The following post was written by Michael, founder of CreditCardForum.
The credit card industry has taken part in affiliate marketing since the early days. At first it was a lucrative form of monetization for any half-way decent financial website, but by the middle of last decade, the sector had become largely oversaturated. It seemed like everyone and their mom was hawking credit cards on their blog, and in turn, generating those commissions became a whole lot harder. Then there was another blow; the financial collapse. During this time most banks ceased their credit card marketing altogether. That brings us to today… in 2010 are credit card sites still a moneymaker?
As founder of CreditCardForum.com, one of the top sites for credit card reviews, I definitely know a thing or two about the industry. Not only have I ridden the ups and downs, but I’ve also consulted for a number of credit-related online ventures. Perhaps you already have a credit card venture or maybe you’re thinking about building one to flip? Either way, I’ll give you my take on the industry as it stands now. Here are some things you need to know:
Credit cards in the post-crash era
The industry today is completely different than it was just two or three years ago. For starters, banks no longer give credit to anyone with a pulse. In fact, I see even those with stellar credit scores getting denied left and right for cards like the Chase Sapphire. But it’s not just the Chase Sapphire and other upper-tier cards that have tightened up… even the mid-tier cards now have ultra strict requirements. Naturally, this has a major impact on credit card commissions – less approvals means less money.
Something else that has drastically changed the industry is the Credit Card Reform Act of 2009. Now that the vast majority of proposed changes are in effect, credit cards are a completely different business for the banks – they’re less lucrative. In turn, most credit card companies aren’t offering those uber-generous sign up bonuses, long balance transfer offers, and other promotions we became accustomed to last decade. Without these, of course, it’s not as easy to convince someone to apply for a credit card.
Lastly, it’s important to point out that the FTC has significantly stepped of regulation of financial products and services. What does this mean if you’re blogging credit card reviews? Well some issuers, like American Express, are requiring cumbersome company disclaimers to be included in your actual content, not below it (even if you already have your own disclaimer). A fellow industry veteran I know summarizes it as “The scales have tipped from too little regulation to too much. There is so much red tape these days.”
Where I think the industry is heading
I’ll be the first to admit that humans, in general, have a very short memory and rarely learn from their mistakes. However, if you think the banking industry is going to head back to the credit hay day we saw before the recession, think again. The financial crisis was such a major calamity, if the credit gravy train ever comes back, it won’t be for many years (decades). In other words, I think we have learned from the days of loosey goosey easy credit. Conclusion? Credit card marketing will not be nearly as lucrative as it was in the early days.
Have a credit site or thinking about starting one?
If you already have an existing credit card site and want to sell it, I would advise to do so sooner rather than later. Why do I say this? Because at this moment the banking industry is relatively stable. So if you sold your site, you would be selling a business in a viable market and therefore it would be more attractive to the buyer. But the credit tides could turn for the worse at any moment – all it would take is another recession, a major terrorist attack like 9/11, etc. to put the economy back into a free-fall. And if that were to happen, who’s to say the banks wouldn’t pull their credit cards out of affiliate marketing again, like they did from 2008 through early 2010?
If you’re thinking about starting a site for credit cards – either to keep or to flip – you may want to re-consider. It takes a massive amount of resources to compete these days in the credit card industry. Besides all the matured credit card specific sites, now you’re up against the big boys like Mint, BillShrink, etc. It’s just not the same lucrative opportunity it was ten years ago.
Alternative financial industries to consider
Lastly, the brings us to the question, if not credit cards, what other niches in the finance sector are still lucrative? Here are a couple ideas…
Identity Theft & Credit Monitoring – This is an industry that was practically non-existent a decade ago, but look at how popular it is these days? Even I used to think these monthly subscription services were unnecessary, but once you become a victim of identity theft, I’m sure you’ll think differently. These days it seems like there are more con artists than ever before and you frequently hear stories in the news about this kind of stuff… so I think this is an industry that will only get bigger. There are a number of companies that pay affiliates generous commissions for new customers.
Investments – The fact that the Dow is at the same place it was ten years ago doesn’t really matter… this is still an insanely profitable sector to be in. There are a number of different ways you can make money. You could do online broker reviews to generate affiliate referrals. Forex is a cash cow, but I think it’s too competitive… instead I would recommend something in commodities (which could be monetized using ClickBank eBooks). Whatever route you go, I would highly advise you to pick a “niche within a niche” because it gives you a fighting chance – i.e. natural gas trading in the commodities sector.