Carphone Warehouse do it again – 50% lower commission on the 3G iPhone, but only if you don’t promote it!


Last year when the original Apple iPhone launched Carphone Warehouse thought they would fleece affiliates by reducing their commission by more than 50%. A classic example of a merchant treating affiliates with disrespect. I did a straw poll at the time to ask affiliates which merchant they would use to promote the iPhone. And out of 86 votes, 78 voted for O2, 5 votes for the Apple Store and only 3 for the Carphone Warehouse (and they were probably staff). So I'm surprised that they haven't learnt their lesson this time around with the 3G iPhone. Here's their email to affiliates:

The much anticipated Apple iPhone 3G is due to go on sale on Friday 11th July. Carphone Warehouse will be paying affiliates a fantastic £20 commission for all Apple iphone sales generated.

They will also pay commission for all Apple iphone orders from the 7th July that then convert to sales once the product goes on sale.

Commission is based on one important factor, affiliates are forbidden to promote this product under any means, including; links to the Carphone Warehouse Apple iphone page and pay per click. If any affiliate is found advertising the Apple iPhone, Carphone will not pay any commission on the sales generated. buy.at will be monitoring affiliate sites carefully to make sure there are no breaches. This is due to the very limited stock.

So let me get this straight, they will pay us a "fantastic" (i.e. 50% lower than standard) commission of £20 but only if we don't promote the 3G iPhone?!?!?!?! We're not allowed to link to it, or promote it in any way?? So all sales will presumably be "accidental" driven from customers who visit the Carphone Warehouse from generic banners. Why this radical (backward) approach to affiliate marketing? Well it's because of our favourite excuse reason, so called "limited stock". In other words, "this product is so popular that we don't need affiliates to sell it, thanks very much". As last used by Toys R Us and a few other retailers last Christmas with the Nintendo Wii. I wonder if the 3G iPhone stock will be as limited as the official launch last year which saw empty shops with none of the expected queues outside and loads of stock left over? What I'm listening to right now: Algebra – "Simple Complications"

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23 Responses to Carphone Warehouse do it again – 50% lower commission on the 3G iPhone, but only if you don’t promote it!

  1. Lammo says:

    LMAO – “We’ll only pay you if you don’t promote our products”… That’s it, cross it off – I’ve heard them all now! And I can’t believe that buy.at are going to be paying a member of staff to look out for those “sneaky” affiliates earning commissions by actually providing something of value by pre-selling etc.

    Well, I certainly won’t be promoting Carphone Whorehouse anytime soon – when do I get my cheque?

  2. The email I got yesterday from Tradedoubler about Carphone Warehouse was totally different. It said zero commission.

  3. Steve Allinson says:

    What makes me even more angry is the fact that the networks just sit back and let us get treated like this. All because they are scared of upsetting the merchant and losing them to a different network (which in Tradedoubler’s case seems to be happening more and more lately).

    The way the email from TD is dressed up to give the impression that the 50% commission is a good deal for us just adds insult to injury.

    Interesting to see that Buy.at have yet to mention the issue. I’m sure it will be exactly the same for them. Maybe they are hoping that TD will get all the flack and then they can sneak their email out a day later.

    Oh well let’s wait for all the usual lame excuses regarding reduced margins etc.

  4. Dazza says:

    It was Zero commission, but it looks like they’ve changed their minds today. At least they’ve put a positive spin on it – ‘we have a very positive update regarding commission payments against the new iPhone’.

    I’m glad I don’t promote mobiles, you guys must be fuming!

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  7. Bob says:

    “I wonder if the 3G iPhone stock will be as limited as the official launch last year which saw empty shops with none of the expected queues outside and loads of stock left over?”

    Nope, stock will be tight for up to a month, maybe longer.

    Why should any business go to a paid channel when there is scarcity and high demand? The whole point of a paid channel is that it can drive incremental business at a slightly higher CPA than a company’s core market, and where there is no possibility of incremental business then the first thing to get cut is obviously the paid channels.

    Think about this; why aren’t E2Save selling iPhone? Why is your commission lower for USB modems and prepay than it is for contract mobile phones?

    I agree that “Fantastic news, we’ll be paying you less and you can’t promote it” isn’t the way I’d have handled this (honesty and straight talk trumps most things, I find) but if they didn’t pay you at all you’d be bitching about conversion leakage, and if they paid you full contract commission rates they’d not make as much money as if they didn’t – and guess what, Carphone and every other merchant are here to make as much money as possible, not pay your mortgage off at the expense of their shareholders.

  8. Kieron says:

    Bob – you say “Why should any business go to a paid channel when there is scarcity and high demand?”

    Because I don’t think it’s right to just cut affiliates out of the loop when a product comes along that there is a high demand for. So we’re only good enough to promote the slower moving product lines? You’re having a laugh right? And why is there no possibility of incremental business for the iPhone from the affiliate channel??

    If you’re unsure of how affiliates react to this type of thing then just search the A4U forum and blogs for reactions when a lot of retailers pulled commissions on the Nintendo Wii last Christmas.

  9. Amin says:

    Someone should find the guy in charge of their affiliate program and give them a slap for being so stupid.

  10. Bob says:

    “And why is there no possibility of incremental business for the iPhone from the affiliate channel??”

    Because O2 and CPW both sold out of their first week’s allocation in around 2 hours using just their own websites, with no PPC or affiliate involvement?

    By definition incremental business is impossible.

