It is difficult to scale affiliate marketing like you can scale products, at least in a way which makes sense. For example, typical affiliate payouts for many products are in the 30% range. Many startups want to have many, many millions in revenue. Once you start talking about a million here and a million there you have to ask yourself what it is about the affiliate that the merchant can't bring in house.
In some cases, the answer is that the affiliate's aggregation capabilities provides value -- hotels would be a good example of this. In many cases, the answer is NOT pleasant. Sometimes the right hand doesn't really want to know what the left hand is doing.
The other alternative is somehow making a scalable business out of bundling lots and lots of little merchants together and providing scalable affiliate services to all of them. By that metric, Google is almost the biggest affiliate in history. (You can even do CPA bidding!)
Relatedly, Google takes huge, huge amounts of money from advertisers whose hands are less than clean. (Ringtones, for example: essentially 100% of these are rebill scams. Ditto diet, weight loss, acai berry, teeth whitening products, whatever the flavor of the month is.)
Think ScamVille times two or three orders of magnitude and perpetuated under the curiously unseeing eye of the most beloved tech company in history.
" Sometimes the right hand doesn't really want to know what the left hand is doing."
I agree. There's a level of plausible deniability with using affiliates. They can resort to some black-hat tactics and when they are caught, you can claim you didn't know, and ban them.
"Google takes huge, huge amounts of money from advertisers whose hands are less than clean."
I agree with this, while noting that almost all ad networks do. No one wants to admit it, but a lot of the internet was built on rebills and affiliate ads. Now Google is bigger and has some large clients to keep happy, so they push back harder on scams as they crop up. But as long as rebills exist, Google and others are stuck playing "whack-a-mole" with the latest flavor of rebill.
The latest FTC moves have put some pressure on affiliates, but it's just a matter of time before they come up with something else.
That's true. I think, the affiliate is a good start. Once you're big, it's silly to leave money on the table. Obviously, you have to be careful with the industry you pick, so it's big enough.
What I'm speaking, though, is about relatively small companies. I don't mean VC backed companies with well researched markets. There's a lot of kids dreaming about big buck doing #31337 clone of Flickr. It's basically a waste of time, in most cases.
You have to be careful with the real products. They have their drawbacks, too. You have to do the support, reply e-mails from the actual customers, sometimes forecast the demand etc.
Another thing I literally love in the affiliate industry is their experiments driven approach. The best test (it even rhymes!). That's what Google do obsessively, too. (see Marissa Mayer vs Doug Brown thread)
I think there's a lot to learn from the affiliate industry. It's silly to get into usual moralistic standpoint: usually they have less skills than a regular wizz kid, and, somehow, manage to make better money.
EDIT: It's also good to have a broader perspective. When you're speaking with a client directly and agreeing on the fee, you're doing affiliate, too.
In some cases, the answer is that the affiliate's aggregation capabilities provides value -- hotels would be a good example of this. In many cases, the answer is NOT pleasant. Sometimes the right hand doesn't really want to know what the left hand is doing.
The other alternative is somehow making a scalable business out of bundling lots and lots of little merchants together and providing scalable affiliate services to all of them. By that metric, Google is almost the biggest affiliate in history. (You can even do CPA bidding!)
Relatedly, Google takes huge, huge amounts of money from advertisers whose hands are less than clean. (Ringtones, for example: essentially 100% of these are rebill scams. Ditto diet, weight loss, acai berry, teeth whitening products, whatever the flavor of the month is.)
Think ScamVille times two or three orders of magnitude and perpetuated under the curiously unseeing eye of the most beloved tech company in history.