E Channel – Sales, Not Eyeballs, Govern Web Affiliate Deals

Posted: 10/2001

E Channel

Sales, Not Eyeballs, Govern Web Affiliate Deals
By Josh Long

More companies are reconsidering the “pay per view” marketing strategy that dominated the dot-com golden year(s).

These companies are less likely to pay affiliates for merely routing traffic to their web sites. Instead, many are choosing a revenue-sharing model, whereby partners are compensated based on sales that close — not on the number of hits they generate.

However, high-tech executives say that, in conjunction with more traditional marketing strategies, affiliate programs, banner advertising and revenue-sharing partnerships can help to generate qualified leads and, ultimately, new sales.

Not just any alliance will do, however. Partners must reach the appropriate audience to generate these qualified leads. Corp., a telecom e-marketplace that allows medium-sized and large companies to compare sophisticated telecom products and services, targets a specific audience, says spokeswoman Amy Smith. It has forged revenue-sharing agreements giving readers of certain online publications access to comparison and e-commerce tools.

“You want to go where your audience is and everybody has limited time and resources in a tight economy,” Smith says. “The last thing you need to be doing is slap your link on a bunch of irrelevant web sites.”

The more random the partner, the greater the odds that the affiliation will result in little to no business, some telecom executives report. They say it’s hard enough to get serious shoppers to click on a link, let alone people who are not in the market for your product or service.

Statistics bear this out. Banner advertising has a click-through rate of less than 1 percent, according to Nielsen/NetRatings Inc. And research firm Gartner Inc. reports that most customers identify a company offline before making a purchase on the web.

For instance, potential customers may be familiar with a company or see an advertisement offline, says Gartner analyst David Schehr. What is more, the majority of people that purchase something online find the product or service through a search engine like Yahoo! Inc., he adds.

“People have discovered from watching buyers and consumers on the web they really don’t click on a lot of banners,” says Karen Shelton, CEO and founder of Dallas-based T&S Software Inc., a company that sells interactive voice response systems and other solutions to enterprises and carriers.

She says partners benefit the most when they offer each other a solution to complement their core business — whether in cyberspace or offline. Citing an offline example, Shelton says her company partners with Hyannis, Mass.-based Taqua Systems Inc., which provides a class 5 alternative switch. The companies serve a joint customer that is building houses equipped with state-of-the-art communications systems that integrate Taqua’s switch with voice mail provided by T&S Software.

Industry sources say web alliances are most effective when partners generate qualified leads and complement each other in the eyes of their customers.

Bethlehem, Pa.-based CarrierChoice, a company that automates requests for proposals (RFPs) online and subsequently negotiates contracts to provision frame relay and private line services among several other complex telecom services, is a case in point.

The company recently re-launched an affiliate program targeting value added resellers, systems integrators, consultants and IT portals.

“Because CarrierChoice can negotiate extremely aggressive contracts with our service providers, our partners can then cost-justify solutions, up-sell their client or simply provide greater overall value by securing the bandwidth contract for them,” says Patrick Doherty, COO and co-founder of CarrierChoice. “The marketing partner rids themselves of the difficulty of managing multiple vendor relationships and the cumbersome negotiation process.”

The partner may have a CarrierChoice logo linking customers to the site or customize the functionality of the portal on their own web site in a private-label agreement. Partners pay no fee to use the technology.

VARs, systems integrators and consultants, that generally direct qualified leads, receive a residual revenue payable on a quarterly basis, Doherty says.

In contrast, partners, such as an IT portal that displays a link to CarrierChoice on a web site, would receive a one-time commission if the lead results in a sale, Doherty adds.

Closing a deal with a potential customer that was referred through a portal can prove more difficult than working with VARs and other partners that have existing relationships with their clients and need bandwidth, he explains.

CarrierChoice has a handful of partners, including Bethesda, Md.-based The ASCII Group Inc., which represents more than 2,000 independent computer resellers. The resellers have neither the time nor the expertise to quickly provision bandwidth for their customers, says Jerry Koutavas, director of business development for the ASCII Group. That is what makes the affiliate program between the computer reseller association and CarrierChoice such a good fit, he adds.

In mid-August telecom e-marketplace Inc., which is geared towards consumers, had 2,175 affiliate partners. The best performing affiliates are online comparison shopping portals, most of which include general shopping sites with communication or electronic categories, according to CEO and co-founder Tracy Lawrence.

The partners put an icon on their site, which links to, an e-marketplace that targets a wider spectrum of customers than, say, CarrierChoice or pays affiliates a $10 to $20 commission based on the sale of certain products and services. The company has added bonuses based on monthly performance. During an August interview, Lawrence said the affiliate program, launched in early summer, has been “successful so far.”

In another revenue-sharing model, e-marketplace TeleBright Corp. offers private-label or co-branded web sites to such partners as Boise Cascade Corp., a distributor of office products and building materials.

TeleBright Corp. spokeswoman Kristie Hughes says the company had considered whether to launch a formal affiliate program, whereby a large network of partners might have received compensation for directing traffic to

TeleBright decided to forego a formal affiliate program and support a revenue-sharing model, in which the company’s partners are compensated after a sale is made, says Hughes.

Within the context of formal affiliate partnerships, companies also are incorporating more sophisticated marketing tools, such as storefronts, to promote their products and services, says David Feng, vice president of corporate and product marketing at Internet marketing company Be Free! Inc.

Affiliate programs are not always used to sell a product or service. Carriers such as Qwest Communications International Inc. support affiliate partnerships to promote search capabilities on various web sites, Feng says.

For instance, Qwest’s affiliate partners can provide their web users a search form to look up the carrier’s QwestDex yellow pages. The partnerships can help the carrier generate additional advertising revenue by proving that mountains of eyeballs are being exposed to the online directory,

Feng explains.

He agrees there is a trend towards compensating partners based on sales transactions, but he adds that companies still pay for leads. Why?

It comes down to Business 101. When marketing a product or service on the web, a sales executive must interact with a potential customer to close the deal.

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