Amway enters Affiliate Space
Two weeks ago we shared our interest and enthusiasm for Facebook’s new ad platforms, not so much because of the targeting capabilities but because it had the chance to usher in a new era of performance marketing, person to person affiliate marketing. In many respects, Google paved the way for a key piece of Facebook’s new system. Getting people comfortable seeing ads alongside information once seemed off-limit to them, e.g., one’s inbox. With Facebook, instead of ads in an inbox, users see ads in their news feed, the idea though, being that these ads will occur when a friend takes a relevant action, perhaps someone has purchased certain music or dvd. No one doubts the influence of friends, but never before has a platform existed for friends to influence others in a trackable manner. If I purchase music that a friend did, we have a record of that transaction, whereas in the past, no one else knew of his influence. Facebook has the platform to make it easier for me to purchase the music my friends do, but it doesn’t have a way to reward my friends and other influencers. So much of what influencers do revolves around commerce, that by simply making it easy for people to buy what their friends suggest and take a piece along the way, Facebook, could end up building a much bigger business than anyone might think, anyone but Amway that is.
Amway, pioneered peer to peer commerce to the tune of billions in sales annually, but they for the most part have not grasped the web, using it to help protect what they have not as a tool for growth. I’ve long been critical of Amway, primarily because they don’t play by the accepted rules of affiliate marketing. With Amway, a new person will end up spending well over $100 to get on their way, purchasing high margin training materials, margin that the referrer receives no compensation for. A member receives credit only when someone changes their purchase behavior, and logically, they receive more credit when someone buys one of the company’s own products (as they have higher margins) and a smaller percent when someone makes a purchase where Amway acts as a large super affiliate and the referring member, the sub affiliate. They have succeeded and will continue to succeed because of the brute force nature of their approach and people’s never ending desire to see if such thing as a quick buck exists. The problem with their approach lies in one of its underlying principles, changing people’s behaviors. It sounds simple enough to have people reallocate money they spend on necessary items towards theoretically similar items, but those spending billions on advertising know that isn’t the case. Amway can influence what you buy and how you buy it only by leveraging a personal relationship, in a way refinancing one’s own equity.
About a week ago, news came out about the latest from Amway. As The New York Times reported, "the door-to-door peddler of vitamins and soap, wants to reinvent how Hollywood sells entertainment." The article continues by adding that "the owners of the multilevel marketing company are pouring millions of dollars into a new online store called Fanista (pronounced fa-NEE-sta)," which when visited has a beta user sign-in and a request for access. Like any site that accepts membership, this one too hopes you as the consumer will join, but unlike Amazon, eBay, or Netflix – three companies with strong affiliate ties, this one explicitly wants users to recruit their friends. Says site founder and hired outsider for the Amway funded project, Daniel H. Adler, "The distribution system for the entertainment business is broken," and that they are "pioneering a new model." Adler adds, in a statement quite similar to that issued by Facebook’s Zuckenberg upon explaining the power behind his social ads platform, "people make entertainment purchases based on the recommendations of people they encounter directly. That is the only authentic voice." The problem with this, though, is that the Amway model runs counter to the authentic voice. It comes back to the fundamental problem of relying on changing behavior rather than being rewarded for influencing behavior.
The challenge of Fanista is the same with trying to start up a social network today. It’s relatively quick for a user to set up a new profile, but getting people to become active users of that new profile isn’t as easy. Without hitting a niche that, until then remained underserved, offering an experience far superior than the existing, and/or entering the market at a time when the dominant player has stumbled, the chances of success will be very low. Fanista enters the market with none of these; it wants a lot from the users – picking out their favorites, generating unique content in the form of reviews, their friends, etc. for very little in return – 5% of their friends’ purchases. If Amway and company wanted to shake up the market, they should have sunk those millions into buying a company with users, and find a way to better facilitate peer commerce. Again, don’t try and force commerce. In a parallel to the model itself, if the site succeeds, it will do so by the founder leveraging his connections, like the NFL Network, who will change people’s behaviors because they don’t have a choice. In the end, I had hoped that Fanista would advance affiliate marketing, instead of setting it back and having it lumped in with multi-level marketing. Rather than focusing on the user like Google did to rule the world, they want the user to focus on them.
