Affiliate Program Models
Affiliate programs models have evolved quite a bit since their inception. Over the last few years, affiliate marketing has evolved from the original prototype model that CDnow.com created and has spawned a variety of new and innovative models. Affiliate programs now work effectively for individuals, businesses, schools, and charities.
What Is Context-Centric?
| Context-Centric is matching your product or service offer closely to the visitors of an affiliate’s site. Place the product or service in context (closely related to the content it’s next to) and more people will buy. |
But in almost every case, the models that are seeing success are those that that are becoming evermore context-centric. That is, what’s being offered to site visitors closely matches the content of the site itself. The idea is obvious. Place the product or service in context and more people will buy (see Figure 5.1). An affiliate site would have more success selling video games than lawn mowers on a site targeted to teenagers. It’s presenting the right message to visitors in the right place at the right time. Whatever affiliate model you use, it must be content-centric to succeed.
Figure 5.1. Tattoos.com is good example of placing product offers in context.
You can affiliate with Web sites in two ways—first, by placing offers on your affiliate’s sites that link back to your company servers where the sale is made, and second, via hybrid models. The program models come in six basic types, and your company can offer any or all of them to potential affiliate partners.
They are
Banner or Text Links
Storefronts
Pop-Ups
Imbedded Commerce
E-mail
Two-tier Programs
Combined, they represent the different ways your business can generate revenue, generate leads, and acquire new customers.
Banner or Text Links
The oldest affiliate model is the banner or text link. Affiliates place a small banner, image, or text link on their site which—when clicked—sends the site visitor to the merchant’s site (see Figure 5.2).
Figure 5.2. Pr News Wire is a good example of a site using affiliate banner links.
The banner or text link usually has the name of a company promoting what the merchant is selling. Amazon.com is a good example. A Web site might place a banner for Amazon on its Web pages promoting the fact that great books can be bought from Amazon. There would be some promotional copy on the banner to get the Web site visitor to click it (see Figure 5.3). When the user clicks the banner, it sends her to Amazon’s site where she might buy a book. If the visitor buys a book, the affiliate site gets a commission.
Figure 5.3. Amazon’s square banner informs potential customers that Amazon has the earth’s biggest selection of books.
Banners are not limited to products. Some financial institutions promote their different credit cards using affiliate marketing. NextCard at (www.nextcard.com) is a good example (see Figure 5.4).
Figure 5.4. Unlike most affiliate programs that promote products, Nextcard uses affiliate marketing to promote a service.
Affiliate Web sites place a banner persuading visitors to apply for a NextCard Visa card at a very low percentage rate. When the user clicks on the banner, it sends them to the NextCard site where they can fill out an application. If the user is approved for a Visa card, the affiliate site gets a finder’s fee.
Do
| DO use a combination of both a banner and a text description—especially a testimonial—on an affiliate’s site to increase the chance of a sale. |
Studies have shown that combining both a banner and a text description—especially a testimonial—produces better results than a banner or text link alone. This gives the viewer not only a graphic image but also a compelling reason to click it (see Figure 5.5).
Figure 5.5. Access Arizona combines a graphic with text to promote a product.
There are other revenue models using banners that don’t depend on commissions. Instead of paying a commission on products or services sold, you can offer Web sites a CPC (cost-per-click) affiliate program. In this method, Web sites earn revenue every time one of their visitors clicks through to your Web site. This method is especially useful for driving traffic to your site. Another model is CPA (cost-per-action). With CPA programs, affiliates earn commission every time one of their visitors clicks-through to your site and performs a task, such as filling out a survey form or entering a contest on your site. No sales are made, but your company can build up a list of prospects that you can market to in the future. Examples of pay-per-lead networks include WebSponsors (www.websponsors.com) and DirectLeads (www.directleads.com) (see Figure 5.6).
Figure 5.6. With DirectLeads, your company can build up a list of prospects that you can market to in the future.
The advantage to you is increased traffic to your site. The disadvantage to your affiliate is that he loses that traffic. These types of “click-and-bye” links, as discussed in Chapter 2, are frowned upon by some affiliates because there is no opportunity for residual commissions and there are no financial transactions. However, the CPC is guaranteed commission, and CPA deals typically convert at a much higher rate than the sales models. This makes the CPC and CPA models very attractive to many affiliates.
Storefronts
Though the basic e-commerce banners have been successful for online merchants, the results for affiliates have been negligible. This is primarily because when a Web site’s visitor clicks on an affiliate program banner, the visitor leaves the affiliate site to complete the transaction. The affiliate Web site loses the traffic that he has worked hard to acquire in exchange for the small chance that the visitor would actually complete a transaction at the online store and earn a commission.
