This month at Affiliate Summit West, I participated (along with other industry leaders) in a keynote panel, “View from the Top: Performance Marketing in 2019,” moderated by Robert Glazer, Founder and CEO of Acceleration Partners. The session covered a variety of challenges and opportunities facing the performance marketing industry. One of our more “heated” conversation topics focused on exclusivity.
What is Exclusivity?
There’s two common forms of exclusivity in this industry:
Contractual Exclusivity
The first is where it’s stated in the contract that a brand will work with only one affiliate provider. It’s typically not clearly defined but if the brand tries to work with someone else and they are considered a competitor, the provider can contractually prevent the brand from working with that company.
Non-circumvent Exclusivity
The second is what’s called non-circumvent. If a brand forms a relationship with a publisher while working with one provider – and then later switches providers, they can be prevented from migrating their partners over to the new provider. A non-circumvent prevents this from happening because the first provider exerts ownership over those affiliate relationships.
How exclusivity affects the tech industry
I feel these forms of exclusivity are anti-competitive and possibly illegal – imagine Google trying to demand some kind of exclusivity in their agreements and what governments around the world would have to say about that. Companies that put these clauses in their contracts are afraid of their competitors and use these clauses to prevent their clients from leaving them. They literally can dictate how their client do business on the internet.
Exclusivity requirements started in the late 90’s and early 00’s, when networks fostered the partnerships between brands and affiliates. At that time, nobody knew what or who an affiliate was – so you went to a network who already had a pool from which to dive in. But today? Every brand has 20 -30 partners that drive 95% of the volume. These top partners are common across similar brands – in other words, there are no partnerships that are exclusive to just one network.
The reality is – most people just don’t think in terms of exclusivity within the MarTech or online marketing industry. For example, If I contract with Salesforce or Marketo, there’s nothing in that contract that says I can’t use other similar tools. On the flip side – can you imagine a network telling a brand that if they sign up, they won’t work with the brand’s competitors? Of course not.
But that hasn’t prevented these terms and conditions still being included in contracts today. Further cause for concern is some of these legacy networks have threatened to sue their clients over these exclusivity clauses. Fortunately, many brands have negotiated these clauses out of their contracts – but not all have done this and their ability to migrate their performance marketing channel is at risk.
Exclusivity is earned
At Impact, we do not believe in exclusivity clauses. In fact we believe that they are harmful for the industry. Companies and most C level executives don’t want to be sued for breach of contract. And quite frankly, litigation benefits no one. We have heard time and again that Impact has better data, better tools and better controls. Brands that have had programs on multiple solutions wind up consolidating and choosing Impact. Exclusivity is something to be earned, not mandated in a contract.
Too often I hear that a brand wants to work with Impact but they fear retribution over their contracts with competitors. The way I see it – if you provide great service and great technology, you’ll be able to earn and retain business. If your pricing isn’t right and you’re not willing to negotiate, or you’re not keeping up with other companies’ innovations – then you aren’t able to earn exclusivity. I’m more of a free market person. I’ve been in this industry for 20 years, everything I think about and do is to grow the industry because I know if I grow the industry – if what I do benefits the industry as a whole – it’ll benefit Impact.
You can watch the full keynote and hear what the other panelists had to say about exclusivity here at the 24:53 mark:
