www.RMIUG.org
July 10, 2007
"Affiliate Marketing: Making Money Selling Other People's Stuff Online"

MEETING SPONSORS

Microstaff (www.microstaff.com) provides refreshments

Copy Diva (www.copydiva.com) provides the audio-visual equipment

NCAR (www.ncar.ucar.edu) provides the facility

ONEWARE (www.ONEWARE.com) sponsors these minutes.

We thank all of them for their support.

-------------

About 60 people attended tonight's meeting. Josh Zapin facilitated and Bette Frick recorded the minutes.

----------------------
ANNOUNCEMENTS

Josh welcomes suggestions for topics for future meetings, please email Josh with your ideas.

World Usability Day: November 8 will focus on healthcare. www.WorldUsabilityDay.org.
Texturemedia.com is looking for technical employees

---------------
INTRODUCTION (Josh Zapin)

As legend has it, Jeff Bezos, CEO and founder of Amazon.com, chatted with a woman at a cocktail party about how she wanted to sell books about divorce on her web site. After that exchange, Bezos thought about having the woman link her site to Amazon.com and receive a commission on the book sales. This was the impetus for creating the "first on the Web" Amazon.com Associates Program.

That was 1996 and, if you believe the legend, the Affiliate Marketing industry was born.

10 years later, Affiliate Marketing has grown, according to Marketing Sherpa, into a $6.5 Billion industry. Thousands of people, known as affiliates, literally earn their livings (or, as in yours truly, some extra coffee money), selling other people's stuff online. Stuff that they never have to touch, ship, or handle in anyway.

----------------------
ABOUT THE SPEAKERS

Bob Dunlap, director of marketing for ClickBank, one of the world's largest online retailer for buyers and sellers of digitally delivered products and services, has a long and successful career in the area of planning, developing, launching, and marketing high tech products for global markets. He came to ClickBank nearly two years ago and since that time has worked closely with the company's nearly 11,000 product vendors and 100,000 active affiliates. Bob will be addressing the functionality of online networks and what the future holds for those engaged with affiliate marketing.

Dan Murray (Dan@RavenwoodMarketing.com) is Internet Marketing Strategist at Ravenwood Marketing, a performance-based search engine marketing firm in Boulder, and has spent the last five years as an affiliate. He will be speaking from the affiliate perspective, discussing various affiliate business models, networks and how affiliate marketing works. Dan will also cover some economic realities of the field as well as "a day in the life of an affiliate" and some additional resources for affiliates.

------------------------
BOB DUNLAP

ClickBank was founded in 1998. The model combines e-retailing with affiliate network for downloadable goods. 2006 revenue was $200 million. ClickBank processes over 20,000 transactions per day. 70% of sales are affiliate-assisted. Definition of affiliate marketing: A method of promoting web buinesses (merchants/advertisers) in which an affiliate (publisher) is rewarded for every visitor, subscriber, customer, and/or sale provided through his/her efforts." (Source: Wikipedia)

The affiliate creates sales and gets a commission for the sale. Who uses affiliate marketing? Not just Amazon and WalMart; it's REI and Blinds.com, and golfballs.com and other very small businesses. The attraction is that you can be an entrepreneur with freedom to do your own thing. This has created a new class of entrepreneurs.

Affiliate Networks:

  • Third party providing services to both merchants and affiliates
  • Tools to match merchants and affiliates
  • "Manage" affiliates on behalf of merchants
  • Handle tracking of clicks and sales
  • Make commission payments to affiliates
  • Provide analytics and reporting interface
  • Enforce terms of service
Top Tier Networks
  • Linkshare
  • Commission Junction (CJ)
  • Adsmarket.com
  • Clickbank
  • Shareasale
  • Double click performics
Merchants' Perspective
Pros/Benefits
  • Incremental channel
  • Complimentary initiative
  • Pay for performance
  • Can start quickly
  • Extend reach into new market segments significantly
  • Target new segments
  • Easy to measure results
Cons/Challenges
  • Internal buy-in
  • 80/20 rule applies (more like 90/10: 10% of affiliates will produce 90% of your revenue), so focus on the 10%
  • Program management
  • Recruiting new affiliates
  • Monitoring affiliate activity
  • Brand protection (tricky topic)
  • "Rogue" affiliates
Hot Topics In Affiliate Marketing
  • Confusion on what affiliate marketing is
  • Competing with affiliates on search
  • Bidding on brand and trademark terms
  • Tracking and awarding correct affiliate credit
  • Fraud and unlawful activity
  • Privacy vs. monitoring (affiliates want to be left alone to do their job; merchants want to know what their affiliates are doing); there's a fine line between the two.
The Future:
  • Micro-niche marketing/merchandising (Hammocks.com, birdcages.com, binoculars.com)
  • Further development and exploitation of the "long tail"of products and services
  • Merchants working even more closely with key affiliates as business partners
  • Improved tracking, analytics, and reporting
  • Monetizing Web 2.0

QUESTIONS OF BOB:
The stigma of affiliate marketing is the e-mail delivery of messages; another problem is that the merchant is unable to see where the lead is coming from. Bob said these were valid points (10% and 90% rule); monitoring is a big issue. Make sure you have the right terms of service and enforce them. The more restrictions on the affiliates, the more they will resist working with you.

Clickbank's main products are software products, ebooks, games, ringtones, music files.

Using managed services may allow you to scale your business.

