Affiliate Networks and Scarcity: Supply and Demand (More or Less)

water_molecules_lg.gifThe amount of inventory in ad networks created by publishers and affiliates is too high to sustain any sort of scarcity that could drive cpm prices higher for publishers or affiliates. However, this abundance of inventory creates a viable and incredibly valuable chunk of potential revenue for both the network and the partnering publisher or affiliate.

So, the affiliate marketplace is no longer constrained by a macro supply and demand metric. That is the key problem that many large scale merchants have been grappling with in their attempts to use the affiliate channel with any degree of success.

The limitless digital reservoir of content and inventory located in the existing ad networks will only grow exponentially as the web continues to expand more into our lives and subsumes every channel of offline content. Entertainment (mp3’s and torrented movies) and comparison shopping (Amazon, eBay) have already created a sustainable paradigm shift and every market will undergo these sorts of tectonic movements – and soon.

This includes the marketing market, which seems to be an illogical oxymoron, but in reality is a marketplace just as real as entertainment or shopping. Marketing offline has translated itself online in the form of our metrics (CPA, CPM) and business plans. However, that will change and online marketing (especially affiliate marketing) will begin to create new paradigms and languages which will prove much more profitable and effective for both advertiser and advertisee.

Offline content (whether music, movie, clothes, beer or marketing campaign) was easily proprietary in nature. You could easily set up walled garens to limit access (and distribution) of the “good stuff” to select customers willing to exchange a certain commodity of currency or attention. However, the digital nature of the web transforms that because what was once a tangible product are now digital H20 molecules in a rushing river or digital content (and that river always leads to a vast ocean).

Scarcity placed limits on choices for networks and for affiliates in the traditional economic setup. Now, those limits are rapidly vanishing. Affiliate marketing is in a very good place to help create the marketing equivalent of bittorrent technology.

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