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Why we’re shutting down our affiliate program

by Drew Strojny on January 19, 2012 / 20 comments

As you may know, we’re currently working hard on a responsive refresh of our website here at The Theme Foundry. Part of that refresh is a shiny new backend, powered by our upcoming Memberful product.

Change is exciting, and it provides an opportunity to re-evaluate all aspects of your customer experience. On that note, we’ll be officially shutting down our affiliate program on January 31st. Let me tell you why.

Why we had an affiliate program in the first place

When we first started selling themes we added an affiliate program for two reasons:

  1. Everybody else was doing it.
  2. The software we were using had the feature built in.

Two really bad reasons. On top of that, an affiliate program always felt a bit slimy to me (we’ll get to that in a minute). On the positive side, it does generate revenue for us almost every day, and we do have a few honest members of the program who do a great job.

Wait, you hate money?!

I was surprised last year when Brian Gardner of StudioPress mentioned on a panel we both participated in that their affiliate program generates somewhere between 30% – 50% of theme sales (24:23 in this video) in any given month. Our affiliate revenue percentage has averaged somewhere in the 5% range, which obviously makes it much easier for us to shut down the program.

To make this clear, we don’t hate money, but we do hate the fake endorsement, toxic sludge, and miscreant behavior that we’ve seen generated by the affiliate program. Let’s dive a little deeper.

Fake endorsement

My number one problem with affiliate programs and affiliate marketing is what I call “fake endorsement”. Plain and simple, we prefer our customers to do the talking when they aren’t getting paid for it, and plenty of our customers do just that.

When I’m making a purchasing decision, I want real reviews from real people, not endorsements from company shills. Not only that, it’s refreshing to buy from a business you know isn’t paying people to pitch their products. When you read a review or a positive tweet, you know it’s genuine, no research required.

Spam sucks

Jennifer is in charge of managing our affiliates, and she’s spent quite a bit of time chasing down spam generated by the program. This really bothers me. Our affiliate program is generating toxic sludge that’s polluting the interwebs. We don’t want to be part of that, even if it means a little less cash in our pocket.

Fraud

If you’re in the business of selling digital products, you know what chargebacks are. They’re a thorn in your side, because you almost always lose. Losing means refunding the money and paying a penalty of anywhere from $15 – 40 per incident. The credit card company will never side with you, because you’re selling a digital product. Even when it’s just a jerk who feels like stealing your hard work. But, you chalk it up to “the cost of doing business”, it’s a good problem to have right?

Jennifer’s the accounting wiz around here, and according to her, over 50% of our chargebacks originate from the affiliate program. The worst of the worst really. Someone trying to steal twice!

Strike three affiliate program, I don’t think we’ll miss you.

Update: We’ve had a few affiliates contact us about getting paid out for credit that has not yet met the program minimums. Yes, we will be paying out everyone with credit in their account. The program rules state a $100 minimum, but we feel paying everyone out is the right thing to do.

20 Comments

  1. Devin Reams

    Good read, Drew. We’ve been asked to think about affiliate programs but this helps sum up some of the potential downsides.

  2. Kristy Ewing

    Am really glad to see you take a stand on this issue and reveal affiliate programs for what they are worth – or not worth as the case may be. Again, you show that you believe in playing fair and that you have integrity, in addition to doing just plain great work. Well done.

  3. Steven Gliebe

    As a user of your affiliate program I’m sad to see it go, but your reasons for shutting it down make perfect sense. Gotta shed whatever is making business harder. Can’t wait to see your new site.

  4. M. K. Safi

    It’s true that not all affiliates are slimy scammers. But by shutting down your affiliate program, you’re firing those honest affiliates who’ve invested time and effort into promoting your content in an ethical manner. There are many legitimate and ethical ways to promote affiliate products. It can be traditional online ads, honest comparison reviews, tutorials, deal news sites, and more.

    When people were abusing AdSense, Google didn’t say, “okay, this is too nasty. We’re shutting it down.” They instituted policies and guidelines to clean up the place. And it’s been working out great for many people.

    Instead of shutting down, why don’t you make your affiliate program private/invite only and remove the low quality affiliates that you currently have?

    I make a living creating honest and valuable content around commercial WordPress products that offer affiliate incentives. That’s why it saddens me to see a popular theme shop, of which I’m a customer, set a bad example. It’s a loss to everyone.

  5. Drew Strojny

    Thanks for the follow up M. K.

    I believe we’re setting a good example, not a bad one.

    Like I said in the post, my biggest issue with affiliate programs is people being paid to promote or review products. It’s a conflict of interest. It’s extremely hard to give an unbiased, real review of a product when you’re getting a kickback on said product’s sales. If affiliates use “full disclosure” on every post / page where they have affiliate links, it’s at least transparent to the reader, but very very few affiliates do this.

