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Industry veterans will tell you that affiliate marketing is about relationships. So when the head of the Google Affiliate Network (GAN), J. J. Hirschle made a brief announcement that Google planned to shutter the network just shy of its fifth birthday, it shouldn’t surprise anyone since relationships have never been Google’s strong suit.

What was surprising is how Google chose to shut down the network. Hirschle’s post was the only public notice.  Advertisers who hadn’t read the official blog only received notification 48 hours later via email. As of today advertisers and affiliates who login to the Google Affiliate Network are not greeted with any kind of notice in their dashboards that the network is closing. Things were so “business as usual” that many affiliates I know wondered at first if it was a hoax.

Google’s blasé handling of the situation might be expected if the network wasn’t active. But it was full of many large companies, including Netflix, Orbitz, Fandango, Acer, GUESS, Target, Sam’s Club, Wolverine Brands, Under Armor, Patagonia, Kohl’s, Citibank,and Discover. Also affected were several local Seattle companies: Destination Lighting, Bag Borrow or Steal, Big Fish Games, and Rhapsody (disclosure Rhapsody is a current client). Over 750 advertisers were active on the network as of this month.

So why the decision? It comes down to timing, scale, fit, Amazon, and legal liability.

Timing: Google came to affiliate marketing late. When it bought DoubleClick in 2007 the affiliate network Perfomics came with it. Google took almost a year to integrate the tools into its UI and launch GAN, making it the third largest affiliate network behind Rakuten Linkshare and industry giant Commission Junction.

Scale: At its core, affiliate marketing was designed around building relationships with thousands of small publishers. It’s a high-touch model, and Google has never shown real interest in such models.

Fit: Given the scale issue, Google’s decision to launch an affiliate network was always perplexing. Google originally positioned the move as a way to give customers two tools to manage ads on a Cost per Acquisition (CPA) basis (GAN and Conversion Optimizer). Guess which product won? As Per Peterson, co-founder of Impact Radius, points out Google has always had a love/hate relationship with affiliate marketing. The Wild West mentality of the industry constantly ran afoul of Google’s own algorithms. And it’s hard to ignore the irony that last year’s rollouts of Penguin and Panda specifically targeted many affiliate sites as being too spammy. Yet some of these were the same affiliates that GAN was trying to work with.

Amazon: Google may not be overly concerned about competing against other affiliate networks. However, it’s definitely concerned with competing against Amazon. GAN simply never enjoyed the same affiliate adoption enjoyed by Amazon’s affiliate program. Often credited with bringing affiliate marketing to the mainstream, Amazon has so many Associates (its name for affiliates) in its program that Amazon ads on blogs have become mainstays. The popularity of Amazon’s program is due to the extensive tools they built out with Amazon A-Store. GAN tried to imitate that availability by rolling out affiliate units on Google’s Blogger platform last summer, but it was too little too late.

Potential Legal Liability: After Google purchased Performics, it sold off the very profitable search marketing side of Perfomics business because it was a conflict of interest. Despite divesting itself of Performics, owning an affiliate network still left Google open to some potential legal minefields:

  • They penalized affiliates on one hand while courting them with the other
  • Advertisers not on GAN raised suspicions that Google played favorites with the product listing ads of those on its network in search results
  • The Amazon Tax issue impacted GAN by opening up Google to conflict with state legislatures it simply didn’t want
  • The FTC presented an even greater problem. First, affiliate tactics often run afoul of FTC rules, especially with their increased focus on privacy. Google already faced FTC fines of $22.5 million since they circumvented Apple’s privacy policy and allowed the insertion of ad cookies, including affiliate cookies. After that ruling, GAN retroactively compensated affiliates whose referrals were not correctly tracked by the network.

For Google, as long as it owned an affiliate network, it was only a matter of time until it faced a more costly run in with the law.

Despite the shutdown of GAN, Google is still courting affiliates. Hirschle clearly indicates in his post that the CPA model is still a priority:

“Affiliate publishers can continue to earn AdSense revenue through the AdSense network. And marketers can take advantage of other CPA-oriented Google tools like Product Listing Ads, remarketing and Conversion Optimizer to drive valuable online sales and conversions. These areas are growing rapidly and we’re continuing to invest heavily in them.”

However, owning an affiliate network isn’t on the agenda. Google doesn’t need the liability or headache of running an affiliate network to get CPA offers from brand advertisers in front of consumers. It already has many ways to integrate ads into search results or push those ads to publishers via Adsense. Plus, rumor has it, they are expanding their attribution model in Analytics for advertisers. Everything an affiliate network does, only at scale. Touchy-feely stuff not included.

Angel Djambazov is a GeekWire contributor. He is the former editor-in-chief of ReveNews and the owner of Custom Tailored Marketing.

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