Commission Junction Needs to End the EPC Insanity
Today I started working with InsureMe’s Commission Junction (CJ) advertiser account for pretty much the first time. Over my few years here at InsureMe I have been able to somehow avoid working on our CJ account, but the time has come for me to learn how to navigate the site and start handling our publisher relationships.
So far I have found the CJ process to be interesting, and once I got over being annoyed by the slowness of the CJ site, the process was pretty slick.
But with that said, Commission Junction has managed to build its business on a fundamental metric, which from both an advertiser and merchant point of view, is flawed. That metric is EPC, or earnings-per-click.
Flawed Logic
The premise behind EPC is a good one – publishers can easily identify the advertisers who will make them the most money by looking at their EPC number. The higher the EPC, the higher their earnings will be with the advertiser. This is solid logic, if all publishers were created equal…but they aren’t.
The truth is different publishers send different types of traffic in different ways. If a publisher sends traffic with low conversion, it doesn’t mean the traffic is bad, it just means that less of it converts. The traffic that does convert can be great traffic – and both publisher and advertiser can be happy with the traffic being sent. That is, until the advertiser starts to see a drop in their EPC…
How EPC Forces Advertisers to Drop Publishers
As I’ve said in the past, EPC commoditizes advertiser’s offers in the Commission Junction network. As advertisers, we know that the primary way our offer will attract new publishers is by having the best EPC in our vertical. This is especially true for a vertical like insurance, where coupons, sales, data feeds and the like don’t exist…so out-marketing our competitors with special features is not easy to do. This means advertisers like us have to aggressively monitor and work to improve our EPC to remain attractive to good publishers.
Unfortunately, working to improve our EPC means removing publishers (called “expiring” in CJ) who send too many clicks that don’t convert. Never mind if the publisher and the advertiser are profitable from the traffic that is converting – if the click-to-lead conversion is poor, we can’t afford to keep the publisher on our program. So we end up ending a good relationship so we can continue to attract new relationships…seems rather counterproductive, doesn’t it?
This Is a Huge Problem for CJ (Even if They Don’t Realize It)
The EPC issues is going to become more and more of a stumbling point for Commission Junction as larger advertisers start to get fed up with the CJ model and start building their own in-house affiliate programs.
After spending time with our CJ account today I can tell you that managing EPC is not fun, and I had to end relationships with a number of affiliates who could have been profitable for us, but had poor EPC. This is not only annoying for us as advertisers; it is also something that CJ should be concerned about. You see, when we expire relationships to protect our EPC, CJ stops making commissions on those relationships. I would not be surprised to hear that advertisers managing EPC through the expiration of publisher relationships costs CJ hundreds of thousands (if not millions) of dollars a year. Yeah, most relationships that are ended are with small publishers, but thousands of potential transactions never happen because of relationships that end prematurely.
What’s even worse for CJ, if InsureMe is forced to expire a publisher because of poor EPC, that publisher may find and join our in-house affiliate program. So in the end, we are still getting the traffic, the affiliate is still getting paid, but now CJ isn’t making a dime.
Time for Something New
Overall, I think CJ’s intrinsic focus on EPC is a terrible thing for advertisers, publishers and CJ…but for some reason, CJ continues do develop a culture that focused on the management of EPC. I think this is an error, and I think CJ’s slow demise will continue if they don’t find a new way to quantify quality advertiser/publisher relationships.
What would that new metric be? I’m not sure to tell you the truth. But I do think that CJ’s insistence in blocking meaningful communication between advertisers and publishers would be something to reconsider. It could be possible that by opening communication between advertisers and publishers and publishers and other publishers could develop a CJ culture where the wisdom of crowds, not the wisdom of EPC, help make advertisers and publishers more successful. I know I would rather listen to a fellow publisher for advice than rely on EPC to tell me which program I join.
Anyway, that’s just how I’m feeling today. As publishers and advertisers on the CJ network, let me know your thoughts on EPC. Am I making too big of a deal about this? Is EPC an awesome thing for publishers, or does it frustrate you as well?
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Comments
Wow - James, this is one of your best posts. Alot of the advice for newbies is to look for high EPC advertisers on networks. I had never considered that EPC may be as much a factor of how picky the advetiser was - as in how well traffic converted. Also, CJ does seem to put more emphasis on recruiting new affiliates than retaining old ones. The old adage - it's easier to keep an old customer (or affiliate I guess) than get a new one - doesn't seem to apply there.
Posted by: Quoteus | April 3, 2007 06:56 AM
HERE HERE James! That has been the most frustrating point for me through the entire CJ management. I have let CJ know on several occassions that this is a large frustration. Although the account managers are empathetic, I think their hands are tied. I've suggested on a regular basis that this be improved somehow but that seems to go unheard. Thank you for the post.
