Patrick Anderson's Report from BEYOND THE BANNER

Patrick Anderson heads ADNet International, a leading provider to the affiliate network industry.

We just attended the first-of-its-kind conference,

"Beyond The Banner"
Maximizing revenue with strategic Internet partnerships, affiliate marketing programs, and co-branding on the Internet.

This is the first ever affiliate program conference. It was held in San Francisco December 8th through 11th. Presented by International Quality and Productivity Center (IQPC) and co-sponsored by LinkShare. One of the most fascinating conferences we have attended recently. The most interesting thing was the number of merchants who had implemented revenue share and affiliate programs, and actually were discussing what they had learned, how they had set up their programs, and sharing in detail their actual results. There was a refreshing amount of that, where they were actually revealing what worked, what didn't work. One thing was very clear: that the cost of developing these re-seller channels was money that everyone felt was extremely well spent.

Some of the surprising facts that we learned is that these high-profile companies that we've heard about like Cyberian Outpost, Electronic Newsstand, AutoWeb, Artuframe, Virtual Vineyards, Travelocity, that have affiliate programs, have a real small staff managing these. They had, typically, one to two people whose job, in addition to several other duties, was primarily that of acquiring new affiliates and providing the customer service for those affiliates. The company that had the largest number of staff devoted to it, still only had four people. So one to four people are all that's running these programs for these major Internet companies. They are all getting about 20% for the amount of revenue that's being generated to the company, just from the affiliate programs. In addition, there is sometimes up to another 50% of the revenues coming in, not directly from the affiliates. In other words, they are not paying them the commissions, but having heard of the company through the branding from the affiliates, then they start ordering direct. So, by just adding this program, people are seeing immediate returns of 10 to 20% that they are paying commissions on, and an additional 40 to 50% revenues from the additional exposure that this works out for them.

Another surprising fact was the large percentage of affiliates that would sign up for a program, but then would not actually go to the next step of adding a link to their page. The numbers we heard were between 10 and 45% of the people who sign up then do nothing. And, the 10% figures were with a company that was highly focused on customer service where, in many cases, they would actually call the affiliates and then go look to see if the links were placed on there, but then people who didn't have much follow-up in place, could see almost half of the folks signing up would do absolutely nothing at all. This is pretty consistent with our experience as well.

Over and over we heard that the setting up of the software was fairly painless and getting their system together was easily accomplished. But after that, the biggest concerns were how to acquire the good-quality affiliates and how to keep them as part of the program - to keep them selling. So, the acquisition and retention was critical to the success of the program. Also, they were finding then that this was the most time-consuming part of their job, so everyone was looking for a way to do both of those more effectively and a little more automatically.

The successfulness of these programs was mentioned over and over. That every company who had started one of these was very happy that they had started it. What they were saying was a couple of things -

Number one, a lot of people sign up and then a lot of people actually start bringing sales into the company. But the first thing that happened, before sales came in, is that a lot of traffic was being developed, and most merchants were pretty aware of the fact that their products and services weren't impulse-buying items. So affiliates were bringing traffic over to them, but it didn't convert, necessarily, directly into sales.

There was a big concern about this issue - that people don't buy on their first exposure. In fact, with the way many systems were set up, they were ending up where about, we heard numbers like 50% of the sales, being made from a company they were paying no commissions on, because they were not coming directly from the link of the affiliate.

The understanding of the merchants was that sometimes this is the second, third, fourth time contact, then people decide to buy. Maybe they see it in e-mail, maybe they've gone to a couple of sites and seen the banner, and then they finally come and bookmark and go directly to the company when they make their final purchase. They end up by-passing the whole affiliate network when the sale is made. For the merchants this is a good and bad thing. The good thing is, they pay no commissions at all on these sales, so they have no cost of advertising and no cost of sales for the sales commissions. But at the same time, they know that they want to reward their affiliates for the efforts they are making, so they will continue to want to do the advertising and refer business to them.

We were real encouraged to hear that every merchant was really concerned about their affiliates and looking at ways to have them earn more money by coming up with some very innovative, new revenue-split kinds of programs. Some things that emerged were a combination of paying a click-through with the sales commission. Some people were talking about tiered commission payments, where you would get a certain percentage on your own direct sales and then an override type of percentage when other affiliates came up and signed up through your site, then you can get an override on their sales as well.

Trying to match the reward to the action was the effort here. Where if somebody is bringing you eyeballs and exposure, that was worth something. If those eyeballs actually did something, like sign up for your newsletter, that was worth something more. If those eyeballs then moved to the point of purchasing one item, and actually moving through the sales process, that was one more reward. And then we heard a lot of discussions on the lifetime value of a customer, the on-going repeat sales business potential, and how some companies had been thinking through how they could get those on-going sales profits back to their affiliates as well. Really great discussions! I think what became really clear is that the industry is new and emerging and not only are the terms being defined but the revenue models are being defined, even as we speak.

The conference was well-attended, well-run, there were lots of great questions, all of the presentations were by merchants or people who provided the software solutions. All with a been-there, here's who we've done that type of focus. The exhibitors were kept to a minimum, so there were four exhibitors, three of them were providers of software solutions, Be Free, Link Share and Commission Junction, and the fourth exhibitor was ADNet and Declan Dunn, author of "The Complete Insider's Guide to Associate and Affiliate Programs." The software companies all had customers there and they were well represented and it was really fun for us to get to meet everybody.

One thing we noticed from Link Share is that their people are completely passionate and really involved in seeing the affiliate-type of programs mature. The Commission Junction people were kind of newer on the scene and just had a whole determined attitude of really setting up a lot of folks. The Be Free people were almost like a corporate machine - not to be ignored. All three of them provided great software, but from our viewpoint, none of them are really competitors and will all emerge as industry giants. The reason is, all of them have extreme focus on customer service, which we appreciated seeing.

ADNet was also an exhibitor and an announcement was made that a merger had happened between Declan Dunn's company, Web Success, and ADNet. ADNet added the strength of a promotion company combined with research, along with Declan's writing and guide. Also, copies of his book were given away and the sequel to the Insider's Guide was announced, which focuses on ways affiliates can maximize their success. This is part of a large-scale training effort on behalf of both companies. ADNet is positioned to be the support services company for all of the merchants and their affiliates. Some talks have been started.

This book is combined with ADNet's training system that has been put into place by some major ISPs, which gives the on-going motivation, education and training, and access to advertising services. Please visit the ActiveMarketplace for more information.

Rumor has it that IQPC (http://www.iqpc.com) is holding the second Beyond the Banner conference in May in the Chicago area. It should be interesting.