16y ago
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 16y ago
  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.

jacquesm 16y ago

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.

deleted 16y ago
[deleted]
robryan 16y ago
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.

jamesteow 16y ago

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

deleted 16y ago

[deleted]

lwhi 16y ago

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.

hewnandhammered 16y ago

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 16y ago
Are there other affiliate programs you can use?