Affiliate Programs

Introduction

• Affiliate program – A form of partnership in which a company pays affiliates

(other companies or individuals) for pre-specified actions taken by visitors who click-through from an affiliate site to a merchant site

• In this chapter, we discuss: – Costs

– Benefits

– Program reward structures

– Program-building options• Tracking and affiliate solution providers

– Directories and search engines that provide affiliate- and partnering-program resources

How an Affiliate Program Works

• New income streams• Merchant

– The company that advertises on another company’s site

• Affiliate– The company hosting the advertising in return for a reward

based on predetermined terms– Affiliates act as an extended sales force

• How it works– Merchant places banner on affiliate’s Web site– When a person clicks through to the merchant’s site via the

advertisement on the affiliate’s site and makes a purchase, a commission on the sale is typically awarded to the affiliate

• “Win-win" situation

Selecting an Affiliate-Program Reward Structure

• Program reward structures– Pay-per-click

– Pay-per-lead

– Pay-per-sale

– CPM (cost-per-thousand)

– Multi-level, or multi-tiered

– Hybrid model

• Implementation of appropriate reward structure(s) depends on the type of site and its product mix

Pay-Per-Click Model

• Pay-per-click model – Rewards an affiliate for each click-through that is generated

from a banner ad hosted by the affiliate• A click-through is when a person clicks on the banner

advertisement on the affiliate site and is taken to the merchant site

– Easy for affiliates to generate dishonest click-throughs to “run up the numbers”

– Sites that depend on advertising rates use this model to increase traffic

– GoTo and Lycos

Pay-Per-Lead Model

• Pay-per-lead model– Rewards affiliates based on the number of qualified leads

generated• Potential customers that have expressed interest in a product or

service and meet requirements determined by the company

• Can include new customer registrations and having visitors sign up to receive a newsletter or use a free demo

• Mailsweeps.com

Pay-Per-Sale Model

• Pay-per-sale model– Also known as the commission-based model

– Compensates its affiliates for each sale resulting from affiliate-hosted advertisements

– Rewards to the affiliates based on sales are typically larger– express.com

– Virtual store • Allows affiliates to sell merchant’s products without requiring

visitor to leave the affiliate’s site

Multi-Tiered Model

• Multi-tiered model– Also known as the multi-level model

• New affiliates are recruited by current affiliates, who are then rewarded with a percentage of the new affiliates’ revenues

– Two-tiered model involves only the original affiliate and its recruits, also known as subaffiliates

• ValueClick

Hybrid Model

• Hybrid model– Combines features of multiple models

– Can make an affiliate program more competitive

– Can increase the cost for the merchant– FreeShop.com

CPM (Cost-Per-Thousand) Model

• CPM (cost-per-thousand) model – Requires the merchant to pay the affiliate a fee for every

1000 visitors that simply view the merchant’s banner on the affiliate site

– Not used as often as the other models because merchants prefer to pay for actions

– CPM is often used to price traditional advertising methods

Attracting Affiliates

• Grow affiliate program and increase profits• Try posting announcements on message boards• Newsgroups

– Online discussion groups– Spamming and unwanted advertising are unwelcome and can

against rules

• Use Directory – A site that provides aggregated information and links to sites

relevant to specific topics – META tags

• Researching companies to see what kind of affiliate programs they may offer can help a merchant.– Determine reward structures and commission amounts of

competitors

Monitoring An Affiliate Program

• Use tracking information – To analyze effectiveness of programs, make improvements,

monitor payment schedules and identify strongest affiliates

• Creating tracking solutions– By creating duplicates of every Web page, each affiliate can

link to an individually assigned page• Referred visitors will click through to only the mirror page

(the duplicate page) designated for that specific affiliate, allowing companies to record these visits separately

• Costs include – time to construct mirror pages, – hosting and updating mirror pages, – payments, marketing, – credit-card processing and – customer service

Affiliate Solution Providers

• Affiliate solution providers – Companies that can provide end-to-end solutions for a

company’s affiliate program

– Recruit affiliates and merchants to participate in programs, conduct accurate tracking, provide detailed reporting for merchants and affiliates and distribute commissions

– Fees may be required for affiliate solution services

Commission Junction

• Commission Junction offers design, implementation and management services (B2B affiliations)– No fee to become affiliate, merchants charged a fee– Application service is Web based

• Do not have to download or upgrade any software

– Instant tracking and reporting in real time– Makes monthly payments to affiliates for merchants

• EnContext solution • Services to merchants include SmartMatch

SmartTrack SmartZones SmartStats SmartServe SmartPay

LinkShare

• LinkShare offers affiliate programs for B2B and B2C

• Affiliates can join pay-per-click, pay-per-lead and pay-per-sale programs for free

• Merchants can use The LinkShare Network , a Private Label Network or a combination of the two to develop affiliate programs– LinkShare Network provides merchants with access to

companies that have become affiliates through LinkShare

• LinkShare Synergy

– Private Label Network allows merchants to sign up affiliates through their own Web sites

LinkShare

LinkShare’s home page. (Courtesy of LinkShare Corporation.)

