So, What’s Wrong With The Affiliate Marketing Industry?

11/09/2017 08:57 am ET
Pixabay

Depending on whom you talk to, affiliate marketing is either at the peak of its game or succumbing to countless serious flaws. Critics of this marketing method point to its high costs, uncertain results, and enormous potential for fraud. Supporters insist that if done right, affiliate marketing is one of the most profitable forms of publicity for publishers and their clients alike.

So is affiliate marketing really broken? Yes, but only in the sense that it’s imperfect. This form of marketing still has enormous potential to create value for publishers, clients, and audiences alike, but only if performed through a transparent, reliable platform. Armed with blockchain technology, marketing platforms like RefToken are making affiliate marketing more secure, effective, and affordable than ever before, allowing publishers and their clients to use this method with confidence.

What’s Wrong with Affiliate Marketing?

Let’s say that a company signs a contract with a publisher who promises to bring new customers to their website. The company agrees to pay the advertiser for every new visitor. The publisher then starts releasing ads for the company and tracking how many people click on those ads. At the end of the month, the publisher reports that the ads received 10,000 clicks. But the company claims their website only received 100 new views. Should the company pay the publisher for 100 views or for 10,000?

While this disparity may seem large, publishers frequently report larger numbers of conversions than their clients do. This can happen for a number of different reasons, including:

Affiliate Fraud- Publishers may falsify their conversion numbers, such as by programming bots to click on their ads repeatedly. Clients may refuse to pay for such fraudulent results, but only if they can prove they aren't legitimate.

Client Fraud- Clients are every bit as capable of fraud as publishers are. They may lie about the number of views they have received from a marketing campaign in order to get out of paying publishers for the full cost of their services. If publishers can prove that their reported conversions are legitimate, they can demand payment for all of them.

Interpretation Issues- Publishers and clients may disagree over conversions even when neither of them has done anything wrong. Perhaps the publisher defines a conversion as any time that a user clicks on their client’s website, while the client only considers it a conversion when someone stays on the site for at least 30 seconds. Disagreements like these are the most difficult to resolve, which is why clear, detailed contracts are essential in affiliate marketing.

Traditionally, publishers and clients have relied on paid intermediaries to deal with these problems. Intermediaries can research potential clients and publishers and evaluate them to ensure that they are trustworthy. Once a publisher and a client agree to work with one another, they can hire an intermediary to investigate claims of fraud, as well as to interpret their contract and resolve disagreements. But intermediaries are imperfect, and frequently make errors in interpreting contracts, recognizing fraud, and evaluating potential publishers and clients. They are also expensive; paying intermediaries can take up as much as 40 percent of advertisers’ budgets, raising costs and making affiliate marketing less accessible.

How Can Blockchains Solve These Problems?

Blockchain technology is a method used to store information securely. It involves tying each record to all the others in a chain, so that if one piece of data is altered, every other part of the chain changes with it. This makes it easier to detect when data has been tampered with, dramatically reducing the risk of fraud and inaccuracy.

Blockchains have the potential to resolve the most serious problems in affiliate marketing, and marketing platforms like RefToken are using it to do just that. In particular, this technology is key to developing:

Streamlined Networking- Platforms like RefToken use the blockchain to provide publishers and clients with detailed information about each other. The two parties can then evaluate each other and begin working together without the help of a skilled intermediary. Because the blockchain can’t be altered, both parties can be confident that all the information they consider is accurate.

Automatic Fraud Detection- RefToken has developed programs to interpret the conversion data it receives, distinguishing bot activities and other forms of fraud from real conversions. It then authorizes payment only for true conversions. This prevents publishers from defrauding their clients and allows all companies to be more confident about using affiliate marketing.

Smart Contracts- Besides preventing publisher fraud, platforms like RefToken prevent clients from failing to pay their affiliates by creating contracts that enforce themselves. “Smart” contracts are programmed with specific instructions on how and when to authorize payments for publishers. These instructions are embedded in the blockchain, making it impossible for clients or anyone else to alter them. This ensures that publishers are paid fairly and promptly for their work.

Clear Records- Because their contracts are automatically enforced, publishers and clients are less likely to have disputes. But if a dispute ever does arise, the blockchain provides accurate records on all contract terms and past activities, making the disagreement easier to resolve.

Digital Currency- RefToken is using the blockchain to develop its own cryptocurrency tokens with a fixed value. Clients must purchase these tokens; the blockchain then automatically transfers them to publishers in exchange for conversions. This measure speeds up the payment process and ensures that clients are always able to pay for the services they receive.

If these efforts are successful, blockchain technology has the potential to largely solve the problems with affiliate marketing. With luck, this method won’t stay broken for long, but will become more secure, affordable, and effective in the coming years.

This post was published on the now-closed HuffPost Contributor platform. Contributors control their own work and posted freely to our site. If you need to flag this entry as abusive, send us an email.
CONVERSATIONS