MasterCard Massacre Paves Way for Industry Leaders – By Laura Miller

by Shawn Collins on May 7, 2010

Once again, affiliate marketing was jolted by the swift moves of outside forces. The sudden mass exodus of MIDs (Merchant ID’s) by MasterCard swept many advertisers just in time for the New Year.

It had been rumored that the FTC (Federal Trade Commission) and Credit Card Associations, which encompasses Visa and MasterCard, had been meeting to develop guidelines that would regulate our industry. These guidelines have yet to be published, so it was the abruptness by MasterCard which caught many industry players off guard.

The number of advertisers and/or actual MIDs that lost processing is a direct result of a few “bad apples” that unfortunately bled across the compliant and ethical advertisers. There was no advance notice passed down from the bank to the advertisers. The advertisers typically found out after they stopped receiving new orders.

The advertisers that MasterCard targeted were the trial plus continuity merchants. The continuity piece of this business model was the portion that caused those advertisers the most heartache, as they could no longer bill any customers that had already enrolled into their programs.

These advertisers count on a certain rebill percentage and retention rate in order to recoup their marketing costs. Since they were unable to process rebills, most customers were written off as a complete loss.

So, now what?

We change. We adapt. A few years back, many networks eliminated incentivized traffic. Those publishers evolved and learned new promotional methods. Advertisers who were reliant on this traffic source learned how to fully optimize the other traffic types those networks accessed.

More recently, the FTC came out with new guidelines. Publishers and advertisers, once again, complied and changed to meet these new requirements.

This latest blow does not dictate the death of trial products or the end of subscription-based programs. This simply opens the doors for those advertisers and publishers committed to this industry.
The short-term players who saw our industry as an opportunity “to get rich quick,” will fade. Those that are committed to success will prevail.

Many of the affected advertisers are processing again. Several merchant processors have instituted “best practices,” which are guidelines that these advertisers must follow to get new MIDs. These “best practices” are a foreshadowing of the predicted guidelines that will be published by the Card Associations, so it is best to begin optimizing according to these changes now.

This is an extremely exciting time for anyone looking to enter performance-based advertising. It is going to be those companies who look at the changing times as an opportunity to gain a competitive advantage that we will see as leaders for years to come.

Laura is the Director of Advertising for and leads Clickbooth’s team of Advertising Consultants.

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