The channel, which includes lead generation Web sites that let consumers browse several issuers' offerings at once, had been considered a relatively cheap and easy way to sign up cardholders. Issuers often pay the sites only for applications received that they approve, ensuring a higher return on their investments. Direct mail, by contrast, requires issuers to pay up front for materials that many consumers simply discard without opening.
But observers said the affiliate sites generally attract less creditworthy customers, whom most financial institutions are avoiding these days. The exodus from the channel is another example of how issuers are putting less emphasis on finding new customers and redirecting what remains of their marketing budgets to earning more money from current customers.
Since November most major issuers have removed at least some of their products from lead generation sites and online advertising networks. JPMorgan Chase & Co. and HSBC Holdings PLC's U.S. card unit have almost stopped using such intermediaries altogether. Most other major issuers, including Bank of America Corp., Citigroup Inc., Discover Financial Services, and American Express Co., have pulled several products from the sites, or stopped using some sites, over the past two months.
Some issuers, including Citi, blamed the "difficult market environment" and indicated that the pullback from online affiliate marketing was temporary.
"We're facing some challenges," said Curtis Arnold, the founder of CardRatings.com, which the online marketer QuinStreet Inc. acquired last year. "We expected to see some scaling back, but to see Chase pull not only their consumer cards, but their business cards, out of the space almost entirely. … That caught me by surprise."
Campbell Edlund, the founder and president of EMI Strategic Marketing Inc., which advises issuers like Citi on marketing and loyalty strategies, said credit quality and macroeconomic concerns have played a role in such pullbacks.
"In today's market, with FICO scores crashing and burning, affiliate channels are shakier," Ms. Edlund said. "Who goes to the affiliate channels? It's not somebody who's 700 FICO."
Also, the economics of lead generation sites, which can require issuers to pay either "per click" or for each approved application, are harder to justify in the current environment, when most financial companies are slashing their marketing budgets, she said.
An even bigger motivation for many issuers, according to observers, is an overall move away from account acquisitions. "Many banks, many issuers are investing more in capturing wallet share than in acquiring prospects," Ms. Edlund said. "Issuers are really leveraging captive channels like branches, their own online channels, their call centers. The marketing dollars they spend really have to have the highest return."
Most acquisition marketing efforts appear to be falling, though online marketing only recently caught up with direct mail volume, which has been falling dramatically for the past year.
In October consumer card acquisition mailings by U.S. issuers fell almost 50% from a year earlier, to about 361 million pieces, according to the Chicago market research firm Mintel International Group Ltd. Since last summer issuers' use of the much cheaper alternative of e-mail acquisition marketing has fallen just as dramatically, according to Mintel.
"Issuers are being selective about who they're mailing new offers to, but I don't expect them to stop going after new customers completely," said Stephen Clifford, Mintel's vice president of financial services. He also said that direct mail volume could level off this year.
