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Affiliate Marketing

KAREN LAKE: Take us back to the beginnings of Commission Junction.

LEX SISNEY: Back in 1998, I was running a small e-retailer called NetMedical, which sold nutritional supplies and health supplements, vitamins, those kinds of things. I didn't have an advertising budget, but about that time, Amazon.com had launched an affiliate program. It caught my attention. "Kind of revolutionary," I thought.

An online merchant like Amazon only paid for their advertising when it resulted in a qualified lead or a sale. So I launched an affiliate program for NetMedical. Affiliates would sign up every day. I thought that was just about the greatest thing that I'd ever seen. It was free exposure. I only paid for advertising when it brought in a sale.

There were also some problems associated with running an affiliate program. The first of which was either building or buying an effective tracking and recording system. There were some software solutions on the market at the time. As a small/mid-sized merchant, the price of that software was prohibitive. The software solutions only solved part of the problem because you also had to locate affiliates, recruit affiliates, approve them, provide realtime tracking and reporting for your affiliates, and cut the checks. Yet, I was aware of the great potential of affiliate programs.

The genesis of Commission Junction came about because at the same time as I was running an affiliate program as a merchant, I was also participating as an affiliate with several other merchant programs. Some were outright frauds, but they all had different user IDs and passwords to check stats. They all had different ways to provide reporting information. Some provided it in realtime, others sent it via e-mail, but what got my blood going is the fact that each merchant would only pay me as an affiliate when I met some payment threshold that they decided was acceptable. For instance, xyz.com would only cut a check for me, the affiliate, when my earnings were over $50.00 or perhaps, once per quarter. As an affiliate, that was very frustrating because I was doing all the work. I was receiving no payment up front, I was only being paid on a percentage of sales and I never received any reward for that work. So being aware of some of the problems involved with affiliate programs and having a glimmer of understanding of the vast potential at the time, I designed Commission Junction.

Commission Junction is a web based service. We help companies set up and manage their affiliate programs. We do it to provide unique advantages for both the merchant and the affiliate.

KAREN LAKE: Please define the word affiliate? What does it mean in the Internet setting?

LEX SISNEY: An affiliate allows online merchants like Amazon.com to advertise on other websites. The merchants only pay for that advertising when it results in a qualified lead or a sale.

KAREN LAKE: No matter what my product? In the case of Amazon, I list books as part of our cybercast. Then we receive a commission based on the people who buy those books through our cybercast.

LEX SISNEY: That's exactly right.

KAREN LAKE: So that can happen with books, with software, with chili, with anything anybody can sell?

LEX SISNEY: Yes, with any product or service under the sun.

KAREN LAKE: Is your program only for point of sale or are there other goals or markers that people get paid for?

LEX SISNEY: All of our merchant customers can run any type of program. Pay per click is an actual click-through on a link. Pay per lead occurs when a potential customer actually registers in some way or another at a merchant's site. For instance, they might join an opted e-mail list or fill out some other type of subscription form that's pay per lead. There's also pay per sale, which can either be a percentage of a sale or a flat dollar rate per sale.

KAREN LAKE: When you started in 1998, who was doing that in the marketplace?

LEX SISNEY: Two companies: BeFree out of Boston, Massachusetts and LinkShare out of New York.

KAREN LAKE: Has that changed over the last year?

LEX SISNEY: There are really just those three affiliate solutions providers. There's also ClickTrade, which is owned by Microsoft. They're starting to make some headway in terms of pay per lead and pay per sale. They started out as a pay per click network. In terms of merchants running affiliate programs, it has absolutely taken off in an incredible, incredible way. It still has a long way to go in terms of teaching merchants and affiliates the value of an affiliate program compared to doing CPM, or cost per impression banner advertisements around the Internet.

KAREN LAKE: Is banner advertising a direct competitor?

LEX SISNEY: No, it's not a direct competitor, but according to a recent report by Forrester Research, affiliate programs are about twice as effective on average as CPM banner advertisements.

KAREN LAKE: So, your message to the public is that this is a more effective way to get your product out there and make sales.

LEX SISNEY: Yes, it's kind of a one-two punch. It's the most cost effective way to advertise online, but it's also the most effective in terms of driving sales and revenues to the bottom line. [cont..]

Read more: Starting An Affiliate Program

by Karen Lake, strategyweek.com

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