Affiliate programs greasing e-business

At the party three years ago, Bezos was asked for advice by a guest who wanted to sell books about divorce on her Web site. That exchange got Bezos thinking: Why not have her add links to Amazon.com (Nasdaq:AMZN), and pay her a commission for every book sale?

The idea has been parlayed into a new marketing institution on the Web called affiliate or associate programs, which have more than an estimated million participants.

The programs provide traffic and potential commerce to transactional Web sites from any Web site that cares to host a linkable banner, icon, Java ticker, animated GIF or hyperlink.

For example, let's say Joe hosts a neighborhood soccer site that includes book reviews. Each book review could include links to Amazon or Barnesandnoble.com. If Joe's visitors follow the link and make a purchase, Joe would get a percentage of the book order.

And it costs Joe nothing but a link.

Amazon has 200,000 "associates," who are paid up to 15 percent of the transactions channeled to the online book giant. Amazon would not disclose the amount of money it pays to associates each month, only indicating it was a hefty amount.

It's a simple system, serving both sides well.

"I think the affiliate systems will be wildly successful," said Ken Lim, senior futurist at CyberMedia Convergence Consulting in Cupertino, Calif. "The affiliator makes it easy. They handle the accounting and the coding."

The marketing technique is so promising, in fact, that executives at some of the most-trafficked portals are anxious to get programs running.

Personal e-commerce
GeoCities (Nasdaq:GCTY) recently signed a technology licensing deal with BeFree.com, an affiliate program with merchant partners including Barnesandnoble.com (NYSE:BKS), Travelocity (Nasdaq:TSG), Electronic Newsstand, Reel.com (Nasdaq:REEL) and Network Solutions (Nasdaq:NSOL).

Be Free reportedly has more than 100,000 affiliates who have agreed to add links to one or more of Be Free's 35 merchant partners' sites.

Meanwhile, GeoCities will launch its affiliate program on Monday to its 3.3 million Homesteaders, and will include an impressive lineup of heavy-hitting online vendors. GeoCities spokesman declined to name the more than dozen retailers.

"I think the future is personal commerce sites ... it drives a lot of commerce," said David Bohnett, chairman and founder of GeoCities, at the Interactive Newspapers conference in Atlanta two weeks ago. "People want to hear what others have to say about their recommendations."

Gordon Hoffstein, CEO of Be Free, based in Marlborough, Mass., projects the business model will be a significant revenue generator.

Affiliate care and feeding
"We believe affiliate sales channels can produce 25 to 30 percent of online merchants' revenue if the appropriate feeding is done to that sales channel. It reaches to places you wouldn't normally get to," Hoffstein said. "Online sales of products will be in multibillions of dollars. Millions could come from each sales channel."

Hoffstein said his company attracts affiliates by placing banner ads on such affiliate information sites such as affiliate.net, associatesprograms.com and refer-it.com. The ads link to their affiliate registration information, and they also advertise on such partner sites as Barnesandnoble.com, and its affiliates such as CNN.com.

It costs affiliates nothing to put links or content on their sites. In fact, they are rewarded with commissions every time the traffic that is driven to the merchants' sites is converted to a paying customer.

For example, lendingtree.com, an online loan company, reports that it paid affiliates up to $6,000 total last month for driving business to its site. No comment has been made on how many affiliates drove the traffic, or how the rewards are calculated.

"At the end of the day this is about reach. We reach more eyeballs than other sites do," said GeoCities spokesman Bruce Zanca. He declined to say how Yahoo! will promote or expand the program after the Yahoo-GeoCities merger is finalized in mid- to late May.

Incentives phone home
Meanwhile, one of Be Free's partners, Xoom.com, is writing a business plan to beef up its eight-month-old affiliate program. It hopes to require its largest sites on the network to put links on their sites to drive traffic back to Xoom.

So far, upward of 5,000 have signed up for the Xoom affiliate program, many driven from ads on Xoom's home page.

The Web site host will create value-added programs to encourage more affiliates. One program in the works: discounted voice mail and long distance if you sign up to be an affiliate, said Stuart Illian, vice president for e-commerce development for Xoom.com

Bo Peabody, CEO of Tripod and Angelfire, calls affiliate programs "the democratization of distribution."

"The Web doesn't want to be centralized," Peabody said. "It provides the individual with the commerce link."

Martha L. Stone teaches New Media & Technology at Roosevelt University, and is a frequent contributor to ZDNN.