Beyond The Net
Affiliate programs can generate new revenue streams
From virtual computer stores to ads for matchmaking sites, affiliate programs are gaining attention because they are helping companies develop new revenue streams and make up for slashed advertising budgets.
Affiliate programs are designed to enable one website to link directly into the e-commerce system on another site, bringing new traffic to the host in exchange for a percentage of sales generated by the affiliate.
Amazon.com runs one of the best-known affiliate programs. The online bookseller -- which now sells far more than books -- drives sales by enabling other websites to create their own mini-Amazon stores.
Match.com, one of the most successful dating destinations on the Web, offers up to 70 percent commissions to affiliate sites that deliver visitors willing to pay for matchmaking services.
Whether you are looking for new sources of income or new sales leads, you may benefit from an affiliate program. If you have an audience but don't sell products yourself, consider participating in an affiliate program to earn commissions. If you have an e-commerce site and need customers, consider hosting an affiliate program to drive traffic and build your brand.
After reading my last column about new advertising models on the Web, Bruce Matthews, vice president of business development at TigerDirect, called to tell me why he found using an affiliate program a cost-effective compliment to other kinds of advertising.
''We went with an affiliate program because we pay only when we sell something,'' said Matthews. ``In a normal advertising relationship, you hope for a return on your investment, but it's harder to measure.''
TigerDirect.com, a Miami-based company that sells computer equipment and software, has some 15,000 online affiliates around the world. According to Matthews, nearly 10 percent of online sales now come from affiliate sites.
TigerDirect, a subsidiary of Systemax, which features some 50,000 computer products on its site, launched its affiliate program in the summer of 2000, Matthews said. But it was not until the company added a dedicated staff person to manage the program that it really took off.
''The affiliate manager's job is to identify the right partners. This is not so much a numbers game as a quality game,'' he said, noting about 10 percent of their 15,000 partners drive 98 percent of affiliate sales.
A good affiliate program brings the benefits of both an ad campaign and an outside sales force, but finding the right partners and building the right system can be complicated. If you are considering launching your own affiliate program, keep the following points in mind.
First, seek out partners who reach the right target audience but don't compete directly with you. For example, if you sell pet supplies, seek affiliates who have websites about the joys of pet ownership, but lack the capability to sell products.
Second, offer the right incentives. It's important to set a commission rate that's high enough to motivate partners but still leaves a profit after you cover your costs. For example, computer hardware sales have a very low margin so TigerDirect offers only a 2 percent commission to new affiliates. Match.com is a service-based business and can afford to offer a much higher percentage because there are minimal costs associated with each new registration.
Third, pay attention to your best partners. Most affiliate programs reap the greatest benefits from a few key partners. Pay attention to your best performers and offer exclusive incentives that they can pass on to their users.
Most importantly, make it easy for partners to set up an affiliate site.
Your biggest expense is likely to be the technology that makes it possible for affiliates to link into your online store and a tracking system that can measure results so you know how much to pay in commissions. Depending on your current system, adding an affiliate program can cost thousands or even hundreds of thousands of dollars, but if it's not simple to use, you'll never get a good return on your investment.
Amazon.com features a completely automated process that enables anyone with a website to set up their own store in a few minutes, even if they have limited technical skills. Visit Amazon.com and follow the links to their associates program to learn more about how they manage relationships with affiliates.
TigerDirect.com also provides a good model. On the affiliates page at their site, you'll find the message: ``It's Easy: We provide you with all of the tools you need as an Affiliate. You can add links to your site and access reports online so you can see how well you're doing -- We handle the order, shipment and billing. All you do is place the link and make money!''
First publication, The Miami Herald, Mon, May. 06, 2002
