Will Cashback Sites Mean The End Of Traditional Affiliate Marketing?

As with most things on the internet, the affiliate marketing landscape is ever changing.

This throws up both opportunities and dangers galore for anyone looking to make money from the commissions to be earned by referring customers to businesses. And for my money the biggest opportunity of the last two years has come in the shape of cashback sites.

The idea behind a cashback site is very simple. Businesses are promoted in the usual way, but instead of the website owner pocketing any affiliate commissions earned from sales or leads, the site either gives some or all of its affiliate earnings to its members (those that give all of the commission to members charge a membership fee).

So if you join a cashback site, you can effectively obtain a discount on everything you buy through it. And that includes purchases from High street retailers like Boots and Marks & Spencer, car insurance, holidays and more.

And their success has been phenomenal. When BBC Radio 4’s Moneybox featured them back in May, 2006, Rpoints was quoted as having 70,000 members. And although cashback sites are reluctant to give out current membership figures, here’s a few numbers to give you some idea of the size of the market today.

Rpoints has completed over eight and a half million cashback transactions to date.

Greasypalm has given its members over £6.2 million (and counting) in cashbacks since its launch in 2003 according to its website.

More than 165,000 members made purchases via Quidco in November and December, 2007, according to Netimperative, which quoted Paul Nikkel, founder of Quidco as saying, “Christmas 2007 will be seen as a watershed – the year when savvy consumers realised that it really does pay to shop online.”

Word of mouth alone will ensure membership numbers continue to grow.

If you are someone who has just got £80 cashback on your car insurance or who gets 5% cashback every time you shop online with your favourite High Street retailer, why wouldn’t you tell your friends and family to do the same?

The logical conclusion then is that everyone who shops online will eventually do so through a cashback site.

So where does that leave the likes of me?

Virtually all of my content websites contain affiliate advertising from which I earn money.

Will increasing numbers of my visitors use the information I provide only to then login to a cashback site to make the purchase? Effectively leaving me out of pocket?

In short, will cashback sites mean the end of traditional affiliate marketing and traditional affiliates like me?

And should I be building my own “me too” cashback site to cash in on the future of affiliate marketing?

I personally think not. Indeed, my own view is that cashback sites will become the victims of their own success.

Because the logical conclusion is that everyone who shops online will NOT do so through a cashback site.

And here’s why.

Affiliate marketing at its best delivers incremental sales or generates new leads for businesses. Cashback sites can deliver both, but will increasingly deliver neither.

In fact, they are already doing the exact opposite in some cases. They are delivering existing customers who use Cashback sites to purchase goods and services that they would have bought directly anyway. And for purely online retailers, that could eventually mean giving every customer, including repeat customers, a discount on every purchase.

Given the current state of the UK’s retail market and the increasingly competitive nature of doing business online, it’s unlikely that many businesses can afford to offer everyone who shops with them anything up to a 15% discount on everything they buy (and pay an affiliate network for the privilege of doing so). It just doesn’t make economic sense.

The reason why everyone who shops online will NOT do so through a cashback site is because businesses simply cannot afford for them to do so. Not for the long run anyway.

As cashback sites increasingly fail to deliver incremental orders and instead effectively take a cut from non-incremental orders, you can expect retailers to start to shy away from them.

Remember when ASOS boss, Nick Robertson, called time on his company’s affiliate programme because of “grubby little people in grubby studios growing income at our expense, getting in the way of genuine sales“?

By genuine sales, Nick presumably meant sales that ASOS would have got anyway. Given the increasingly non-incremental nature of cashback sales, I dread to think what choice words he’d reserve for cashback sites.

My own view is that the pendulum will swing back in favour of traditional affiliate sales where incremental sales and leads are delivered.

And that’s why I’ll be continuing to build the best content websites I can, providing value to both my visitors and the companies who pay me commissions on sales to my visitors.