As a result, affiliate Web sites like cost-per-click programs much more than banners. If a visitor clicks off their Web site, at least they have the guarantee of being paid for it. Similarly, cost-per-action programs are favorable to many affiliates because their traffic is more likely to convert to a commissionable action than it is in the sales model.
The storefront affiliate marketing model shows promise to revitalize the sales commission model. With the storefront model—or syndicated boutiques—visitors don’t leave an affiliate partner’s Web sites. With this model firms like vstore (www.vstore.com) provide Web server space and design templates to mom and pop Web sites that want to set up shop on the Net but don’t possess the requisite technical know-how and resources to do themselves. Such firms pay their affiliates commissions on each sale generated through the storefront. In the storefront model, a Web site owner can actually create a complete online store that looks like it resides on his or her Web site.
The popularity of storefront affiliate programs is growing because—in the words of Roman Godzich, Director of Communities for vstore.com—“People are beginning to discover the difference between a ‘pay-per-action’ affiliate relationship and owning their own store.”
Storefront companies sell no products themselves but offer the merchandise of many different merchants to their affiliate partners. In effect, they come between the merchant and the affiliate—working for the affiliate sites, not the merchants—by offering complete lines of merchandise built around the theme of each affiliate site. With this model, affiliate partners are offered a way to seamlessly integrate a complete online store, selling products in a variety of categories on their sites.
But as with any new technology, tread lightly and avoid putting all your eggs in one basket. In December 2000, Nexchange Corp., provider of the self-coined “Syndicated E-commerce” service, announced that it was closing down due to the company’s inability to secure the financing necessary to carry it to profitability.
Do
| DO consider incorporating models like storefronts and pop-ups into your program to e-commerce–enable affiliate Web sites and keep the affiliate’s visitor on its site. |
Although the Syndicated E-commerce concept promises to be a very important mix to any Web site’s and retailer’s revenue stream, unfortunately, it won’t be Nexchange delivering on that promise. However, the technology is important and it will continue to be with us in a variety of permutations.
Why are these program models attractive to affiliates?
According to Forrester Research, building a Web storefront costs between $2 million and $40 million dollars, with another $2 million to almost $50 million in recurring costs. This is why storefront affiliate programs are so attractive to Web sites wanting to e-commerce–enable their sites.
Pop-Ups
Affiliate models that use storefronts keep the affiliate partner’s traffic on its Web site. Its visitors never leave its site. With pop ups, visitors never leave the affiliate’s PAGE. An example of this type of technology is ePod (www.epod.com) (see Figure 5.8) and IQ (www.iq.com). Both of these companies use a technology that offers products and services to Web site visitors through a small pop up widow. When a visitor comes to a Web site, he or she may see a small banner or icon advertising a product or service of an online merchant.
Figure 5.7. With ePod’s affiliate program, Web sites can place complete e-commerce in the form of a pop-up on their site.
Figure 5.8. Art.com provides galleries populated with specialty art for a specific market niche to their affiliates.
At first glance, some of the banners look like traditional affiliate banner links—they also offer ePods in a variety of sizes, including a double banner (468×120 pixels) and a baseball card (234×332 pixels). But instead of being whisked off to another Web site when the link is clicked—or even to another page on the existing Web site—a small pop up window appears with the offer inside. The original page still appears in the background, so when the visitor is finished reading the offer—or even completing a transaction—she is still on the Web page that she arrived on when the pop up windows closes.
Pop-ups do have their disadvantages, however. Because the pop-up window is small, there is a limited amount of space that you have available to present your offer and complete a transaction or task, or collect information.
Imbedded Commerce—Boutiques
A more sophisticated form of a context-centric affiliate program is embedded commerce. This approach builds specialty “boutiques” for niche-market affiliates. All these programs have specialty pages designed for affiliates that carry only a portion of a merchant’s product line. For example, Art.com (www.art.com) (see Figure 5.9) provides galleries populated with specialty art for a specific market niche.
Art.com provides a complete travel-oriented online print gallery. Another example of an embedded commerce boutique is eBags.com (www.ebags.com). Affiliates that run a site for business travelers can offer briefcases or computer cases, for example. eBags offers several vertical-market niches for affiliates, such as travel, school, fashion, sports, and outdoor recreation.
Another approach to embedded commerce is WebCollage. WebCollage (www.webcollage.com), a New York start-up, is offering a service to merchants who have affiliate programs that allows affiliates to embed parts of a merchant’s e-commerce application right into their site. For example, instead of just offering a link to a travel merchant, affiliates can incorporate the travel reservations application itself directly into their site.