    Re: Adsense. Advertising is the core of Google’s business, so finding a way to make it work is paramount. This isn’t the case for us as our affiliate program represented a small slice of our theme sales.

  6. RichConley

    It just goes to show that “The Theme Foundry” officers are capable of making a business decision – good, bad or indifferent – it’s an awareness. The alternative is unconscious leadership.

  7. Jeff Sebring

    Thanks for sharing your insights on this part of your business Drew. Those who are going to spread the best message about your products are going to do so anyway.

    I think it’s important to decide where to put attention. Some might not mind policing an affiliate program instead of working on improving products.

    My attitude is the same. There are some good affiliate marketers out there who provide value. That doesn’t mean I want to sort through the rest to find them.

    You can use the extra time to build Forge 4.0!

  8. Susan

    Sad, to see such a move, being an affiliate. I’ve been an affiliate manager myself and understand the concerns with spam or leads that cost you money, when the customer is not real, etc. Did your team try a verification process, collect EINs or SSNs and such to validate your circle of affiliates? Or perhaps only allow a small circle of affiliates to operate (perhaps the ones that bring you the most traffic)?

  9. Dan Reese

    While I’m a little disappointed, I understand your reasons. But what I wanted to say is thanks for paying out the fraction of money owed. I think that shows some class.

    Thanks and good luck.

  10. Immanuel Henne

    Hi Drew, I think what matters in business is trust. I always counted the most I think but now with the Internet trust plays a new role. The virtual world allows to hide behind … it makes “things” (or people) less personal and partially leads to less accountability. I don’t think that that’s always the case but my point is more that there is a higher risk in the virtual world as there is in the face to face world. What I always liked at your company is that I truly felt that sense of trust. Your posts and your video (I haven one some months ago) made be feel connected. What you are saying and how you do explain your business and do your business makes me believe in your company and in your good work. Thank you very much for that. Btw. I love your Themes the most of all in the internet. I look forward to more.
    Yours, immi (Immanuel Henne)

  11. Michael

    As a website developer I get incensed every time I contemplate the purchase of an individual premium theme or package of themes only to learn that “affiliates” make roughly 50% commissions. So I”m paying, let’s say, $300 for a theme package while in the back of my head I realize that if I buy the same package through an affiliate, I still pay $300 but the developer of that theme package receives $150.

    So just sell me the package for $150. I feel like I’m throwing my money away by buying through an affiliate relationship. And there is no value added either.

    I absolutely detest affiliate programs, yet as you point out in the case of StudioPress anyway, tremendous sales can be generated as a result of an affiliate program. But that sure doesn’t benefit me. So while it may be a dilemma, I do prefer your views on affiliate programs. Your abolition of it is a respectable decision.

  12. Drew Strojny

    Susan: We didn’t do any verification process, but we did consider keeping a small circle of affiliates (as most of the revenue was from that small circle anyhow). In the end, even if we solved the spam and fraud issues, the fake endorsement part of the equation just doesn’t sit right.

  13. Jason Lancaster

    I agree with M.K. – the solution to solving many of the problems you’ve listed isn’t to can the program. It’s better management.

    I have first-hand knowledge of running a fairly large affiliate management team (I was the manager at what is now Affiliate.com for a short time) and I understand that it can be a tremendous burden. Still, I think that there were some other solutions on the table.

    Making the affiliate program invite only, for example, would have solved or massively reduced the spam application problems. Instead of reviewing apps, Jennifer could have looked for websites the ethically reviewed themes and invited them to join…it’s a little harder, but it helps maintain quality.

    There’s also the fact that most affiliate program revenue is generated by about 10% of the affiliates, while the other 90% do nothing (or worse, cause trouble). It’s not unheard of to fire affiliates who don’t produce, or at the very least put them on probation.

    I know it’s easy for me to Monday-morning quarterback, and I know that I’m late to this party, but I’d hate to see you give up on an excellent sales tool. I’d like to see you guys be successful for a long, long time. ;-)

  14. Drew Strojny

    Thanks for the detailed follow up Jason, I appreciate it. We could have probably fixed two of the issues (fraud and spam) with better management of the program. I agree with you (and M.K.) on that point. But, even if we did, we’re still left with the fake endorsement problem. No matter how you slice it, being paid to endorse a product is a conflict of interest 99% of the time, and it rarely benefits the consumer.

  15. Peter

    Got a great template and lots of support from your site. Thank you and agree with your reasoning. Same applies in other areas, talked to a guy who boasts he gets 2-3 fab meals a week in the best restaurants as his wife does write ups on them. Good luck to him but the articles she writes aint worth the paper they are written on as far as I am concerned.

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