E-commerce Affiliate Programs-2000-05-15--Dan Blacharski

What's the best way to promote your brand on the Web? Banner ads? Think again.

Banner ads were the earliest marketing model on the Web, and provided an opportunity for site operators to sell ad space on high-volume sites for top dollar. As an ad model, however, banner ads have seen their better days. While still useful, their value has diminished, and it has become virtually impossible to sell banner-ad space for fixed fees on all but the most well-known, high-volume sites. Advertisers want proven results, and are demanding deals in which they pay for performance--with ad fees based on click-through rates, or on actual sales.

Win One for the Gipper

Web merchants have embraced an alternative ad model called affiliate marketing, a collaborative mechanism loosely based on the Japanese concept of keiretsu, or a cooperative circle of mutually beneficial business relationships.

If you're a vendor with a product to sell, you can get hundreds of Web sites to post links to your store. You don't even have to pay for the screen real estate on their sites, you just pay a commission on each sale that is made as a result of the link. The other side of this model is that you don't have to have your own product or stock your own inventory to go into the Web business and make a few bucks from your Web site. You can focus on delivering content, and take your profit by placing links to merchants offering related goods.

Affiliate marketing is a refreshingly simple concept. Suppose you're a Notre Dame fan, and you have a content-rich Web site full of information about Notre Dame football. You don't actually sell any products of your own, you just publish information online. Using this model, you can post a link on your history page to a vendor who sells mugs with pictures of Knute Rockne on them. Every time somebody clicks on your link and buys a mug, you get a dollar.

A 1999 report by Forrester Group surveyed merchants that have affiliate programs. Those merchants derived 13 percent of their online retail sales from affiliates, and that figure is expected to reach 21 percent by 2003. The report also illustrated the effectiveness of affiliate programs compared with banner ads--reporting that affiliate programs enjoyed a click-through rate six times higher than average banner click-throughs.

Because you're not out any money to join these networks, there's very little down side, outside of the fact that a lot of your affiliates may be small-time operators who will, in reality, provide very little traffic. The aggregate result, however, may make it worthwhile.

Of the merchants interviewed for the Forrester report, the average retailer had 10,270 affiliates. These huge affiliate programs can be achieved with very little work, since the programs are often automated, and links are provided for affiliates on a cut-and-paste basis--giving the merchant potentially thousands of commissioned salespeople throughout the world with very little effort or upfront cost. The affiliate site, on the other hand, can sometimes enter into hundreds of programs to earn no-risk commission dollars.

Wanna be an affiliate?

Okay, you want to be an affiliate. You want to place a couple of dozen links to various merchants on your site, and earn some extra money for what is really not much work.

The first thing to consider is where to put the link. The obvious answer is to put it next to relevant text. The biggest mistake operators make in entering into affiliate programs is placing row after row of affiliate links on the site, with no apparent context. But if you publish an article about gardening, and place it next to a link to a company selling rototillers, you'll be a lot more successful. This is similar to good old-fashioned impulse buying-the time-honored grocery-store tradition of putting candy next to the checkout aisle.

Because the goal for vendors is to sign as many affiliates as possible, providers of link mechanisms have made this as easy as possible. In most cases, becoming an affiliate just involves filling out a form, and cutting and pasting a link onto your Web page.

This is a way to get in on the e-commerce boom without a big investment. Here's what to look for:

An affiliate program should be free--at least to the affiliate. Merchants sometimes have to pay a small fee. Most affiliate programs will present you with a Web-based interface in which you enter in data about your site's content, and what type of affiliate programs would be most appropriate for you. The program should also give you some sort of reporting facility, so you can keep track of how successful you become-and how much you're due in commissions.

So how do you, as a prospective affiliate, find the merchants who want to place links on your site? Trapezo offers a service that connects affiliates with vendors based on their interests. A sort of automated e-commerce match-making system, Trapezo's Partnership Network lets you form partnerships dynamically. The system automatically introduces partners based on pre-specified criteria. Trapezo has a three-step process for affiliates.

First, you set up an account and describe your site. Secondly, Trapezo automatically recommends merchants based on that profile. Third, you select from pre-written HTML tags and choose display formats (text link, picture ad, etc.) Trapezo then automatically populates the link with relevant products on the appropriate page.

LinkShare has a similar model, which is free for affiliates and fee-based for merchants. It's not automatic; instead, you look through a list of about 400 merchants with affiliate programs, and pick and choose who you want.

You, the affiliate, are presented with a unified interface, where you can see which merchants are generating how much revenue for you, which types of links are best, and other relevant statistics. The HTML code that makes up the link is automatically generated, so you don't have to write that yourself. It's a simple cut-and-paste operation.

You can place your link within a body of text, so it stays in context. For example, if you mention a product within an article, users can click on the product name and buy it. You can use a storefront link, which displays a page that highlights several products; or you can show products one at a time. If you want to conserve screen real estate and weed out the links that aren't generating any revenue, the provided report offers you a granular format that lets you check on these details.

All of this detail is provided because the LinkShare merchant is required to install back-end technology on its site, which allows LinkShare to keep track of transactions and affiliates' credits and debits. This is a fairly simple tracking software program that monitors online transactions for the merchant's affiliate program and is used as an alternative to technologies such as cookies, which are frequently disabled by the user and could therefore result in some sales being made without compensation to the affiliate.

Becoming an affiliate may not generate huge volumes of cash, but it's an easy way to get your feet wet in e-commerce, or add a supplemental revenue stream to an existing Web site.

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