“Gold mining has always had this glittery Powerball mentality. You can strike it rich, even if your chances aren’t good.”
Dr. Pierce Mullen, Emeritus Professor of History, Montana State University
In August 2022, Shopify launched Collabs, a network that connects influencers and brands and brings with it both risks and rewards. Drawn to its size in the marketplace, many agencies, brands, and affiliate programs have flocked to the program. Collabs’s growth is due more to “shiny object syndrome” than its quality, however. Rather than a true influencer network, Collabs is closer to an affiliate network with less transparency, limited reporting, and fewer safeguards. We are concerned with two major issues: coupon overlap and lack of tax management.
Issue #1: Coupon Overlap
Collabs involves the creation of unique coupon codes that influencers share with their audiences. These codes are often leaked onto coupon sites. This can result in the Collabs partner getting credit for the sale, artificially increasing Collabs’ performance. This is especially problematic for clients that have affiliate programs. Leaks create an attribution nightmare and a double-dip in cost, harming publishers and entire program’s ROAS:
“This summer I discovered over $50,000 of revenue overlap per month and growing in Collabs on a client account our team had inherited. Commissions were double paid. It took months to find and correct all the duplicate codes. In the end, I was able to save our client thousands of dollars, but it was a mess and a headache.”
Lab 6 Client Success Director, Scott Jangro
We would like to see more oversight and transparency from Shopify in how they handle their partners’ revenue as it impacts more traditional publishers and affiliate programs’s ROAS.
Issue #2: No Tax Management
Because affiliate networks pay publishers, they are legally obligated to collect tax information and to send a 1099 at the end of the year. To date, Shopify is putting the responsibility for collecting tax forms on merchants. Essentially, Shopify’s stance is that they are solely acting as a gateway, and thus are not liable. However, we are concerned that this deferral will catch many brands flat-footed during tax season. Will this position come back to haunt Shopify as tax season approaches?
Final Thoughts:
Collabs offers rewards for some brands but it also potential hazards. At the end of the day, the chance to strike gold is only as valuable as the reliability of the path leading there.
We’re planning to dive deeper into Collabs in a series of upcoming posts, because we do feel there is promise here, if Shopify can get their act together. Stay tuned for more!
