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If you thought e-commerce died with the dot-coms, guess again. Affiliate marketing is fueling a grass-roots rebound in Internet retailing.
Jeannie Otero wanted to change her life.
A single mom with two young daughters, she hated the three-hour round-trip commute to her job in Miami, time she would rather spend with her girls. She dreamed about starting her own business, thought about investing in real estate. But she had the age-old problem: You have to have money to make money.
Then, she heard that a good way to make money was to build a Web site that connected shoppers with online merchants. "I put up this funky little site called PartyClowns.com," Otero laughed. "I didn't know what I was doing at all. It had a bunch of links to coupons, and it didn't actually have anything about party clowns." But it was the first step in her road back home.
Otero had entered the world of affiliate marketing, a sort of parallel economy in which anyone at all can become an online retailer with almost no investment or experience. Two years later, she's generating a good supplemental income and looking forward to quitting her day job. She's discovered that all an affiliate needs is a combination of some smarts, some personality, some common sense and a ton of ambition.
Affiliate marketing has quietly become a booming industry, involving thousands of U.S. corporations, millions of affiliates and hundreds of millions of dollars in transactions. If you haven't heard of it, here's the deal: You sign on as a commission-only salesperson for an Internet retailer. You use all the creativity, intelligence and perspiration you can muster to get customers for that merchant - customers it might not find on its own. For every customer you refer to the merchant, whether it's for a paid purchase, a new subscription or a name for its email-marketing list, you get a commission. Because merchants pay only for results, they consider affiliate programs a form of advertising called pay-for-performance.
Affiliates have the whole world of commerce at their fingertips. They can put together an array of products from a global selection of retailers and offer them to their own customers. They typically build one or more Web sites that mix content with links to products on merchants' e-commerce sites, and sometimes feature products in email newsletters or place ads on others' sites. They never see or touch the merchandise themselves; the merchant handles all aspects of payment, warehousing and shipping. They get paid once a month, or whenever their commissions reach a pre-determined threshold.
Sounds easy, doesn't it? It's not. While just about anyone can sign up for an affiliate program and put up a site, earning those nice commission checks is another story. While figures are sparse, the Internet Affiliate Marketing Association estimates that fewer than 5 percent of Internet affiliates have revenue of over $100 a month. That's because affiliates face some of the same challenges as any other entrepreneur. Inexperience and a lack of basic business skills short-circuit some people's attempts. Others don't have the drive to persevere without a boss standing over them.
According to AffTrack, a service provider that aggregates statistics about the industry, 2 percent of affiliates make 98 percent of the commissions. "Affiliation is so easy to get into, that you might only have 10 percent of people who sign up actively promoting merchants, and a smaller amount still might be making any real money," said AffTrack CEO Scott McNulty.
Like any other frontier, the affiliate world is rambunctious and confusing. There's more than a whiff of the old envelope-stuffing scam to this industry, where you'll find site after site promising that you can earn thousands of dollars working at home a few hours a day. It's also gotten a bad rap from unethical affiliates, who bear some guilt for contributing to the spam deluge. When evaluating affiliate programs, don't forget to apply the rule that if something sounds too good to be true, it probably isn't true.
Retailers know affiliates can drive sales and keep customers coming back, but they give most of their attention to the top producers. "Retailers have begun to think about the way affiliate programs will work for them in a more efficient way in terms of driving quality traffic and repeat traffic," said Carrie Johnson, senior analyst with Forrester Research.
This doesn't mean that there's less opportunity for you as an affiliate. But it does mean that you'll have to work smarter and better to be part of that successful 2 percent. Like everyone else in this tight-fisted era, online retailers expect more for their money.
While there's more competition, there is still plenty of opportunity. Affiliate marketing is the second wave of transformation in the global marketplace. The first wave, the rise of the commercial Internet, put the power of information in the hands of consumers, letting them compare prices among merchants anywhere in the world. This second wave has leveled the playing field between huge conglomerates and individuals who represent online merchants.
Raison d'Etre
Sending traffic to merchants' sites is the affiliate's major goal. While you'll find plenty of affiliate sites that are just lists of links, many experts say that it's unique content that draws visitors and keeps them there long enough to get interested in your merchant's offerings. "Your site has to have a reason to exist," said Brad Waller, vice president of affiliate and business development for EPage, a content syndicator. "It's rare that someone can create a site and make money from affiliation without doing anything himself. No one will look at it because it's not original."
This doesn't mean that you have to be a professional Web designer or an experienced writer. Most affiliate sites are highly personal; like Otero's, they're often sparked by a personal interest in a particular subject.
"The personal touch makes a big difference," Otero said. For example, she created a special Web page with a rave review of one baby item, just because she thought it was so neat. "I had eight visitors and made $20," she said. Now, she writes introductions and personal notes for most of her Web pages and plans to write a personal review for the best product in each category for her BabyShoppingGuide.com site.
A smart way to decide what your first site should be about is to choose an audience, according to Robert Bennett, an affiliate with eight years' experience who also runs affiliate programs for several ISPs owned by his company, Archieboy Holdings. "Do you have any connections in any industry, or any opportunity to market to a certain group that other individuals don't?" he asked. Continued on Page 2...
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