Eli Singer, WebCollage’s chief executive, says their service also gives the affiliate the ability to customize certain aspects of the merchant’s application to make it appear much more like it’s a part of the affiliate’s site. “Instead of sending a user somewhere else to access an application and losing that traffic, we decided that it made much more sense to bring the application to the user,” Singer said.
Site59.com (www.site59.com), a last-minute travel service (see Figure 5.10), uses the WebCollage service to increase its reach and visibility across the Net by embedding its application in its affiliate sites.
Figure 5.10. Anyone with an e-mail address can participate in the Barnes & Noble affiliate program.
Many merchants with affiliate programs are focused solely on the activity that can be conducted on a Web site. But Web sites aren’t the only places to conduct an affiliate program. Web sites can only generate a small amount of traffic and sales. Web sites are an important facet of affiliate marketing, but this passive method is neither the only, nor the most effective, method for optimizing the potential of affiliate marketing for your company.
Do
| DO permit the use of opt-in e-mail lists by your e-mail affiliates. Be careful to monitor affiliates who use this strategy and include a provision against spam in your affiliate agreement. |
Using e-mail, you can take a more proactive approach to affiliate marketing. Over the last year or so, e-mail affiliate programs have emerged as a significant player in the industry.
Barnes & Noble (www.bn.com) was the first merchant to use Be Free’s (www.befree.com) B-Intouch program. With its MybnLink (see Figure 5.11) program, even individuals without a Web site could participate in an affiliate program by adding a link to their e-mail. With a service like B-Intouch, a merchant can make anyone with an e-mail address an e-marketer for their company.
Figure 5.11. SuperSig offers the ability for individuals to make money with their outgoing e-mail.
What Is an E-mail Signature?
| The signature option allows for a brief message to be imbedded at the end of every e-mail that a person sends. |
It works like this:
When a person signs up to become a Barnes & Noble MybnLink program, they place a small snippet of code in the signature of their e-mail. This small piece of code calls the B-Intouch program from Be Free that automatically inserts a promotion for Barnes & Noble at the bottom of an e-mail message. If the recipient of the e-mail clicks through to Barnes & Noble’s Web site and buys a product, the sender of the e-mail gets a commission.
It’s quick, simple and easy. The merchant gets the sale and the e-mail sender gets a commission.
But why stop at text links in the signature field? With the growth of HTML enabled e-mail, complete images can be tagged at the end of mail messages, imploring the recipient to click the image offer for discounts or special deals on a product or service. It can also be used to direct the recipient to surveys and free offers where their e-mail address can be captured and then marketed to at some later date.
SuperSig (www.supersig.com) is an example of such a program. The SuperSig model enables the integration of interactive applications with e-mail and provides for the enterprise-wide implementation, management, and tracking of application-enabled e-mail.
And there lies another benefit to these e-mail affiliate programs. They’re viral in nature.
Viral E-mail Marketing
The premise of viral affiliate marketing is simple. People love to show their support for their favorite products and will happily advertise them free. Look at all the brand names people wear on their clothes, or logos they stick on their car bumpers and rear windshield. And what about team sports apparel, such as hats, jackets, and T-shirts? So why not let individuals accessorize their e-mails with advertising messages too—and get paid for it!
What Is Viral Marketing?
| Viral marketing is the rapid adoption of a product or passing on of an offer to friends and family through word-of-mouth (or word-of-e-mail) networks. It is any advertising that propagates itself the way viruses do. |
That’s the core of viral e-mail marketing—individuals acting as affiliates promoting a merchant’s product or service offers.
With an estimated 3.4 trillion e-mail messages sent in 1999 (or 2.1 billion daily), you can see that an e-mail affiliate program is a powerful marketing device that can very quickly spread a merchant’s offer across the Net.
Favemail is an example of this kind of e-mail technology (see Figure 5.12), and SuperSig is another. SuperSig (www.supersig.com) offers the ability for individuals to make money with their outgoing e-mail. But SuperSig (see Figure 5.13) also offers a way for individuals to personalize their e-mail message by including their own graphics and pictures, stylized text, live opinion polls, quotes of the day, and information about whether or not they are online at the time.
Figure 5.12. AllAdvantage.com is an example of a multi-tier commission program.
Viral e-mail affiliate programs offer an easy entry for merchants wanting to promote products and services via e-mail while still maintaining the pay-for-performance benefits of affiliate marketing.
In addition to the formal affiliate e-mail programs, there is also a method known as browser redirect that allows affiliates to create a file that redirects a person to their affiliate link. This is especially useful for affiliates that wish to promote an affiliate program in their e-mail or text newsletter. The affiliate just has to go into the code and replace YOUR-AFFILIATE-LINK with the text link code from the merchant, then upload the page to its Web site.
