of the trade
DC - February 24, 1999) When it comes to building an affiliate network on the Internet,
context is king. So said experts on this hottest of trends in online marketing. At a
gathering of netpreneurs Wednesday morning, they shared their tricks of a trade that is
expected to generate billions of dollars.
What is affiliate marketing? Its when a merchant pays a Web site owner for
generating sales from a button, banner or link placed on the owner's Web site. Its
the latest buzz in Internet retailing, accounting for 11 percent of customer transactions
this year and a predicted $9 billion or 25% of online shopping revenue by 2002. Online
bookseller Amazon.com blazed the trail and today has
over 140,000 affiliates.
By some estimates, more than 40% of online retailers say they have or are going to
build an affiliate network in the next six months. Those statistics were mirrored with
enthusiasm by over 250 netpreneurs at the first Coffee and DoughNets session
of 1999, sponsored by the Morino Institute's Netpreneur
When asked whether they were looking to establish their own affiliate networks, almost
half of those attending raised their hands.
The nuts and bolts of building an affiliate program were provided by Tom Gerace,
co-founder and executive vice president of Be Free, Inc.,
a leading provider of online affiliate network technology.
He was joined by Brian Hecht, CEO of The Electronic
Newsstand Inc., a homegrown media company whose Web site, is the top online source for
magazine subscriptions. Enews.com has some 5,000 affiliates and Hecht told the gathering
that number would soon double.
The two explained that a key to success is contextual selling -- integrating products
or services into targeted Web sites where content and commerce are logical partners.
Selling in context dramatically increases conversion to sale, said Gerace.
If you just have a button on the page, a lot of people will ignore it. But if you
have two or three products imbedded in or after an article that follows the same theme,
youre much more likely to drive a transaction.
In other words, if you want to sell canoes, a good affiliate might be a site on
wilderness treks. If your product is travel, try a weather-related site. And, if
youre selling expensive wine, look for gourmet food. Gerace said affiliate marketing
is truly effective for moving customers off the dime, or as he put it: transitioning
a user from a having a thought to taking an action.
Gerace had three pieces of advice for affiliate marketers. First, identify a strategy
and decide whether your approach is reach or conversion. He described a good &
plenty model, where you either go after a targeted number of affiliates with a high
conversion rate, or seek a large volume of partners to spread your brand. He suggested
that you need some combination of the two.
Second, he said, is to set up a tiered payment structure, or bounty, that rewards
better selling affiliates with bigger commissions. Affiliates make commissions ranging
from 3 to 25 percent of the sale, he said.
Finally, according to Gerace, youve got to market your affiliate program heavily.
Hecht also stressed the relationship between the merchant and the affiliate. He said
enews.com came away with these five pointers after launching its affiliate program:
1) Keep in constant communication with your affiliates, via email and phone calls.
Understand where they are in their program development cycle and help them through it.
2) Encourage the noodges. If someone makes the effort to call - no matter
what the reason - thats someone who cares enough to potentially be an active
3) Say "Thank you" every step of the way, and be timely - recognize and
acknowledge your affiliates successes when they happen. As they start to perform,
even consider raising your affiliates' commission as a way to motivate them.
4) Know who the winners will be among your affiliates. Its almost impossible to
pick them at the outset, but keep your eye on your own radar screen and track your best
5) Remember that affiliates are people not numbers. Its about relationships more
than anything else.
The biggest thing that we have learned is don't do this alone, said Hecht,
who added. Now there are resources, there are discussion groups, there are products
that can help you get off the ground even if you are on a tight budget.
Following the presentations, Hecht and Gerace responded to questions posed by the
audience- even one from an Israeli marketer who emailed in his question. The discussion
ranged from how much money affiliates are making to whether these programs actually lower
acquisition costs for merchants. A question about how to structure a deal resulted in a
dialogue about current payout plans, as well as details on how a merchant or affiliate can
audit and evaluate a program. The role of content in an affiliate program was highlighted
repeatedly as being as valuable as the payout itself - stickiness is why
people come back to a site.
At the end of the session, it was clear that the opportunity in affiliate marketing is
vast and in its infancy. Affiliate marketing is helping change the face of Internet
advertising. The issues of site promotion, payouts, relationships, branding, tracking,
content and context will continue to be discussed by these experts and others for some
time to come.