| Very interesting example. This is definitely the reality, but perhaps you can teach an old beast new tricks. 1. In the hypothetical situation you provided, it seems that if your CPA is based on trial signups, the cost structure doesn't scale with the demand and value you get from using the SEO charging per trial. If you generate revenue on a conversion, why do you have a CPA based on a trial registration? Doesn't eBay pay per conversion? Perhaps this is a common practice. Can you renegotiate to a more reasonable cost structure, maybe get it right from the start or allow some flexibility if you and the SEO aren't aware of how the costs will play out? 2. If eBay is unhappy about the LTV per CPA, why not agree on a cost structure that more readily scales with varying LTV rather than blame the affiliate for not meeting a particular threshold? 3. There is an opportunity cost with firing an affiliate due to poor traffic quality for a month rather than keeping them consistently there. You might fire your SEO for one month's bad performance in a heavy-handed fashion, but what if Christmas, not just any old Christmas, turns out to be a legendary one. Bingocardcreator is the new hot fad for Christmas family games night and conversion rates are through the roof. If there was a cost structure that hedges odd months like October, (3-month moving average of CPA for example) your SEO would be around consistently, ready for a key opportunity. I see parallels here to most successful farmers that use futures to hedge their fuel costs and stabilize their revenue in varying weather and environmental conditions. It won't save you from an SEO not being economical, but it will make the costs less uncertain. 4. Helping an SEO affiliate optimize on an aspect that may or may not be under their control may be a big task, but already, providing a conversion table like you did is probably more than what was probably provided by eBay. 5. It is not economical to work with people to optimize their sites to hopefully be sending quality traffic again, since that is hard, non-obvious Sites don't have to do a lot, just be transparent and manage expectations above the bare minimum. Affiliates like everyone else don't like uncertainty mixed into their return on investment. Even if the nature is an uncertain one, you can still manage expectations to keep that fact transparent, and keep a cost structure flexible but clear enough to support. 6. might be against the interests or intentions of the site owner, and consumes resources which would be better spent optimizing the customer's own sites. Brilliant insight, this is probably a factor as well, but I care to believe that eBay still handled this case in a sloppy fashion. |
After we switch to any of your suggestions with dynamically scaling payouts -- which eBay did a long, long time ago -- we enter a world where the payouts, seen from a vantage point outside the system, resemble black magic. That is exactly this site's complaint. They have been judged by the black magic and they have been found wanting.
There is no way to explain to them what they've done wrong because it is an emergent behavior of the interaction been Google's rankings (black magic), their own site and strategy, eBay's business practices (black magic), the underlying economy (black magic), etc. There might very well not be any person in eBay who can explain, given any amount of resources to investigate, what this account did "wrong". But they can justify, with incredible predictive capability, that systemwide the black magic generates higher average LTVs for lower average traffic acquisition costs.
Any sufficiently advanced conversion optimization system is AI. (Blog post coming up on this.)