Good example of a brand that got hurt by affiliate marketing was Vonage. Also, Victoria's Secret (both issues happened a few years ago).

Hard to characterize the 90% of sales; usually, these are not people doing it as a hobby, but rather, they do it for a living.

Can it work for more complicated sales cycles? Yes, although most of those want instant gratification.

The last click gets all the credit and it's hard to track correlation v. causation when there's a lot of clicks in more and more complex products (complex, multi-channel marketing).

------------------------
DAN MURRAY

Life as an affiliate marketer

Ravenwood does not have outside funding; it's profitable but not taking on new customers. He's a big fan of affiliate marketing. Ravenwood started 5 years ago and has 3 employees in the Boulder location.

What is affiliate marketing? "The use of third party specialists who are capable of targeting audiences on behalf of advertisers/merchants and who are also willing to take financial risks in the delivery and performance of the traffic, in the form of no/low upfront fees and instead higher backend/success payments (commission)." (VinnyLingham.com)

How does affiliate marketing differ from other marketing?

  • You only get paid on performance (it's not about traffic, clicks.only sales)
  • You don't commit to any volume levels.
  • You can easily drop a client.
  • Affiliates can share in risk and upside.
  • There is trust involved.
  • More independence.
  • There are rules, though! (terms of service; contractual legal agreements)
Affiliate Business Models
  • Organic search engine optimization
  • Paid search engine marketing
  • e-mail marketing
  • Social networking
  • Review sites
  • Aggregation sites
  • Widgets
Economics of Affiliate Marketing
  • Click cost = 24 cents a click
  • It takes 25 clicks for affiliate to land order (4% conversion rate)
  • Average order = $30
  • Merchant pays 12% ($3.60)
  • Made 4 sales x $3.60 per sale=$14.40
  • Profit: $14.40-$24 = $-9.60)
  • (Upside down means you lost money)
  • Smaller affiliates may get $150-200 in payments on $100 in clicks
  • Clicks are priced on supply and demand; you can dial that up and down.
A Day In The Life
  • Analyze results from recent campaigns
  • Respond to email inquiry on new offers
  • Conference call w/merchant on rate card
  • Remove prohibited keyword from account
  • Staying current on latest blogs and newsletters
  • Pay credit cards online
  • Find out why conversion rate dropped on one campaign
  • Ask new merchant about PPC rules
  • Build experimental campaign
Controversy In The Field
  • Trademark bidding
  • Adware/spyware/malware
  • "Rogue" affiliates
  • Turf war with internal marketing teams
  • Agency conflict
  • Branding concerns (read the brand manual)
Future directions
  • Affiliates migrating to agencies
  • "Select few" affiliates get special perks
  • Affiliate-developed widgets (software to promote the merchant's products)
  • Marketing $ going to affiliates from other channels

QUESTIONS OF DAN

Do you or others specialize in certain product lines?
Yes, definitely; some focus on hosting or insurance, for example. Dan is more broadly oriented. Dan does direct linking through Google and MSN.

Do you get to control the landing page?
In general, they give you the landing page and that's what you use. If you have a good relationship, you can request a landing page.

If you want to add a new merchant, how to search for them?
One thing you look at is earnings per click. He recommends always keeping a "bull pen" of possible new merchants to add when you have time. A lot of affiliates are doing mobile clicks, but Dan is not.

------------------------
QUESTIONS FOR DAN & BOB

Q. Can you use affiliate marketing for a startup?
A. You can do it as long as you can get affiliates interested.

Dan often gives merchants usability suggestions.

Q. What is your attitude toward geography?
A. Dan: local search, geo targeting is going to be big; maps will be big. DashLocal, founded by Dennis Yu in the audience, is doing local SEM.
Audience member comment: Google has unpublished policy that there is only one affiliate per company on page one in organic results.

Q. As an affiliate using PPC, how much of a problem is fraud?
A. Dan: can't really monitor it. Some affiliates have gotten refunds based on documented click fraud. Dan thinks it's a cost of doing business.

Q. Movement toward affiliates using landing pages?
A. At various times, there have been trends that pushed affiliates towards or away from building their own landing pages. It can be hard at times to create landing pages that Google deems quality pages.

Q. Is it more attractive to promote a merchant who has its own tracking program?
A. Dan: We grow that relationship slowly. Top tier affiliate networks are a known quantity, totally bombproof but they take their cut.

Q. Are consumers getting more sophisticated in pursuing a check back, like Ebates?
A. Dan doesn't think it's growing; Audience comment: it was bigger five years ago. It's against terms of service.

If you can sell it online, you can use an affiliate.

Talk about the writing the ad copy itself: Testing is required! Try to get a lot of different trials going. Dan says he's not a copywriting expert. So try several ideas on a small scale and you'll find out what works.

LINKS

http://www.clickbank.com
http://www.ravenwoodmarketing.com
Abestweb.com (affiliate discussions)
QuitYourDayJob.com - Jeremy Palmer
AffiliateTip.com (Dan highly recommends)
Affiliate Summit conference
VinnyLingham.com Vinny Lingham blog


Select a Year

2008 Minutes
2007 Minutes
2006 Minutes
2005 Minutes
2004 Minutes
2003 Minutes
2002 Minutes
2001 Minutes
2000 Minutes
1999 Minutes
1998 Minutes
1997 Minutes
1996 Minutes
1995 Minutes
1994 Minutes

Copyright 2005 RMIUG.org, All Rights Reserved