Why the Performance Fee Model Is On Its Way To Extinction – Part 3


This article was originally published in PerformanceIn.

Over the last few weeks we’ve looked at the history of the network performance fee model, why it’s problematic to advertisers and five trends that are quickly leading this model down the path of extinction.

In this third and final post, we’ll look ahead and see what the future is likely to hold for performance fee structures and what networks need to do to say relevant and useful to the changing marketplace.

Future Gazing

Here’s what I see when I look at the future of performance marketing fee-structures:

  • Continued decoupling of pricing for technology, publisher development and client services. More fee-for-service relationships will involve itemization of costs and resources so brands can make informed choices.
  • Tracking and payment services for large partners will continue to become commoditized and will be based on a fixed fee or a dramatically reduced performance fee.
  • Networks and platforms will need to differentiate on innovation, technology and client service. R&D will be driven by client demand.
  • Transaction fees or usage fees will be based on program revenue, volume, platform capabilities, etc. rather than a one-size-fits-all “performance fee”. I see them also being re-labeled as “platform fees”.
  • True “performance fees” will be aligned to the sourcing of unique relationships and program management that drives quality growth. For example, partners recruited directly by the retailer are subject to one fee structure. Partners recruited from or by the network or technology provider may be subject to an additional or premium performance fee. This is similar to the Impact Radius marketplace model.
  • Performance fees for individual partners will not be paid in perpetuity. There will a cap or a time period at which point the fee structure will switch to a fixed or usage based model, more in line with traditional sales.

There is massive opportunity for a whole new group of partners to redefine and drive the performance marketing industry into the future. However, realizing this potential will require the existing players to embrace change and accommodate what the market is asking for. It also calls for more client-focused innovations and for companies to have the right team and resources in place to manage these next generation programs.

This all goes beyond technology, publisher development and account management and extends out to creative, business development, outreach, and client services – and each of these segments will need to demonstrate tangible, attributable results.

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