Dealing With Affiliate Pitfalls
by Joe Tracy

On March 15, 2000, eToys sent a letter to its affiliates stating that changes were being made to the eToys affiliate program. EToys was increasing the new customer finders fee from $5 to $10. Then came the bombshell — eToys was eliminating the commissions on all affiliate-generated purchases.

EToys has long been recognized as the leading online toy store just as Amazon.com has been recognized as the leading online bookstore. One of the main reasons eToys made it to the top was because of its strong affiliate program. When the program first opened, some affiliates were offered a 25% commission on affiliate-generated purchases. After several months, eToys changed the affiliate program commissions to "between 5-12%" depending on various factors. To "compensate" for the lower commissions, eToys offered a $5 reward for every new customer affiliates brought to eToys. Now, two years after its affiliate program started, eToys decides to dump commissions altogether.

On March 21, 2000, CNET published a news report titled, "E-commerce firms step back from early strategies." The second paragraph of the story stated, "Analysts say eToys' move represents the next step for many big sites: dropping contracts they once depended on to get off the ground because they became big enough to draw their own repeat customers."

The message that statement sends is that Websites can use affiliates to build a huge market base then dump affiliates without consequence. Imagine if tomorrow Amazon.com announced that it was canceling commissions from its affiliate program. 430,000 members of the Amazon.com affiliate program would be directly affected.

E-commerce businesses that build an empire based on an affiliate program should never forget those who helped make them successful - the affiliates. When you turn your back on those who help make you successful, then success will often visit another. Just look at what happened to Apple when Steve Jobs was forced out.

So what can be done to prevent large e-commerce sites from following in eToys steps?

1) Sign up for a competing affiliate program.

2) Send eToys an email (service@etoys.com) to express your regret over its decision to kill affiliate commissions. You can also call eToys at 1-800-463-8697.

3) Give your business to another online toy store that doesn't alter its affiliate program every few months.

One of the lesser-known toy stores on the Web is KB Toys at www.kbkids.com. With eToys out of the big affiliate picture, KB Toys now has the best toys-related affiliate program. You get $7.50 for each new customer you bring to them and 5-12% commissions of affiliate-generated product sales.

Another competing toy store with an affiliate program is Toys R Us at www.toysrus.com . They give you 5-12.5% on all affiliate-generated sales.

By switching to another toy store affiliate program, you will help send a message that affiliates are customers too and should be treated with respect and consistency, while being rewarded for loyalty.

This whole eToys fiasco is one that could have vast repercussions on the biggest affiliate programs on the Web. Many large companies could be watching eToys to see if this breakaway from commission giving is successful. If it is deemed successful then many major Websites may start dropping commissions, causing sites depending on affiliate programs to lose a lot of money. As an affiliate, you are a customer. As a customer you have rights. One of your rights is to take your business elsewhere when a company doesn't treat you fairly. By doing so you send a strong message to companies that if they don't treat you right, perhaps a competitor will treat you right.

Some eToys affiliates didn't waste time in leaving eToys. One of their bigger affiliates, eflorida.net , was bringing in several thousands of dollars in business for eToys a month. The Webmaster, Bob Miller, wasted no time in quiting the eToys affiliate program. He also drafted and sent a letter to eToys.

"Repeat customers are the essence of long-term stability in retailing," says one portion of his letter. "We at eFlorida.net work hard to develop customer loyalty and good service. If all eToys wants is new customers from it's affiliates, then you've rendered our customer loyalty valueless."

"I hope this isn't a trend in associate programs," Miller tells Webmaster Techniques Magazine.

Jeff Jameson, CEO of Inter-akt.com, has also deserted the eToys program after the affiliate change. His site, www.ramonamall.com was bringing in thousands of dollars a month for eToys. Here's what he said in his departure letter to eToys:

"Thanks for noticing the sales I've been bringing in to eToys. Unfortunately I've received notification from your company that they are changing the affiliate program in April and this has caused me and many other affiliate marketing professionals to look at other competing toy merchants. I know $10 per new customer would give me slightly more income in the short term, but we all anticipate it will be harder to make significant income on just new customer bonus in the future. I have decided that kbtoys.com with their compensation plan at $7.50 per new customer and 5% of sales to be the best place to continue my efforts in driving toy related traffic..."

Perhaps when more big-name eToys affiliates switch to a competing site then eToys and other large e-commerce companies will get the message that "if you depend on affiliates for your initial success then you should continue to reward affiliates after you've become successful."

Note: Just a year after this feature was written, eToys went out of business, filing for Chapter 11 bankruptcy. We're not surprised.

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Joe Tracy is editor of Webmaster Techniques Magazine and author of "55 Vital Web Marketing Strategies for Marketing Your Website."

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