Affiliate Case Study: The Cybrary

The Cybrary is an educational site (http://remember.org) set up since 1995 to educate students from sixth grade to early college. The visitors to this site are mostly teachers and students from throughout the world who come for the free information. The site has a long growth curve, to its current steady traffic of 500,000 visitors a year, with 10-20,000 in slow months and over 100,000 on its two peak months, generating over a million hits.

Yet no one can offer as much information as that which can be found in copyrighted books. A book store was a natural growth for this Web Site. I went to Amazon.com a few years ago and just searched; within a week I had a book store with over 2,000 books, including a featured page with the most important books suggested by the visitors.

Remember the value of this recommendation; it is one of the most brilliant reasons Amazon.com has succeeded. A book that is recommended is more likely to generate interest than a bland listing of thousands of books.

The scenario is familiar; the Web Site is a community that educates. Profit motives are not important here, because it is a site where children come to learn. As the Web Site developer, I barely have time to keep up, much less sell advertising. The fact is, putting advertising in a child's hands is like selling Pepsi in the classroom; it is just not a classy thing to do.

Books, on the other hand, are a natural market for these visitors. Since it only took a week to set up this book store, with no changes in two years, the time factor is limited. Now this book store pays the hosting fees for this site for an entire year, not much but enough to keep it going.

For Amazon.com, this site generates an estimated 18,864 visitors a year, buying somewhere around 1,440 books (about 120 a month, or 30 a week). Let's break this down to see the real value of this little affiliate.

Imagine 10,000 Affiliates Making $12,000 in Sales ($120 million total) a Year
A Sample Weekly Report From Amazon.com For the Cybrary

Click-throughs and sales by individual item

For the week of 22-Nov-1998 through 28-Nov-1998

HITS is total hits generated, DIR is books ordered directly from the site, NDIR is books ordered after the visitors looked around a bit, and my fee, as you see, is small. What is interesting is that even though I recommend books, ALL my books are bought after they look at the initial recommendation this week. This is a common trend at the site.

                                              YOUR          AMAZON'S
              HITS   DIR. NDIR     FEE    TOTAL PAYMENT    TOTAL SALES
 ---------- ------ ----- ----- ------- -----------------------------------
    Totals:   497     0    31               $  9.58          $249.46 
    

Now let's look at the actual visitors we generated this week.

                                   ISBN/ASIN home page    search   other
 --------------------- ----------- --------- --------- --------- ---------
 Number of Visitors on 22-Nov-1998        62         0         0         0
 Number of Visitors on 23-Nov-1998        69         0         0         0
 Number of Visitors on 24-Nov-1998        64         0         0         0
 Number of Visitors on 25-Nov-1998        43         0         0         0
 Number of Visitors on 26-Nov-1998        40         0         0         0
 Number of Visitors on 27-Nov-1998        71         0         0         0
 Number of Visitors on 28-Nov-1998        44         0         0         0
 --------------------- ----------- --------- --------- --------- ---------
 Total Visitors this week                393         0         0         0
 

Let's determine the value of this small affiliate over a year, with these as average. Use this as a general guide, some figures are rounded slightly for convenience. Remember, I do all the marketing, they maintain their network and email me weekly with results, and cut me a check once a month or so.

                             Per Month                    Per Year
Total Hits                     1988                        23,976
Total Visitors                 1572                        18,864
Total Sales                   $1,000.00                   $12,000.00
Total Affiliate Payout        $38.40                      $460.80

Net Profits: $12,000 - $460.80 = $11,539.20 of profit

If Amazon.com could get 10% of its affiliates generating these kinds of sales, it would make $120,000,000 and spend $4,608,000 to do it, a profit of over $115,000,000.

These figures are general, but they give you an idea of why people love to invest in Amazon.com. No matter how skewed they are, the figures are astounding. Let's look at the Asset Value of this Affiliate called the Cybrary by figuring it in our 5 Keys.

Key 1. Leads: 18,864 ($460.80 affiliate payout): $41 Clickthrough cost (let's say $0.10 per clickthrough): $1,886.40

Affiliate Network Savings: $1,886.40-$41 = $1845.40

Key 2. Sales: $12,000-460.80 = $11,539.20

Key 3. Advertising/Marketing: 18,864 impressions ($460.80 affiliate payout): $41 These costs are difficult to determine and can skew the figures, but to Amazon.com it costs them nothing to do the actual advertising. Let's compare it to banner advertising for a rough comparison.

CPM Banner Ad Cost ($15 CPM average): $280
Affiliate Network Savings: $280-$41 = $239
Amazon's CPM Estimate: 18,864 impressions at $239 = $12.92 CPM

Key 4. Branding

It is impossible to determine a branding value for this affiliate. If you could ever figure out how many books a visitor from this site made at Amazon later, it might help. But it isn't like the Cybrary is the only affiliate doing this, which shows that if they keep seeing this brand name pop up, the value is enormous. Combine this with all the repeat business Amazon.com gets from customers who return on their own, and you see that branding is dramatically extended. The Cybrary introduces the customers to this business and rarely gets repeat sales.

Key 5. Affiliate as Customer

I have never bought a book through this affiliate program, but I buy around $200 worth of books from Amazon.com in the past year, inspired at first by this affiliation. Total Sales: $200.00

Net Asset Value of One Sample Affiliate

Key 1: Leads and Key 3. Advertising/Marketing = $1042.20

If we average the Clickthrough and CPM cost, we get around $1083.20 to use as an average Affiliate Network Savings over Banners and Clickthroughs: $1,083.20-$41 = $1042.20

Key 2: Net Sales = $11,539.20

Key 4: Branding = N/A

Key 5: Affiliate as Customer: $200.00

Net Asset Value of this Affliate Per Year: $12,781.40

Even if they bought banner ads or clickthroughs, the profitability of this venture is huge. What is interesting is the fact that this value is for just one affiliate, and not a particularly big one. If even just 1,000 sites generate this kind of Asset Value, you are talking $12,781,400.00

Not bad for letting other Web Sites do the marketing for you!