Web Marketing Strategy Update

There are a lot of emails going around at the moment promoting a new service for product sellers and affiliates called PayDotCom. Here’s a taste of the marketing blurb:

I am sure you have heard of ClickBank (R)

They are a great marketplace but limited to many restrictions to sell products or earn affiliate commission…

Well, there is a new FREE marketplace to sell any product you want. Yours or become an affiliate for any item in the marketplace.

This site is going to KILL all other marketplaces and I bet in the next 3 months EVERY SINGLE online marketer will have an account…

I must confess PayDotCom is interesting concept, and fills a gap in the market. But whether it will “KILL” other marketplaces remains to be seen.

Personally, I doubt it.

I actually set about writing a piece to explain the key differences in PayDotCom and ClickBank, but whilst going over the site for more details I came across the table below and decided it would be far easier just to post it so you can see the bulk of the information at a glance:

*There is no set-up fee to open basic PayDotCom Vendor or Affiliate Account. You are only allowed one free Vendor Account to sell products. To sell multiple products you must pay a onetime $29 lifetime activation fee. ** If there is no affiliate, then the Vendor pays the fee in full.

PayDotCom charges the following processing fees per sale:

As indicated above, the PayDotCom’s fee is split between the vendor and affiliate responsible for the sale (if no affiliate, the full fee is charged to the vendor) and automatically deducted from affiliate commissions.

PayDotCom’s fee to the Affiliate is $0.50 to $1.50 for each transaction (Based on the sale price of the product/service sold.) The Vendor’s account will automatically deduct this amount from your commissions each month.

If you’re an affiliate you probably don’t like the sound of that. But the problem for PayDotCom is trying to make the cost of what is basically an “add-on” service attractive to vendors in comparison with ClickBank.

PayDotCom wants to position itself as a better option than ClickBank by claiming it offers more features and is cheaper.

From the site:
Other companies charge $1 plus to 7.5% of the sale price. All you pay is our fee plus the cost of your PayPal or StormPay fees.

So how does the service actually stack up in terms of cost?

At first glance it seems very attractive, as can be seen from this table on the site:

But let’s take a look at what you will be paying in total once your PayPal (2.9% + $0.30) or StormPay (6.9% + $0.69) fees are included.

Using PayPal:

Using StormPay:

When using PayDotCom with PayPal, the fee on the sale of a $50 product is $4.75. The fee on a $50 product sale through ClickBank is also $4.75.

PayDotCom is only cheaper for products priced over $50.

Note: These examples are for US users only. For non-US accounts, PayPal rates are 3.4% + $0.30:

(In addition, PayPal also charges non-US users a small fee to withdraw funds. Varies with currency exchange rates but in the region of $0.50-0.60)

However, the examples above don’t take into account the situation where the fee is split with an affiliate.

When there is a referring affiliate, fees for vendors using PayPal would be as follows (I’m not going including figures for StormPay, since we have already seen that if coupled with PayDotCom it’s far more expensive than using ClickBank):

But what about the referring affiliate?

The table below shows how the affiliate’s commission is effectively reduced:

What we can see from all this is that a vendor who’s sales are mainly driven by affiliates (and this after all is PayDotCom’s target market) will find PayDotCom slightly cheaper than ClickBank. They can save on per sale costs whilst (on the surface at least) still offering the same commission as at ClickBank.

Kinda like having your cake and eating it.

If you make most of your sales yourself (i.e. not through affiliates), then PayDotCom will cost you more than ClickBank for all products under $50. However, if you are not intent on building a large number of affiliates to make your sales you’ve no need to use PayDotCom at all, and can simply use PayPal alone.

Of course, there’s no set-up cost with PayDotCom. But that is only as long as you are selling a single product, so it is unlikely to apply to most sellers for very long. If you want to sell more than one product, the set-up fee is $29. Still substantially cheaper than the $49.95 ClickBank charge for a single product account, although it’s also worth mentioning that there are several scripts available that enable the sale of multiple products through a single ClickBank account.

Another plus for ClickBank users is that affiliate payments are taken care of by ClickBank, completely hands off. Whilst PayDotCom does provide sellers with PayPal Mass Pay files to pay affiliate commissions, the vendor still has to log in to their PayPal account, upload the file and go through the Mass Pay process. It doesn’t take long, but it’s still an additional task.

Nevertheless, vendors using affiliate marketing may find PayDotCom’s extra features, plus the lower overall cost per sale and cheaper setup more attractive than ClickBank. Let’s face it, there’s currently no other service at this price point that enables you to do recurring billing or sell physical goods with a 2 tier affiliate program.

It’s a different story for affiliates though.

The generally negligible benefit of 2nd tier commission potential aside, affiliates are better off with ClickBank. At ClickBank a 50% commission means half the sale price goes into your pocket, not half the sale price less $1.50 (incorrect, see comments below). I’m afraid the idea of charging affiliates for the pleasure of using a service catering for the vendors they make money for sticks in the throat somewhat.

Look at it how you want, but basically, the vendor pays PayDotCom a commission on every sale, and the PayDotCom system legitimizes the affiliate commission advertised not being the true commission paid to the affiliate.

But then the PayDotCom site makes the position pretty clear:

Vendor Does Not Pay Affiliate The Full Commission Earned.
Vendor charges to fee to the affiliate (automatically calculated) and pays it on the affiliates behalf to PayDotCom.com at no additional cost to the Vendor.

The Vendors Net Profit Stays The Same.

This is done this way because PayDotCom has a better relationship with Vendors then we may have with come and go affiliates that do not have products with us. This simplifies billing for all parties involved.

The Vendor is responsible for the full fee but the Vendor gets to split the fee with the affiliate by withholding it from their commission. This is all automatically calculated by PayDotCom for all parties involved.

Nevertheless, assuming it proves to be well run and reliable (still some website “issues” evident when I was last there), PayDotCom is likely to become popular over time. It’s a vendor driven site being heavily promoted, and inevitably the mass of affiliates will follow the products they want to promote, even if they are losing out in the process. I may even end up trying it myself if that happens and see if the pain is worth the gain. Although then again, a service that disparagingly calls one of the parties it depends on for its existance “come and go affiliates” gives me the urge to suggest affiliates simply, “go”…

Of course, if PayDotCom does start to take a significant slice of business away from ClickBank, it could well lead to the long overdue upgrading of the ClickBank offering so that it provides the services users have been requesting for years, and possibly with a revised rate structure. There’s nothing like a bit of competition to stimulate a company into listening to it’s customers and providing more benefits to the end-user.