With the announcement regarding DGM following on from the recent news of iLevel, affiliates may naturally be concerned about how protected they are from these events. With this in mind I’m hoping to allay any concerns our affiliate or merchant partners might have by giving a bit more visibility on our processes and the company. I would just like to add that this is not meant to denigrate any other process or detract from the sad state of affairs surrounding DGM but to answer some of the questions raised regarding the safety of network payments to affiliates.
Affiliate Window operates a system that ensures affiliates can be paid as swiftly as possible. We pay our affiliates on all validated commissions (with no claw back), twice every month and in the last 10 years have only been late by a couple of days on three occasions and each time these were tech related. We work hard with merchants to ensure they validate their pending transactions in a timely fashion and validate frequently. This often means that between transactions being validated and merchant invoices being paid, affiliate payments are due. In order to facilitate paying affiliates in advance of being paid ourselves we need two things;
a) A very healthy cash flow position – Currently Affiliate Window has a 95/100 credit score with ample funds to cover the affiliate payments, regardless of being paid.
b) A level of comfort that the network will be paid – In this instance Affiliate Window pays a considerable amount (6 figures annually) to secure credit insurance against every merchant and this is at no cost to affiliates or merchants.
The process of securing credit insurance allows us to assess the risk potential for each merchant and communicate this clearly to affiliates. This is via the traffic light system;
Green – The merchant is within their credit insurance limit and Affiliate Window will pay all validated transactions on the next payment run to affiliates. This process ensures affiliates only have to wait a period of 2-4 weeks from validation date to be paid their commission due.
Amber – This merchant has breached their credit insurance limit and therefore all validated transactions will remain ‘on account’ and paid out to the affiliate once Affiliate Window has received payment.
Red – This merely indicates that the merchant may be in difficulty and we would advise not promoting as payment may be ‘at risk’.
As of today we have 73% under Green status, 26% under Amber status and less than 1% under Red status.
Of the 3 scenarios above, Green status protects the affiliate fully. If the merchant were to become insolvent any financial impact would be on Affiliate Window as we would already have paid affiliates. In cases of Green and Amber status the first £3k is covered by Affiliate Window with any remainder claimed back through our credit insurers. If a merchant were to move to Amber status and then become insolvent we would cover everything up to their credit threshold with anything above that being subject to normal creditor terms. Considering the level of credit insurance per merchants varies from £3k (the limit Affiliate Window covers) up to £2m, this offers a significant level of additional cover for our affiliates in the advent of a merchant becoming insolvent. Total credit insurance cover is in excess of £10m per month. Only when a merchant is on red status will affiliates be unlikely to receive commissions, but again this is subject to any credit insurance allowance or payments received by the network.
Implementation of our AWin Index and the traffic light system have been instrumental in helping merchants appreciate the impact that quick validation times and faster invoice payments have on the profile of their programme and subsequent ‘uptake’ from affiliates. With many merchants wishing to operate extended payment terms, many agencies having limited or no creditworthiness and the pressures of the current economic climate, we feel that our process offers the highest level of protection for affiliates.
Our acquisition of buy.at has gone very well but plans to align the financial operation fall into 2011 so they currently operate a separate payment process whereby affiliates are paid 2 months in arrears regardless of whether the merchant has paid or not. Again buy.at have a track record of paying affiliates when merchants have become insolvent and whilst this is not always a guarantee, both networks have a similar outlook on protecting affiliate earnings and also identifying and communicating ‘at risk’ merchants as soon as possible.
Digital Window is trading profitably with profit before tax of £2m in the 6 months to 31 December 2009. The last audited accounts at 31 December 2009 show a strong financial position with Total Assets of £18.4m, including cash of £8m. Our company registration number is 04010229 for those who wish to verify this personally.
In addition Digital Window’s ultimate parent company is Axel Springer AG – a major German media group with annual revenues of EUR 1.6bn (billion), profit before tax of EUR 400m and Total Assets of EUR 2.6bn (billion)
Unfortunate as the incident is surrounding DGM we must ensure that the wealth of knowledge and experience held within the network is not lost. Digital Window has aspirations for its continual development over the coming years and would like to offer the opportunity for any interested candidates to contacts us at email@example.com.
I trust this communication has helped to add some visibility as to the network’s financial position and policy for protecting partner earnings. This is not to say that things cannot be improved and we will continue to invest in new opportunities to strengthen this position.