The End of Affiliate Commissions?

The newest Microsoft Internet Explorer and Mozilla Firefox include a privacy feature that has a lot of webmasters concerned about losing their monthly affiliate commissions. "Private browsing" will prevent browsers from retaining browsing history, temporary Internet files, saved passwords, search history and — of greatest concern to webmasters — cookies.

Cookies are used by most affiliate programs to track which affiliate referred a surfer, so when they are erased by the browsers, affiliates no longer will receive signup credit if the surfer joins a site at any point in the future. As a result, the existing business model will need to adapt — and pronto because IE 8 and Firefox 3.1 are scheduled for final release by the end of March.

The purpose of private browsing is to prevent any information from being retained after the browser is closed — i.e. nothing is written to disk. Microsoft and Mozilla avidly promote that private browsing has many different use cases, such as researching a medical condition or shopping for a surprise birthday gift. But in actuality, there's only one major use case: porn surfing. In fact, tech bloggers already have dubbed the feature "porn mode."

Private browsing is not the default setting on any browser; users have to enable it by pressing a button or selecting it from a menu. When enabled, the browser launches a new session and copies all existing cookies into memory. Any new cookies acquired during the session are deleted when the session ends. This basically reduces all cookies to "session" cookies that expire when the user closes the browsing session. In terms of affiliate marketing, affiliates mostly will have to rely on users clicking on an affiliate link and signing up during the same browser session. If a user clicks on a link before beginning a private session and signs up during the session, the affiliate still will get credit. But if a user clicks on a link during a private session and signs up anytime afterward — for example, an hour later they open a new browser in either private or nonprivate mode, then sign up — the purchase won't be tracked.

IE and Firefox are not the first browsers to introduce this feature. Apple's Safari has had the feature for some time, and Google's Chrome browser includes a similar "incognito" mode. However, with a combined market share of 80 percent, the new releases of IE and Firefox will make a huge impact as users really begin to adopt the new functionality.

How fast will users adopt the new browser versions? Microsoft and Mozilla use auto-update mechanisms that are very effective. For comparison, looking back at the release of Internet Explorer 7 in October 2006, users updated at a rate of 1.2 million a day, reaching a 30 percent market share within five months. Assuming a similar trajectory, and also making the assumptions that one in three users will adopt private browsing while surfing porn and that 50 percent of purchases will be lost because of cookie deletion, we arrive at the following projections: By the end of 2009, affiliates around the world would lose 9.17 percent of their commissions. By the end of 2010, the loss would approach 12.5 percent.

So how will the affiliate-marketing model adapt to these changes? There are three potential fallouts:

The first is simply a market solution. Affiliates will continue working with sponsors, knowing that a portion of their sales are continuously lost. This already is happening on a small scale as a result of users who have manually disabled cookies. Sponsors even might compensate for the loss by raising their payouts.

The second possibility is that affiliates could pressure sponsors to convert to a publisher/advertiser model, which does not depend on cookies. Affiliates simply would get paid for ad impressions or clicks instead of actual signups. Many affiliates already are doing this with part of their ad inventory, and the trend could move considerably in this direction. This would complicate matters for many sponsors because the quality of clicks and impressions varies greatly, and sponsors would need to track their affiliates' performance constantly.

A third possibility is for affiliates to persuade their users to adopt their own browsers. One site doing just that is xPeeps. By promoting its own xPeeps browser — powered by — the site is able to provide its users with the same privacy features they want, while retaining all the affiliate credit. The HeatSeek software allows users to surf in private but preserves all cookies normally across uses. The relationship also helps xPeeps to increase user retention because the xPeeps browser always starts on the xPeeps home page, thereby continuously turning visitors into return visitors.

We understand that HeatSeek stands to benefit as a viable solution, but we also believe that this is an important issue that needs to be brought to light and examined.


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