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Q & A with the Experts...

logo_adbility.gif (398 bytes)Mark Welch,
Adbility

Mark Welch is a journalist, consumer advocate, and consultant. Since April 1996, he has maintained the "Web Publishers' Advertising Guide," a directory of advertising networks and opportunities for webmasters (http://www.adbility.com/wpag/). He recently withdrew from full-time practice as an estate planning attorney to found Adbility, an internet advertising consulting firm. Earlier, he was a reporter and editor for InfoWorld and BYTE magazines. He lives and works in Pleasanton, California.

Q: In your opinion, who has a worthwhile affiliate program and why?

A: Dozens of vendors have worthwhile affiliate programs, but this really is a very subjective thing. A particular affiliate program may be extremely worthwhile for one site, and a waste of time for another site. For example, I have two music pages: one is about Michael W. Smith (a Christian music artist) and the other is about Semisonic (a rock band). The SheetMusicPlus affiliate program is a great performer on the Michael W. Smith page, because a lot of fans come to that page and want to get sheet music or guitar tabs, which are sold by SheetMusicPlus but are generally not available in any other retail outlet. In contrast, SheetMusicPlus is an awful affiliate program for my Semisonic page, because the vendor does not carry any sheet music from this band and I doubt the same level of interest would exist for sheet music for this group anyway. Unfortunately, it's always easier to identify the "duds" in the affiliate program category: vendors like Spree.com whose affiliate programs provide virtually no benefits to affiliates, or vendors like Memory.Net that simply default on their payment promises. Each site must carefully evaluate each prospective vendor's product mix, pricing, commission structure, and payout thresholds before allocating any inventory to that vendor.

Q: How important are affiliate relationships to the overall marketing plan and what is the relevance to other parts of the plan? (such as banner ads, email marketing, directories, etc.)

A: In most cases, the e-commerce vendor with an affiliate program uses it to augment traditional advertising and promotional efforts. It should really never be the only avenue for marketing. but in most cases it will rank with PR as the best return-on-investment.

Affiliate marketing also can provide a pool of data that can be used when making other advertising buys, or seeking other types of exposure. For example, the results from a particular category of web sites who are participating in the affiliate program may lead the vendor to buy CPM or click-based advertising from other sites in the same category, if the measured return is good. Conversely, the affiliate program may help vendors identify and avoid dead-end site categories at much lower cost than traditional advertising.

I think it is important to track ALL marketing activity using the same set of tools that are used to track affiliates: don't use one system to measure results from CPM or pay-per-click advertising and a different model to evaluate your affiliate program. For vendors, it's all about cost-per-dollar-of-sales.

Q: Without naming names, are you aware of Web sites or publishers that have seen affiliate programs become a viable revenue stream?

A: Regrettably, I can count these sites on one hand: it is extremely rare for most sites to earn anything more than nominal income from affiliate programs. And the players whom I know are earning large sums of money, are extremely quiet about it because they don't want their revenue usurped by competitors.

One major niche that is profiting from affiliate programs are the "price comparison engines," which join multiple vendors programs and then get a commission no matter which way the consumer chooses to go. But I'm finding that many of these search engines don't include low-cost providers of products, and thus consumers are starting to distrust them. If they include low-cost sellers who can't afford to pay sales commissions, then revenue is lost. Catch-22.

I know that less than 2% of my advertising revenue last year came from affiliate program commissions, although that reflects a "niche premium" that my site commands for CPM advertising.



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