As the leading processor of bitcoin payments, we get an interesting look into how businesses and their customers use bitcoin to solve everyday business problems. One market segment that has started to adopt bitcoin is the affiliate network market.
How affiliate networks operate
Affiliate networks have been around since the start of the internet. They are a popular way for any online business to pay for digital marketing, and any internet user can earn some of that marketing budget by promoting and driving traffic and sales to the online business.
Affiliate networks are used in a variety of contexts, from large ecommerce merchants like Amazon.com to travel booking sites to gambling sites to Google Adwords. You can find a good example whenever you go to watch a video online. The ads you see at the start of YouTube videos are funded by an advertiser with a marketing budget and paid to YouTube. The earnings are paid out from YouTube to the content creators of the videos that generated the ad views.
As affiliate networks continue to grow, the way affiliates accept payments from their advertisers and pay out shared revenue to their affiliates is becoming more important.
Bitcoin = more advertising customers, more revenue in emerging markets
Most ad networks collect a payment in advance from the advertiser. Typical payment methods are credit cards and PayPal, which are expensive to accept and may not work at all for collecting payments from advertisers in emerging markets.
Bitcoin is far less expensive than credit cards, with zero chargebacks and no chance of identity theft. Because of this, bitcoin processors like BitPay can offer merchants services fees of on average between 1% - 2%, while credit card transactions costs range from 2% - 6%. Since credit card fees don't cover the merchant's own cost for losses to chargebacks or payment fraud, credit cards stack up even more poorly when compared to bitcoin.
Bitcoin payouts open up new affiliate bases
Most ad networks need to pay out their affiliates on a weekly or monthly basis for the shared revenue they have earned. Receiving those payouts can be difficult for affiliates, particularly those in developing countries. They may have bank accounts, but the ad network often won't have a cost effective way to pay them. If an affiliate lives outside the ACH or the SEPA zones for easy payments in the US and the Eurozone, for example, they are likely receiving a paper check by snail mail. In an age of digital commerce, this is a silly and frustrating limitation.
This problem of making frequent, small payments to affiliates in emerging markets has led affiliate programs to bitcoin as a solution. Since bitcoin is a universal digital currency, businesses can send it anywhere in the world without currency conversion costs, the slowness of physical checks, the unreliability of wire transfers, or the fees of PayPal payouts. For fast-growing ecommerce affiliate markets like Brazil, Argentina, India, and China, bitcoin presents an exciting alternative.
In a particularly striking example, Turkey recently blocked merchants and customers from using PayPal in Turkey. This led to a dramatic increase in advertisers and affiliates paying and receiving bitcoin, which has now become one of the most effective ways to pay online in Turkey.
By accepting bitcoin and paying out with bitcoin, affiliate networks are finding ways to directly, securely, and cheaply reach markets like Turkey's.
How affiliate networks are using bitcoin with BitPay
BitPay's payouts tool allows affiliate networks to take advantage of bitcoin as a payout method for their members all over the world. BitPay batches mass payouts so clients only have to fund once, pay a 1% fee, and be done. Affiliates receive funds within minutes of a bitcoin payout, instead of waiting for days as with traditional payout methods.
NOTE: 1800% growth in above image reflects growth in disbursement payouts, not a reflection of current growth in total payment acceptance volume.
We already work with several global marketplaces and affiliate networks that offer bitcoin payouts and accept bitcoin payments, and the customer feedback and traction has been great. As we continue to grow our merchant base, we'll use bitcoin to solve more pain points for these companies and give affiliates greater freedom with their payments.
Interested in learning more about how your affiliate network can use bitcoin to receive or send payments? Reach out to our team!