Binance Launches U.S. Affiliate Program  

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Two days after leaked emails revealed Coinbase is shutting down its U.S. affiliate program, Binance.us announced it was launching an affiliate program of its own. 

The centralized exchange launched their affiliate program for U.S.-based partners in late July 2022.

Binance has been running against the grain all year. When Coinbase and Gemini announced they were implementing hiring freezes—Coinbase went one step further and rescinded job offers it had already made — Binance responded by going on a hiring spree.

Just as the hiring freeze and job offer rescissions were a response to crypto winter, Coinbase cited the crypto bear market as the reason for suspending its U.S. affiliate program. As reported by Business Insider, the company said it plans to relaunch the program some time in 2023.

What It Costs to Run an Affiliate Program

While it true that affiliates earn a commission when a new customer signs onto a program and that commission isn’t paid until after the new customer meet an acquisition target, there are ongoing costs to running an affiliate program that may not make it profitable in the short term. 

Coinbase’s affiliate program works like this:

  • The affiliate recruits a new Coinbase customer

  • The new customer begins trading on Coinbase

  • The affiliate receives 50 percent of the new customer’s trading fees for three months

  • The affiliate is paid in their local currency through PayPal or their bank account

At first glance, it seems that Coinbase’s expenses are all after it has generated revenue from the new customer, but that’s an illusion. There are associated costs with running an affiliate program and those costs are incurred before any new revenue is generated. Instead, there are three key areas where Coinbase must incur expenses: The platform, creative inventory, and program management.

Coinbase’s Affiliate Platform

There are two ways to run an affiliate program. One way is to do it in-house, and the other way is to join an affiliate network. Either way, there are costs associated with platform management.

For instance, Coinbase offers tools for its affiliates to track their campaign performance and generate more than 20 customized reports. Coinbase also facilitates the ability for affiliates to create custom landing pages for their campaigns. All of those tools cost Coinbase money in hosting fees and software development. 

The technological costs of running an affiliate program are not all paid at the time the affiliate program is set up. There are ongoing costs to keep the program running.

Coinbase’s Affiliate Program Creative Inventory

Creative inventory are the digital creative assets that allow affiliates to promote the company’s products more effectively and efficiently. These creative assets include banners, links, landing pages, and other promotional tools.

Effective affiliate programs are not launched with a set of tools and then forgotten. There are periodic promotions, and each promotional season comes with its own custom affiliate tools. That means there are ongoing costs in developing and creating these assets to support the affiliates.

Managing the Affiliate Program

Beyond the technology and creative assets, an effective affiliate program means a company must commit human resources to mangement. There is often one person whose job description entails the management of the affiliate program. There may also be dedicated graphic artists, developers, and other company employees who assist the affiliate program manager in carrying out the duties of managing the affiliate program. 

In addition to its hiring freeze in June, Coinbase announced it had cut its workforce by 18 percent to prepare for crypto winter. Such reductions most likely impacted the human resources dedicated to managing Coinbase’s affiliate program.

Different Folks, Different Approach

It is not uncommon for companies to reallocate their resources—human, financial, and technological—is downward markets. If a company is highly leveraged, it could sell off some of its assets such as stocks, bonds, and other papers. This is typically done to liquify its assets in preparation for a difficult market. If a company is already liquid, it may not need to undergo such a reorganization, which is probably why Binance is pressing in when other crypto exchanges, like Coinbase, are pulling back.

 

At the end of the day, both Coinbase and Binance must look at their own financial positions considering the current market and future market expectations and make decisions that position them for future success. That might mean cutting affiliate programs  or, in Binance’s case, starting one.

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