You’ve got a product and a website. You’d like to drive more traffic to your site, so you sign up with an online ad network (called an affiliate network). As long as the publishers on that network send you traffic that turn into sales, you’re happy to pay commissions to those publishers, right? Well, yes, unless you end up paying commissions on traffic that would have come your way organically.
The point of advertising on a publisher’s site is to have consumers already on the publisher’s site see your ad, be interested enough to click through to your site, then buy something. Although they may already have known about your products, the key was they didn’t come to your publisher’s site specifically looking for your product or company.
When consumers are looking for your site or product, they will either type in your site’s URL directly or come in through a search engine. If your site is listed high enough on search pages, you may not be buying search words through the search engines. Or, you may be buying search terms so your site will show up higher in the sponsored-search section of the results page. Either way, you are responsible for managing the results of those searches.
What you may not realize, though, is your publishers may be engaging in affiliate arbitrage. This is where they buy search terms applicable to your site or product, hoping they’ll make money on the spread between the commission you’ll pay them and the click costs they have to pay the search company.
In a general sense, you probably won’t mind publishers paying to generate traffic that eventually turns into a sale for you. And since making money through affiliate arbitrage is quite tricky, chances are you may not encounter this.
But if a publisher is unscrupulous enough to buy search terms that are clearly competing with your traffic, you can’t afford to be in a relationship with that publisher. For example, if your company is called Widget House and you are the only makers of the Super Widget product, you would expect people searching the Internet for Widget House or Super Widget to click through the organic search results, or sponsored results that you pay for, directly to your site. Now let’s suppose you’ve got a publisher that you’re paying commissions to through an affiliate network. If that publisher wants to bid on the search words “Super Widget” and “Widget House” through Google’s AdWords, Google will not prohibit them from doing so. If a consumer then searches for “Super Widget” and sees your publisher’s link at the very top of the page, the consumer may click through that link rather than clicking your own link. Although the consumer may then click the ad on your publisher’s page and ultimately buy from you, you’re on the hook for paying a commission that you never should have paid. You’ve just paid an unethical publisher a commission for stealing your traffic and rerouting it to you.
To avoid this pitfall, make sure your attitude toward affiliate arbitrage is spelled out in your terms and conditions with the network and publisher. Also, periodically search for your business and products to see whether any of your publishers show up in the paid searches.