  11. Bob says:

    “If youre unsure of how affiliates react to this type of thing then just search the A4U forum and blogs for reactions when a lot of retailers pulled commissions on the Nintendo Wii last Christmas.”

    A wise man once said, “there is very rarely wisdom in crowds”.

    I know where you’re coming from, it’s very frustrating to be unable to take advantage of strong demand through no fault of your own but there are always opportunities – I note Orange are doing an iPod Touch (which is at the end of the day iPhone minus a phone, and 1/3rd as thin as iPhone 3G, and 4x the capacity of the base model) with many 35 tariffs, and there’s going to be a crippling iPhone shortage for at least 1 month, maybe more…

  12. Kieron says:

    Bob – I find your comments regarding “incremental business is impossible” bizarre. I think Patrick from Blogstorm sums it up best:

    “Words fail me. How can they tell people who have probably been writing about the iPhone for 2 years to suddenly stop promoting it? What about sites that have hundreds or thousands of visitors a day arriving from search engines looking for the iPhone? You cant just turn this traffic off.”

    Original post at http://www.blogstorm.co.uk/iphone-3g-affiliates-to-get-20-commission-but-only-if-they-dont-promote-it/

    And you’re “rarely wisdom in crowds” statement is similarly showing a lack of understanding of the affiliate space. By your definition, just because a lot of affiliates agree on something it must be wrong?

  13. Winston says:

    Although I agree it is harsh, isn’t this just the nature of the business? Merchants have set marketing budgets and a business decsision will have been made knowing that the iPhone will walk out of the their shops thanks to Apple’s own hype machine. If they did it before then maybe they are basing this decision on past experience? Sure goodwill comes into play but maybe they don’t place a high value on that – ie their core strategy is TV promotion and advertising and affiliates just don’t add that many sales for them over and above this. Again, a business decision.

    Here’s hoping phone affiliates get some nice iPhone sales through another channel :) Im sticking to my PayG cheapie supermarket phone though :P !

  14. Kier says:

    I don’t think Bob is saying that because a lot of affiliates agree on something it’s wrong, his quote is pointing out that simply because a lot of people feel strongly about something that doesn’t make them right, that the sum of many opinions can often be wrong. Of course it depends what level you are analysing things because in contrast to scientific facts for example, opinions do actually affect economic reality. From a short term point of view it might make perfect sense for the company to cut affiliates out in this way to minimise costs, but due to the nature of affiliate marketing it might hurt more in the long run if the negative publicity causes a migration of affiliate traffic away from the program in retaliation. Anyway, I really posted because I like to see a properly structured argument more than anything else! As I see it the issue is fundamentally one of short term profit maximisation versus medium/long term reputation with your affiliates.

  15. Jacko says:

    It’s an interesting debate. Although I do feel sorry for the affiliates that had planned to promote the iphone as others have said it’s the nature of business.
    Unless you are dealing directly with the merchant you don’t have a contract with them. You deal with an affiliate network and the merchant has the right to pick what they want to promote through the network.

    CPW haven’t exactly handled this well but IMO affiliates can’t expect to be able to earn full commission on a product where demand is likely to exceed supply.

  16. Andrew says:

    Vote with your feet. Just cut carphone warehouse out of any other promotions you do..

  17. Bob says:

    “As I see it the issue is fundamentally one of short term profit maximisation versus medium/long term reputation with your affiliates.”

    Yup, and I happen to think that 50% is the right balance in this case. I also think the paranoid brand control Apple retains over its products is likely to have made signing off any affiliate activity on a case-by-case basis (as was required last time) an unacceptable cost.

    When life gives you lemons..

  18. Bob says:

    Kieron,

    Using Firefox 3 I get this when clicking “Reply to this comment”

    “Brians Threaded Comments Error:
    There is no hidden form field called
    ‘comment_reply_ID’. This is probably because you
    changed the comments.php file and forgot
    to include the field. Please take a look
    at the original comments.php and copy the
    form field over.”

    :D

  19. Fashion Boy says:

    Hoho..wot a laff…got this the other day..

    “Over the next few weeks Gadgetshop will be stocking both Nintendo Wii and DS hardware and software. Unfortunately we will be unable to offer commission on these items. Commission will be paid at the usual rate for all items that are in the basket not classified under the Nintendo category. We understand that it is not desirable to have products on our feed for which no commission will be paid. However, over the next few months we’ll be looking to use the same system to offer you varying levels of commission on certain items.”

    So it looks like they are gonna be doing this more often, must be the credit crunch factor, right, not greed?

    FB

  20. Dazza says:

    Re: Gadgetshop.
    That’s a joke! You can buy Nintendo Wii’s and DS’s anywhere now. There are plenty of other merchants paying commission on games consoles. All I can think of is that they got stitched up on the price by their wholesaler and have no margin left.

  21. Peter White says:

    The Carphone Warehouse aren’t exactly known for good service in any department.

  22. Kate says:

    Carphone warehouse and the gadgetshop are being short sighted, I feel sorry for those people that have dedicated time and effort into marketing these products. Not sure long term how this will work out for them surely all they have achieved is to sell their current stock – which they would have done anyway – and annoy their affiliates who market their other products and generate leads and sales… Like Dazza says maybe for the gadget shop it is a miscalculation somewhere along the line

  23. Pingback: Affiliates Upset Over iPhone 3G Promotion Ban | Cellphone Directory Mobile

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