The eBay Partner Network (ePN) has announced they will be culling large volumes of affiliate marketing opportunities that operate in what they call secondary tier programs.

The move comes as eBay Inc begin expanding onsite advertising (secondary fee charging) for sellers via the adCommerce program, and PayPal pre-announce swathes of changes in the Buyer Protection Program’s (BPP) transaction eligibility.

Cumulatively the announcements display elements of pre-crisis cash-flow redirecting.  Both the ePN program and PayPal BPP are cost functions for eBay, with adCommerce being intended as a revenue booster.  Combining these moves with Q4-2008’s 10% staff lay-offs and the dismal financial performance in Q4-08 and Q1-09, reveals a company concerned about its revenues.

Whilst the break that the extended ineligible transactions list, for BPP, cuts for eBay sellers is good news, its effect will be felt more noticeably by off-eBay sellers, and as such can be viewed as reinforcement of eBay CEO John Donahoe’s P.T. Barnum positioning of PayPal as the corporates new engine, replacing their core marketplaces division as the strategic focus.  I’ll be covering these changes in more detail over the weekend, but for now, registered PayPal users can log in to their accounts, and view the upcoming changes from the left hand notices menu.

Ed recently wrote a leader story concerning adCommerce entitled, “Will adCommerce lead to final eBay Meltdown?” and positioned several concerns about the program.  With the announcements from ePN yesterday, eBay’s new position is becoming clearer – they will no longer provide the marketing budget previously deployed to bring traffic and buyers to the site.

Henceforth, they will focus more on acquiring a greater portion of customer’s resale revenues, and spend less on driving traffic to those customers’ offerings.  Over time, sellers will have to engage in the same self-promotion tactics that sellers on 2nd and 3rd tier venues have to engage in daily.

For years, when justifying eBay having the highest fees in the online marketplaces industry, their staff have repeatedly stated that it is because they provide the highest traffic flows from the widest range of locations.  That historically may have been true, but blog and forum comments from sellers show an increasingly worried disposition about traffic, watched item, and bid numbers falling.  These are key metrics in judging the viability of a marketplace and the budget to be deployed for a presence upon it.  The latest round of ePN announcements will do nothing to allay fears of an imploding ebay.

Key comments from within the announcement include -

… we have decided to wind down three types of business models that were previously allowed in eBay Partner Network: tier-2 paid search, ad networks, and sub-affiliates.

In general, these business models directly source and redirect traffic from many different sites which the publishers themselves do not control.  This usually results in affiliate marketing that is less targeted and has a sub-par user experience when compared to models in which the publishers directly control their sites or services along with how they source traffic to them.

Tier 2 paid search: Using any paid search / text ad networks that place eBay ads (ads that go directly to an eBay domain) on websites not directly under the publishers’ control.  As a reminder, Tier 1 paid search, defined in our Terms and Conditions as putting paid search links directly to eBay from Google, Yahoo!, MSN, or their related networks, is already not allowed in most of our large programs today.  This change extends this restriction to all paid search / text ad networks in all eBay Partner Network programs.

Ad Networks: Using any graphical ad network to place eBay ads (ads that go directly to an eBay domain) on websites not directly under the publishers’ control.  This has been a model that required special permission until now but will no longer be allowed in eBay Partner Network.

Sub-affiliates: Any arrangement where publishers distribute their earnings from eBay Partner Network to other publishers. Like ad networks, this has been a model that required special permission until now but will no longer be allowed in eBay Partner Network.

Amongst the shake-outs that these changes will create, is that ad-networks like ShoppingAds.com (a subsidiary of the giant Media-Whizz agency) could have to close.  TextLinkAds is another agency that relies heavily on providing traffic to eBay through 3rd-party website publishers – instead of using graphic banners, they utilise contextual keywords hyper-linked to suitable search results, which provides a more direct link to items for sale.

The changes may also affect shopping discount promoters such as KickItBack and others, who offer purchase rebates by acting as a watch and reminder agency for eBay listings, as well as being an affiliate advertising agency for targeted items.

Also, not discussed but most likely concerned by the announcement, will be Commission Junction (CJ).  CJ were eBay’s original and exclusive affiliate marketing agency prior to the establishment of ePN a year ago.  CJ still carry the programs for main sites such as eBay DE, eBay NL, and eBay SE, as well as subsidiary company agencies for Skype, Half.com, StubHub, Tradera, and others.

Half.com is now available via ePN as well as CJ, and this transition may signify it is going to be pulled in-house once other Half-to-eBay-core cross-promotional announcements take effect – in essence, Half will be come a shopping portal feeding products onto the eBay platform to “increase and improve” choice for buyers.  With Diamond PowerSellers already flooding the site with non-selling mass-produced generic items, the addition of Half’s inventory will not be seen as an improvement by many.

My primary issue with the justifications given by the anonymous “eBay Team” signatories to ePN’s announcement, is one of credibility.  The statements they make show a basic lack of understanding that all selling, outside of personally delivered services, is basically a form of Multi Level Marketing (MLM).

Retailing advertising, which is ePN’s sole function, also works on MLM principals – a prime supplier at the top of the pyramid supplying 1st-tier distributors, who then supply wholesalers, and who in turn supply the end retailers (or advertising publishers in this case).

Similarly, with tangible products, the same supply chain cascade applies, and that is something that eBay was built upon, which they also seem to have forgotten and lost sight of.

Summarising the announcements from this week would seem to indicate that eBay is going to spend less on acquiring new shoppers and traffic direct to individual listings and sellers’ stores. They are also reducing their exposure for buyer protection, and have previously cut back heavily on marketing personnel.  Instead they are aiming to further slice sellers’ profits with increased categories carrying compulsory free shipping, whilst blowing smoke over a swinging mirror called adCommerce.

John Donahoe’s performance at the recent Analyst’s Day certainly displayed that he believes a mug is born every minute, and that he will be able to fool some of the people for ever.  Unfortunately for him, and the analysts are catching onto this (if press reports after AD are anything to go by), sellers saw through his act the moment he stepped onto the stage in Washington last January.

The only positive hope to come from this week’s revelations is that, with Diamond PowerSeller’s being pulled onto the platform faster and faster, they will have, and will allocate, cumulative platform-marketing budgets larger and more effective than eBay’s historical ones.  It is also to be hoped that they will be so focussed on box-shifting in a narrow band of product categories, that the rest of the platform will be largely unaffected by their offerings.

If not, the “new-generation” platforms such as eBid, Etsy, OLA, and of course Amazon, will continue to pick up the eBay emigrants.

Gaz