Posted by: apes | April 3, 2007 08:17 AM
Very interesting post and nice seeing a merchant or am saying how they feel about something CJ is having them do. :) One thought to something you said:
"if InsureMe is forced to expire a publisher because of poor EPC, that publisher may find and join our in-house affiliate program."
That publisher/affiliate will most likely only do that if the merchant or am takes the time to explain to them why exactly they are ending that relationship with them. If they are not told why it is happening....believe me there will be no warm and fuzzy feelings towards that am or merchant because they won't know that it was done without the merchant or am wanting to do it. Publishers/affiliates for the most part I think have elephant memories and are not happy when they have been terminated or expired) (psst... ending your relationship sounds so much nicer lol ) but an explanation and a willingness by the am or merchant to want to maintain a relationship with them will inspire them to join your in-house program in many cases.
Posted by: Kathy | April 3, 2007 12:41 PM
Hey Quoteus – glad you enjoyed the post. I am a strong believer in building lasting relationships with affiliates…and I’m afraid CJ can make that hard to do. When an intermediary doesn’t allow you to access contact information easily, it really reduces the ability to for both merchant and affiliate to build anything lasting.
Thanks for the comment April – there seems to be a lot of rope for tying hands in the CJ office…hopefully they’ll wake up before they accidentally hang themselves with it.
Good point Kathy. I’d agree that communicating with good affiliates with low EPC and letting them know why you are expiring them is important. I’ll make sure I do that whenever possible.
Did I say expire? I mean “end the relationship.” :)
Posted by: James Omdahl | April 3, 2007 12:59 PM
Interesting post. Responded at BumpZee discussion.
Posted by: Vlad | April 3, 2007 01:16 PM
Make sure you check out the comments on this post going on over at Bumpzee by clicking here.
Posted by: James Omdahl | April 3, 2007 01:23 PM
As a publisher I very quickly realised that EPC is very shaky and unreliable number.
Especially when you consider that often bot clicks will be counted in the EPC calculation, which further muddies the water.
I agree with you, it's a reall shame that it's all advertisers have to go on.
Posted by: oneninesevensix | April 5, 2007 04:34 PM
Perhaps, one of the solutions CJ could adopt when calculating EPCs, is a top & tail effect by not including the extreme figures towards both the top & bottom end of individual affiliate EPCs to establish a more realistic figure. This could be anything from 10% to 20%. Or maybe looking at the mean EPC. Or analysing the the top 20% percentile to provide a figure of what EPC is acheivable. Some of the above may prevent affiliates being rejected from programs who are generating sales but with a lower EPC.
I would like CJ to bring back trend graphs for EPCs illustrating two graphs. One showing a daily scale & another a rolling 1000 click scale along one of the x-axis, which if a trend falls unusually below a recognised threshold, it may help identify problems like lost tracking.
"The truth is different publishers send different types of traffic in different way"
Very valid point. Potentially there could be different EPC's based on those derived from brand bidding, direct to merchant from recognised ppc search engines & those from registered affiliate sites using product feeds or normal directory listings (again adopting any of the following effects - top & tail, mean, percentile). All in all providing greater data for affiliates & advertisers to make their own inferences from.
All in all I am in favour of EPCs being published, and experienced affiliates will know how to interpret these. However some information is better than no information.
The data is readily available for networks to provide more meaningful EPCs varying on the forms of traffic being generated. Maybe we should be grateful that at least some networks provide this information, whilst others are reluctant to publish these and/or merchant contact details.
Posted by: Moose | April 6, 2007 06:57 AM
Wow Moose...great ideas and a well though out comment. I know that CJ is aware of this post, and has been reading comments, so we can only hope they are proactively working to find more accurate/granular ways to display EPC information, just as you describe.
Posted by: James Omdahl | April 6, 2007 09:59 AM
James, as a CJ advertiser I think this is a great post. I've also pondered the importance of the EPC .
There are other examples of not so productive ideas within the program. In example, the way CJ organizes top performing banners limits the profitability of others. To illustrate, top performing banners, rated by EPC, appear on the top of our banner list, while others, with low EPC, stay near the bottom never to be plucked out by potential publishers. Affiliates, be sure to fully explore your options before selecting a banner add for your site. Some of the newest and most innovative ideas are hiding at the bottom of banner lists. Bottom listed banners don't appear to have made as much money as banners listed on top, but it doesn't mean they have less potential to make money for you. Try to give them a solid chance
Visit AIG Travel Guard in Commission Junction. Search under Travel/Accessories. We are currently offering a $16 fee for every sale originating from a banner add or text link on your site!
Thanks again, James.
Matt
Posted by: Matt | October 16, 2007 09:44 AM