Issue 42 - A New Perspective ...

Monday, September 6, 2010

Issue 42

An Advertiser's Hesitation...

From the Desk of Steve Little...

As many of you already know, affiliate programs can not only be an excellent method of generating sales/actions, but can be done so with little financial risk once you're up and running. Typically, there are two ways of setting up an affiliate program - using a third party company to provide just about everything (a network of affiliates, tracking system, payment processing, et. al - see sidebar to the right for a description of Affiliate Networks) or doing it yourself.

Some companies choose to manage their own affiliate programs, but many more advertisers choose using third party companies like Commission Junction and clickXchange because they offer one-stop shopping.

A handful of advertisers choose to run their own affiliate program (or just don't run any at all) because of the fees associated with using third party networks. For example, if you paid 10% sales commission to your affiliates and your product sold for $20, you would owe your affiliate $2 for each sale. In addition to that, the third party company (providing the affiliate network, tracking system and payment processing) might receive a 30% commission of the commission paid to the affiliate, or $0.60 in this example ($2 x 30%).

AFFILIATE NETWORKS

If you're not familiar with affiliate programs, let me take a few seconds to explain. As an advertiser, you can offer to pay other web site owners a fee if they send you a visitor who takes some predefined action at your site, such as signing up for a newsletter or purchasing a product. The benefit for you is that you only pay when a referred visitor takes that specified action. If the affiliate sends 100,000 visitors your way, but none of them purchase anything, you pay nothing. Likewise, if an affiliate refers one visitor to your site and that visitor makes a $100,000 purchase, then you owe that affiliate a hefty commission.

Affiliate networks like LinkShare, Commission Junction and BeFree, provide a network of affiliates into which advertisers can quickly tap into. The affiliate network also provides the tracking and reporting system, as well as check-cutting services to the affiliates. Affiliate networks usually charge set up fees, commission fees and/or monthly minimum fees that in total, can range from a few hundred dollars per month to tens of thousands.

On top of this, some firms require that fees you pay them reach some minimum threshold (e.g. $500 per month) and if you don't meet the minimum, you're charged $500 anyway. But, advertisers may now have another choice...

POP-UNDERS - FRIEND OR FOE?

As you know, pop-unders (see sidebar at right) are used extensively throughout the web by large companies like Orbitz and Microsoft's Expedia to hobbyists and small business owners. Now, this popular advertising technique has found its way into affiliate programs.

Instead of taking a 30% network commission from the advertiser (see above), affiliate networks, such as Dark Blue (www.darkblue.com), are using pop-unders instead.

POP UNDERS

What's a pop-under? A pop-under is a form advertising that displays the advertiser's web site in a browser window that loads behind another web site. For an example plus a whole list of questions about pop-unders and answers to those questions, visit the FAQ page for the Guaranteed Visitors program.

Here's how it works. Let's say you're an advertiser and are using the services of Dark Blue. An affiliate in their network agrees to place a banner, text link or other form of advertising on their site or in their newsletter. When a visitor to the affiliate's site clicks on your ad, they are taken to your site. At that time, DarkBlue loads a pop-under window behind your site. When the visitor closes the window which contained your site, they'll see the pop-under ad.

BUT DOES IT WORK?

DarkBlue began offering this compensation model in November 2002. Currently, they have 100 active campaigns and 10,000 affiliates. In comparison, Commission Junction, who's been around for some time now, has about 1275 advertisers and "hundreds of thousands of affiliates" at the time of this writing.

Of the all the advertisers at DarkBlue, only two of them have left since DarkBlue began this model. And why should they? There are no startup costs nor monthly minimums for the advertisers, so they have nothing to lose and everything to gain. Therefore, it's a totally risk-free way for advertisers to generate sales.

Now, DarkBlue may change its pricing model in the future, but for now, it's a "no-brainer" -- financially speaking.

IS IT RIGHT FOR ME?

Of course, Dark Blue and other affiliate networks want quality advertisers and have guidelines on what they will and won't accept, so you'll have to check with the affiliate network to which you are applying. However, if you're just starting out, have your own product or service, are willing to pay commissions and don't mind pop-unders being displayed at your site, then affiliate networks like Dark Blue just might be for you.

If you once considered affiliate networks, but balked at the costs associated with doing so, now be a good time to re-evaluate that decision. Combine that with the fact that there are far fewer advertisers out there than there were during the peak of the "dot-com boom," means that their publishers would not only be more likely find your program, but more likely to give it a test drive and see how it does.

If you already have an affiliate program, see if networks like Dark Blue might complement your existing offering.

The bottom line is that like all internet companies, affiliate networks such as DarkBlue, are always looking for ways to innovate and take advantage of the latest and greatest tools available. That means that advertisers, too, must stay current and in this case, review and possibly update their current affiliate network strategies.

Thanks for reading. And as always, you can search the back issues.

Warmest Regards,
Steve Little
Vice President, Marketing
CashFlowMarketing.com