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

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

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

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

GoTo and Lycos

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

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

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

ValueClick

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

FreeShop.com

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

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

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 AffiliateZone.com, My Affiliate Program and

Pro-TRACK

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

9.6.1 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

9.6.2 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

9.6.2 LinkShare

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

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

9.6.3 Be Free

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

9.6.3 Be Free

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

9.6.4 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

9.6.5 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

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 CrossCommerce

Can control their brands’ presentation on affiliate sites

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

9.7 Vstore.com Feature

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

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 

9.8 Becoming an Affiliate

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

9.8 Becoming an Affiliate

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

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

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

9.9 Examples of Affiliate Programs

BabyCenter 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

BabyCenter Affiliate Gateway provides earning reports, images and links that can be downloaded to connect to the merchant site

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

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

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

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, AssociatePrograms.com, Refer-it and AffiliateFind.com

9.12 Affiliate-Program Directories and Search Engines

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