Damon McCoy highlights the customer influx trends and basic characteristics of the affiliates operating within the three major online pharmaceutical programs.Now that we’ve looked at product demand and demographics, let’s take a look at how these programs attract new customers (see graph). On the Y axis is the number of new customers that the program attracts by the hundred thousands, on the X axis is time moving on.
GlavMed / SpamIt have a very similar-shaped curve. It’s somewhat regular; they have a consistently new stream of customers coming in. And Rx-Promotion has a similar kind of linear trend of this constant stream of new customers coming in. And if we you count the numbers, the GlavMed / SpamIt program attracts about 3,500 new customers per week, and Rx-Promotion program attracts about 1,500 new customers per week.
I think this is possibly the most interesting result of this study. It is interesting because it shows that this market for online pharmaceuticals isn’t saturated. In fact, they are constantly gaining new customers at this rate. And I think this explains a lot the behavior of the affiliates and spammers, and why the spammers want to make sure that everyone on the entire US gets spam email advertising these pharmaceuticals, because it’s effective and it works, and they continually gain new customers doing this kind of behavior. This kind of behavior is profitable for the affiliates, so they are going to continue to do this kind of behavior because, indeed, this market isn’t saturated, they are constantly finding new streams of customers, and that kind of advertising works.Now that we’ve looked at the customers, let’s switch to the affiliates and see how they operate. Here is a breakdown of the revenue of the affiliates (see graph). On the Y axis is the percentage of revenue for the affiliate program that each affiliate contributes, and on the X axis is the percentage of affiliates that takes to achieve that percentage of revenue for the affiliate program.
As you can see form the X axis, just like in every other kind of multi-level marketing schemes, there is a small number of very successful affiliates, and there is a large number of affiliates that are not so successful. A lot of them just completely fail at trying to be affiliates for these online pharmaceutical markets.
And in fact, 10% of the affiliates account for about 80% of the total program revenue across all three programs. So, this is another interesting finding, it seems that there is just a small number of very successful affiliates driving a lot of the sales. So, if we could potentially find some way, possibly legally, to disrupt this 10% of the power affiliates that do a really good job of earning for these programs, perhaps that’s another way to undermine them and cause them to be far less profitable.Let’s look at these affiliate commissions in a slightly different way (see graph). On the Y axis is the density, on the X axis is the estimated annual commission rate for the different affiliates. So, GlavMed and Rx-Promotion have kind of similar curves here, and SpamIt has a kind of bimodal distribution. By the way, the little dots on the lines are the median annual income for affiliates. As you can see, for GlavMed and Rx-Promotion it’s about $350. For SpamIt, with the bimodal distribution, it’s about $500 in one of the modes, and about $30,000 in the other mode.
Let me explain why GlavMed and Rx-Promotion follow mostly the same curve. Their type of affiliate program is termed as Open Affiliate Program, meaning that they don’t really do a lot of screening for their affiliates. They’ll let pretty much anyone walk in and try to be an affiliate for them. And that’s somewhat the beauty of the affiliate program structure: the affiliate program doesn’t really incur much cost in allowing more affiliates to join the program because the affiliates only get paid on the commission basis. So, if the affiliate is unsuccessful they don’t get paid, there is no real risk associated with bringing new affiliates.
And the affiliate program has this problem that it is hard to tell a priori who are the good affiliates, who are the good spammers that will drive lots of traffic to your site. So, by being an open program you can just let them all try their hand at being affiliates for your program. A lot of them, as this graph shows, are going to fail. Some of them at the long tail are going to succeed brilliantly.
And SpamIt was more of what they term a Closed Program, where they did a lot more background check for due diligence. Either you had to be avowed by someone else who was a good affiliate, or you had to have some kind of record of being a good affiliate yourself. And indeed, this shows that that does a better job of attracting the power affiliates to your program. But again, still it’s difficult a priori to tell who are going to be the successful affiliates for your program even when you do this due diligence screening. These are just the quick numbers, and as you can see there is this large failure rate as in most multi-level marketing schemes.