Be Free

• Be Free, Inc. BFAST (affiliate-program enabler)– Allows companies to target affiliates in a segmented manner

– Rewards and compensation determined by the merchant

– Be Free tracks impressions, click-throughs and sales for both the merchant and its affiliate partners

– Be Free records each time a promotion is viewed or acted upon

– When a sale is made, Be Free receives information through its connection with the merchant’s site

– Reporting.net is used to provide performance information

Be Free

Be Free’s performance-marketing for page merchant. (Courtesy of Be Free, Inc.)

Be Free

Be Free demonstration: How promotions work, step 1. (Courtesy of Be Free, Inc.)

ClickTrade

• ClickTrade is part of Microsoft bCentral• Web-based service provides tracking and payment

services• Pay-per-lead, pay-per-sale or hybrid-model

program• Merchants have control over affiliate links and

banners • Charges 30 percent of any merchant payments to

affiliates • Companies can sign up to be affiliates for free • Provides reports including tracking of affiliates

PlugInGo.com

• PlugInGo.com Affiliate Network – Web-based solution for affiliate programs

– Affiliate Mail Center

– Online message boards

– Rewards members through PlugInGo Points that Pay

– Reports can be produced daily, weekly or monthly

– Performs payment-processing services

– Companies can join as affiliates for free

– Charges one-time setup fee and a commission of two percent of every sale or lead made through the network

Web-site “Stickiness”

• Stickiness of a site – The ability to keep people at a site and interested in its

content

• Update content frequently, carefully organize a site, provide quality customer service to keep visitors browsing

• Merchants can offer virtual stores to affiliates– Offer e-commerce capabilities to sites that want to

participate in affiliate programs, but also want to keep visitors at their sites

• Nexchange and CrossCommerce

– Can control their brands’ presentation on affiliate sites

Vstore.com Feature

• Vcommerce Corporation provides sites with store-hosting opportunities through vstore.com – Manages credit-card transactions, order fulfillment,

customer service and hosting of the storefront– Provides step-by-step process for design and

implementation • Select a category from the listed choices• Select a subcategory to further concentrate on a particular

market• Choose a store design, store colors and store typography• Personalize store with a name, slogan and logo. • Provide personal information such as e-mail address, name,

phone number and commission payment information

Vstore.com Feature

Sample store from vstore.com. (Courtesy of Vcommerce Corporation.)

Becoming an Affiliate

• Low barriers to entry• Usually free• Joining too many programs may make the site

look cluttered and unprofessional• Identify a target market• Sign up directly at the merchant’s site or join

through an affiliate solution provider or affiliate directory

• Adbility – Offers information on various forms of marketing, including

affiliate programs 

Becoming an Affiliate

Adbility’s specific segments within an industry. (Courtesy of Adbility.com.)

Becoming an Affiliate

Adbility’s listing of affiliate programs for books in the “general” segment. (Courtesy of Adbility.com.)

Becoming an Affiliate

• Some programs have requirements to become an affiliate – Site statistics, information about visitors and a tax

identification number

• Hidden fees and restrictions in some affiliate contracts– Not allowing companies to join other affiliate programs

• Note the reputation of the merchant • Most affiliate programs require a person or

company to have a Web site to participate • Some programs allow individuals to join by

placing affiliate links on their personal sites

Examples of Affiliate Programs

• Amazon.com Associate Program – Pioneer in affiliate marketing

– Sites will be rejected if they contain “amazon” or variations of the word in the domain names, promote violence, are discriminatory or contain sexual material or other content deemed inappropriate

– Associates Central • provides graphics, links, earnings and traffic information

– Affiliates can provide an Amazon.com search box on its site or link to the home page or recommended books

– Joining is free and pays up to 15 percent in referral fees

Barnes & Noble Feature

• Barnes & Noble offers Affiliate Network – Potential affiliates must complete online application

– Gives options for links, banners and virtual storefronts

– affiliate.net provides affiliate performance reports

– Sends a commission check to affiliates every three months

• MyB&NLink program allows people to earn commissions by placing a link to the Web site in their e-mails– Restrictions include spamming, pornography, hate mail and

illegal activities

Costs and Taxation of Affiliate Programs

• Costs– Merchant is required to pay the affiliate, with the amount

depending on the pre-specified terms of the program• Costs can rise with increases in the number of click-throughs,

purchases or other specified actions

– Include losing visitors through affiliate links

– Include developing and implementing the program

• Internet affiliate program taxation– Commissions collected by affiliates are considered income

and will be taxed

– State taxation on sales made through affiliates in states other than the state where the merchant is located has not been settled

Affiliate-Program Directories and Search Engines

• Affiliate-program directories and search engines – Provide parties who are interested in becoming affiliates

with programs that match their interests, and parties who are interested in finding affiliates with the different options available to them

• Associate-It, AssociatePrograms.com, Refer-it and AffiliateFind.com

Affiliate-Program Directories and Search Engines

Associate-It’s home page (Courtesy of iSeed Inc.)