Shutting down Google Affiliate Network is a good business decision

Yesterday, Google Affiliate Network (GAN) announced via their blog that they will be “retiring” the service. Like many others, I was surprised to hear the news. But then again, if you look at it from a business perspective, it makes sense that Google would shut down GAN and move on to other activities. 

Since launching in 2008, GAN never gained the traction Google had hoped for. Although it was one of the larger networks in the industry alongside Commission Junction, Linkshare and Shareasale, it did not dominate its market like many of Google’s other products do. And with the major issues the whole affiliate industry is facing, the future isn’t necessarily all that rosy.

But consider the business side of GAN from Google’s point of view. GAN’s goal has been to “scale, scale, scale” and to integrate with other Google products — pretty much the same goal as any other Google product. While GAN has failed to reach those goals, in the past year Google has seen a steady growth in revenue from Product Listing Ads (PLA). As reported by The Rimm-Kaufman Group, “Product Listing Ads generated 33% of Google non-brand spend among RKG’s retail-leaning client sample.”

rkg-q1-2013-dmr-google-pla

Overall, Google generated about $50 billion in revenue in 2012 with only 50k employees. That’s about $1 million per employee — and $200k net profit per employee! The company is highly unlikely to see that kind of revenue or profit with GAN; but it’s certainly possible with PLA, based on how they’ve done so far.

Affiliate marketing will go on without GAN. Not much is lost there. Meanwhile, Google gets to shift its smart folks to improving the PLA product to drive revenue further. It’s a good business decision that I’m sure its shareholders will appreciate.