By now, we all know the value of working with a trustworthy network. Unfortunately, many networks and affiliates continue to lose substantial revenue to networks that do not pay.
Given that the performance marketing space is highly litigious and constantly undergoing regulatory change, it may be impossible to eliminate risk, but there are some ways to substantially decrease risk and potentially recover some ground. Adhering to or taking action on the following list should help you do just that.
“Where there’s smoke, there’s fire”
You’ve likely heard the expression “where there’s smoke, there’s fire.” Well, if you don’t feel like getting burned, you should probably shy away when you see some clear warning signs (smoke). When trying to evaluate whether there is a potential risk with a given company, look for some clear signs of danger.
First and most importantly, you need to take a look and see whether there are others who are not being paid out. Not being paid on time means not being paid at all (after all, until you receive it, it’s not late – you simply haven’t been paid). I’m not suggesting that you hit the panic button if you read one random anonymous story online – we all know that there is a high level of competition online and companies will stop at nothing to damage each other publicly, so beware. However, if you do happen to discover that several others may be having payment issues with the same company, you should never make the assumption that it won’t happen to you. As a matter of fact, you should assume that it will happen to you very soon. Let’s stick with the “where there’s smoke, there’s fire” expression – when others are not being paid, that’s like seeing a neighbor’s house burning to the ground. At the least, it’s time to start taking defensive measures.
Second, many networks and affiliates fail to follow or properly understand what is happening in the legal world. If a company is engaged in (or has recently gone through) litigation, you need to understand how severe it is or may be. The first step is to look for companies who are or have been engaged in “serious” litigation! Sometimes companies are squabbling over an amount that either one of them can cover without any serious consequence – it may seem petty to the rest of us, it may really even be petty, but they have their reasons and these aren’t the cases you need to worry about.
Other times, a company is being hit by a heavy-handed player (a large company or a federal governing body) – when this happens you need to perk up and focus your attention on what is happening. The industry rarely yields a fairytale story; if a company is about to go out of business or sees that they are going to lose a devastating lawsuit, no company is going to give you a heads-up that they are going out of business. More often than not, they’ll either pack up whatever they have remaining for themselves and call it a day (as we’ve seen happen on a few occasions recently) or fight it out and lose more than they can afford to.
Within this line of thinking, you need to understand that a settlement is not a good thing, it’s simply not as bad as it’s alternative. While settlements are obviously better than their alternatives, they are not “good things.” When it comes to the term settlement, the corporate world has done a good job of making an ugly thing look pretty. When a company reaches an agreement or settles, they do so at a price. For affiliates, that means that their (the defendant negotiating a settlement) freedom may come at your expense. Most settlement agreements within our space require that a company deliver reporting and compliance items on their network, which they otherwise would not have to deliver. This may compromise a network’s (or an affiliate’s) privacy and ability to do business. What’s more is that companies may not only pay a flat fine, they may have to pay a percentage of their earnings in perpetuity (meaning they may need to cut out a piece of their revenue for as long as they exist). When this happens, it decreases their bottom line and may lead to them folding up shop one day. It’s hard enough for a lot of businesses in our space to succeed without any hurdles – when you add heavy fines, percentages of future revenue being cut and some strict reporting guidelines, it can easily spell the end.
Finally, the basics tend to get overlooked at an alarming rate. Here are some quick points that should serve as a reminder whenever you’re considering working with a company.
- How long have they been in business? A track record should be the first thing you look for.
- Is it an established company or something being run out of a basement / dorm room? How a company sets up can be suggestive of whether they’re in it for the short term or long haul.
- Have they been recognized by any major bodies within the space or external to it? While it’s nice to make a websites “top list” that doesn’t qualify for much when you’re paying for it. Being recognized outside of our immediate space can tell you a bit.
- Is the company on a positive trend? In recent years, my company has been accompanied by a few others in our space that have made the Inc. 500 list as America’s fastest growing private companies (we ranked 40th in 2011). Making this list or any other lists that examine the health of a business can help.
- Is it too good to be true? If what you’re seeing is just too good to be true (payouts are far too high) and there is no logic (there’s often a good explanation for high payouts) whatsoever – be weary.
Finally, if you do feel that you are in trouble, you should always consider obtaining legal council. My company is represented by the best in the business because we invest in limiting risk. If you’re owed $50k and can’t get paid, look at your potential legal costs as an insurance policy. Let’s assume you pay out $3k in legal costs before recouping what is owed to you. That only equates to 6 percent of what you were owed, which leaves 94 percent in your pocket. (Each situation will call for different measures of course but give it some thought before making your decision).
Remember, it’s not about whether you were unlucky enough to get burned or not. You have the ability to create your own luck more often than not.
Be safe and be smart.