Chapter 9 Affiliate Programs Outline 9 1 Introduction

Chapter 9, Affiliate Programs Outline 9. 1 Introduction 9. 2 How an Affiliate Program Works 9. 3 Selecting an Affiliate-Program Reward Structure 9. 3. 1 Pay-Per-Click Model 9. 3. 2 Pay-Per-Lead Model 9. 3. 3 Pay-Per-Sale Model 9. 3. 4 Multi-Tiered Model 9. 3. 5 Hybrid Model 9. 3. 6 CPM (Cost-Per-Thousand Model 9. 4 Attracting Affiliates 9. 5 Monitoring An Affiliate Program 9. 6 Affiliate Solution Providers 9. 6. 1 Commission Junction 9. 6. 2 Link. Share 9. 6. 3 Be Free 9. 6. 4 Click. Trade 9. 6. 5 Plug. In. Go. com 9. 7 Web-site “Stickiness” 2001 Prentice Hall, Inc. All rights reserved.

Chapter 9, Affiliate Programs Outline 9. 8 9. 9 9. 10 9. 11 9. 12 Becoming an Affiliate Examples of Affiliate Programs Affiliate Program Examples By Industry Costs and Taxation of Affiliate Programs Affiliate-Program Directories and Search Engines 2001 Prentice Hall, Inc. All rights reserved.

9. 1 Introduction • Affiliate program – A form of partnership in which a company pays affiliates (other companies or individuals) for prespecified 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 2001 Prentice Hall, Inc. All rights reserved.

9. 2 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 2001 Prentice Hall, Inc. All rights reserved.

9. 3 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 2001 Prentice Hall, Inc. All rights reserved.

9. 3. 1 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 – Go. To and Lycos 2001 Prentice Hall, Inc. All rights reserved.

9. 3. 2 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 2001 Prentice Hall, Inc. All rights reserved.

9. 3. 3 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 2001 Prentice Hall, Inc. All rights reserved.

9. 3. 4 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 • Value. Click 2001 Prentice Hall, Inc. All rights reserved.

9. 3. 5 Hybrid Model • Hybrid model – – Combines features of multiple models Can make an affiliate program more competitive Can increase the cost for the merchant Free. Shop. com 2001 Prentice Hall, Inc. All rights reserved.

9. 3. 6 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 2001 Prentice Hall, Inc. All rights reserved.

9. 4 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 – Deja. com • Directory – A site that provides aggregated information and links to sites relevant to specific topics • Determine reward structures and commission amounts of competitors 2001 Prentice Hall, Inc. All rights reserved.

9. 5 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, hosting and updating mirror pages, payments, marketing, credit-card processing and customer service • Affiliate program software – Affiliate. Zone. com, My Affiliate Program and Pro-TRACK 2001 Prentice Hall, Inc. All rights reserved.

9. 6 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 2001 Prentice Hall, Inc. All rights reserved.

9. 6. 1 Commission Junction • Commission Junction offers design, implementation and management services (B 2 B 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 • En. Context solution • Services to merchants include Smart. Match Smart. Track Smart. Zones Smart. Stats Smart. Serve Smart. Pay 2001 Prentice Hall, Inc. All rights reserved.

9. 6. 2 Link. Share • Link. Share offers affiliate programs for B 2 B and B 2 C • Affiliates can join pay-per-click, pay-per-lead and pay-per-sale programs for free • Merchants can use The Link. Share Network , a Private Label Network or a combination of the two to develop affiliate programs – Link. Share Network provides merchants with access to companies that have become affiliates through Link. Share • Link. Share Synergy – Private Label Network allows merchants to sign up affiliates through their own Web sites 2001 Prentice Hall, Inc. All rights reserved.

9. 6. 2 Link. Share’s home page. (Courtesy of Link. Share Corporation. ) 2001 Prentice Hall, Inc. All rights reserved.

9. 6. 3 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 2001 Prentice Hall, Inc. All rights reserved.

9. 6. 3 Be Free’s performance-marketing for page merchant. (Courtesy of Be Free, Inc. ) 2001 Prentice Hall, Inc. All rights reserved.

9. 6. 3 Be Free demonstration: How promotions work, step 1. (Courtesy of Be Free, Inc. ) 2001 Prentice Hall, Inc. All rights reserved.

9. 6. 4 Click. Trade • Click. Trade is part of Microsoft b. Central • 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 2001 Prentice Hall, Inc. All rights reserved.

9. 6. 5 Plug. In. Go. com • Plug. In. Go. com Affiliate Network – – – – Web-based solution for affiliate programs Affiliate Mail Center Online message boards Rewards members through Plug. In. Go 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 2001 Prentice Hall, Inc. All rights reserved.

9. 7 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 Cross. Commerce – Can control their brands’ presentation on affiliate sites 2001 Prentice Hall, Inc. All rights reserved.

9. 7 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 2001 Prentice Hall, Inc. All rights reserved.

9. 7 Vstore. com Feature Sample store from vstore. com. (Courtesy of Vcommerce Corporation. ) 2001 Prentice Hall, Inc. All rights reserved.

9. 8 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 2001 Prentice Hall, Inc. All rights reserved.

9. 8 Becoming an Affiliate Adbility’s specific segments within an industry. (Courtesy of Adbility. com. ) 2001 Prentice Hall, Inc. All rights reserved.

9. 8 Becoming an Affiliate Adbility’s listing of affiliate programs for books in the “general” segment. (Courtesy of Adbility. com. ) 2001 Prentice Hall, Inc. All rights reserved.

9. 8 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 • 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 2001 Prentice Hall, Inc. All rights reserved.

9. 9 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 2001 Prentice Hall, Inc. All rights reserved.

9. 9 Examples of Affiliate Programs • Baby. Center offers a commission-based affiliate program • Pays members for all sales originating from their sites • Pays affiliates for their own personal shopping through the links on their sites • Affiliates are paid on a quarterly basis • Baby. Center Affiliate Gateway provides earning reports, images and links that can be downloaded to connect to the merchant site 2001 Prentice Hall, Inc. All rights reserved.

9. 9 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 • My. B&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 2001 Prentice Hall, Inc. All rights reserved.

9. 11 Costs and Taxation of Affiliate Programs • Costs – Merchant is required to pay the affiliate, with the amount depending on the prespecified terms of the program • Costs can rise with increases in the number of click-throughs, purchases or other specified actions – Losing visitors through affiliate links – 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 2001 Prentice Hall, Inc. All rights reserved.

9. 12 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, Associate. Programs. com, Refer-it and Affiliate. Find. com 2001 Prentice Hall, Inc. All rights reserved.

9. 12 Affiliate-Program Directories and Search Engines Associate-It’s home page (Courtesy of i. Seed Inc. ) 2001 Prentice Hall, Inc. All rights reserved.