With this method, affiliates can use a URL, such as http://www.YOURDOMAIN.com/MERCHANT.htm, in their e-mail or text newsletter, and all the people who clicked this URL would go to the merchant site through the affiliate link.
Here is an example of browser redirect code:
90
<html><head><meta http-equiv="refresh" content="0; url=YOUR-AFFILIATE-LINK"> <title>Write some copy about the merchant here</title> </head><body></body></html>
Two-Tier Programs
Amway (www.amway.com) built a retail empire using a multi-level marketing (MLM) business model. Friends and family would sign up to become Amway distributors, and in turn, sign up their friends and family to be dealers, who would then sign up their friends and family, and so on. When an Amway product is sold, the dealer gets a commission and every distributor/dealer up their chain—or their uplinks—gets a piece of the sale. Their multi-level marketing model proved very successful and has been copied thousands of times by Amway wannabes.
In the pay-for-performance space, affiliate marketers have created a similar model called the two-tier program. With a two-tier program, you are setting up a virtual sales force that’s similar to the real world—manufacturer (your company), sales manager (the master affiliate), and sales person (second-tier affiliate). The master affiliate has an incentive to build his sales force (affiliates) and the sales force has the incentive to earn commissions and recruit other sales people so they can become managers (master affiliates) and have other people work for them.
There is a directory dedicated exclusively to two-tier affiliate programs, called the 2-Tier Affiliate Program Directory (www.2-tier.com).
Affiliate marketing has the potential to be even more effective when the two-tier model is part of the program. Two-tier affiliate programs can grow an affiliate program very quickly because they reward the affiliates for signing up additional affiliates. Basically, affiliate sites can sign up affiliate sites under them. When these second-tier affiliates make a sale, not only do they earn a commission or fee, but they also earn one for the affiliate—or master affiliate—themselves.
Do
| DO expand your reach over the Net with a two-tier program, which can grow your affiliate program very quickly. |
Here’s an example: Let’s say an affiliate joins a simple one-tier program. For every sale he makes, he gets a predetermined commission. So if your affiliate program paid a $20 commission on each sale an affiliate makes and he made 50 sales, his commission would be $1,000. Now let’s say you offer a two-tier program, and the affiliate—a master affiliate in this case—has recruited 50 Web sites under him to sell your product, and your program pays $10 commission for each sale that the second-tier affiliates make under the master affiliate. And let’s say that the 50 second-tier Web sites each make a sale. You would pay the same $1,000 to the master affiliate and an additional $10 commission per sale that his second-tier Web sites make. The master affiliate earns a total of $5,500—the $1,000 plus 50×$10. You can see the power and motivation that the two-tier program offers affiliates.
The advantage to the master affiliate is clear. He can receive continuous revenue from his second-tier affiliates virtually without any continued work promoting that specific program. But there are disadvantages too. The first is obvious. The master affiliate can “rest on his laurels,” so to speak, and let his second-tier affiliates do all the work. That’s a detriment to your affiliate program because your master affiliates are not giving their all promoting your product or service on their sites. They tend to spend more energy signing up second-tier affiliates as a means to generate revenue. If the second-tier affiliates also think this way, then your affiliate program will not be as effective.
While this drawback can harm your sales, another can harm your company’s reputation. Two-tier programs can cause you to lose control of your affiliate program. Unscrupulous affiliates may use e-mail spam in an attempt to build the tier below them. These affiliates will send e-mails to thousands of sites with no regard to their content, offering your product or service to sell if they join your program under the master affiliate.
No one likes spam—especially Webmasters. If your affiliates attempt to build a second-tier program under them using spam tactics, you run the great risk of harming your product or service and the reputation of your company. One solution to this problem is to personally approve or disapprove any second-tier affiliate that your affiliates sign up. This is an optimal, but time-consuming approach to the problem.
Another approach is to deal with the offending marketers after the fact. AllAdvantage.com (www.alladvantage.com) has a multi-tier commission program. (This is not a two-tier affiliate program; it has multiple-levels. See Figure 5.14.) They also have a firm anti-spam policy. It states “If you spam, you are out—your account will be closed, your referrals will be lost, and you will be ineligible for a new account.” They even post the spammers on their Web site.
Figure 5.14. The VegaPC.com banner is an example of using the word “FREE” in their offer.
Don’t
| DON’T harm the reputation of your product or service—or even your company. Don’t allow your first-tier affiliates to expand their second tier by using spam tactics. |
Another drawback to a two-tier program is communicating with the second-tier affiliates. Because they didn’t directly sign up through your program, you can’t capture their e-mail addresses. You need these to communicate and build a relationship with them.
Though a two-tier program can build your affiliate network quickly, the effort, time, and money that you spend dealing with the problems inherent in the system could be better spent rewarding existing affiliates