Getting Burned on Affiliate Net Terms
Your affiliate net payment terms are a hidden tax. How to mitigate.
This week I’m discussing a more obscure part of affiliate marketing. Net payment terms.
As an operator of 100+ content brands, we have 1000s of affiliate relationships. Literally have seen it all.
I never used to pay attention to net payment terms… now I do.
Most affiliate partners look at things like EPC and commission percentage as the most important drivers. While these are important, net payment terms are often overlooked.
This can lead to serious cash conversion cycle problems, particularly for rapidly growing publishers with capital starved content brands (most of us).
This affects everyone too, not just content sites. Email marketers (newsletters), Vloggers (YouTube, TikTok), and paid arbitrage strategies.
Think about it this way….
You publish a new piece of content today. Outstanding!
Even if you have near-instant distribution and make sales this week, your brand partner doesn’t just send you a commission check (with few exceptions).
Most brands want to see if that referral sticks (e.g. no refunds) so - at best - you are stuck with Net-30 payment terms. Meaning, you’ll have to wait 30 days to get paid.
That’s at least 30 days then until you can reinvest (or distribute) those funds.
But some brands have CRAZY net payment terms. Net-60 is fairly, common, but Net-90, 180, or even 360 is possible!
On top of this, brands might have net payment terms AND your affiliate network may have their own terms.
In a previous post I covered some of the top affiliate networks, highlighting Shareasale as a great network partially due to their shorter (Net-20) payment terms.
But some networks are more tech-enabled platforms and just let brands set whatever terms they like…
As an example, I found this in my Impact Account last week…
This amounts to an interest-free loan for the brands. Add in the current inflation tax and this can be a SERIOUS drag on organic growth. Imagine getting paid in today’s dollars… next year?
To add insult to injury, VC advice to startup founders right now often includes, “increase your net payment terms”.
In the meantime, you still have to pay for your content operations. Hosting bills, tech infrastructure, writers.
Imagine asking your writers for Net-90 terms?
Even if you are a solo creator, that’s time you are expending money up front with a longer payback cycle. Time is money.
What Can You Do About it?
Most businesses actually die from not having enough cash flow.
If we then want to mitigate this existential risk, address the cash conversion cycle is key! Net payment terms is a great place to attack the problem.
Here are some ways I’m addressing the issue:
Negotiate better payment terms. Most affiliates focus on the commission %, when just having more favorable payment terms is often better for your business.
Introduce sponsored or prioritized placements. We still maintain editorial control, so it’s not sponsored content per se, but we offer “content prioritization packages” to brands who want content coverage now. What to get 5 placements or new brand focused articles this month? Pay to skip the line. Try for up front payment, but even taking payment “upon publication” is a lot better than waiting for net payment terms.
Prioritize brands by net payment terms. Do an inventory of your top partners and sort by the shortest net payment terms. Refocus your content strategy around these brands.
Sell Direct Ads. Offer fixed ad placements on your sidebar, footer, native in-content, etc… Set your own payment terms, ideally with all or some ad space “booked” up front. For WordPress site owners, tools like AdSanity (affiliate link) can help with this, or marketplaces (any tech stack) like BuySellAds. Ezoic users (affiliate link) can also integrate selling and ad serving directly with their tech stack so the ads appear seamlessly with little setup required.
Another great option is to sell your own products. Easier said then done. If you sell courses or digital products, this can be a great option.
Maybe even add some dropshipping or print on demand. That said, an ecommerce business with physical inventory (FBA, wholesale, etc…) introduces its own cash conversion cycle problems.
Other Great Newsletters I Recommend
Check out my reading list!
Richard Patey’s Clickthrough Newsletter: Affiliate ecosystem specifically for funnel builders.
Entrepreneurial Investing: Scott Oldford is building a modern digital holdco and sharing some great lessons.
A Media Operator: Well developed deep dives into the media & publisher landscape.
Mushfiq’s The Website Flip: Great resource for niche site flippers and operators.
Thanks for shoutout for Clickthrough - just cross-posted this there :)