Sellers Stock Up On Affiliate Web Sites To Boost Marketing

By PETE BARLAS
Avon Products (AVP) is famous for using saleswomen to bring its cosmetics into the homes of consumers.
But these days Avon has another way to get inside homes: affiliated Web sites. For the last seven years, Avon has relied on thousands of partner Web sites to promote its online store. Avon pays these affiliates each time a consumer passes from their site and makes a purchase on Avon's Web site.
The approach is another way for the company to say "Avon calling" to customers, says Pattiann McAdams, executive director of e-commerce for Avon.
"Affiliate marketing is our fastest-growing (customer) acquisition, and I'm optimistic that it still has a lot of growth potential," she said. "It's a way for us to get our brand out there and actually get cost-effective (customer) acquisition."
Avon is one of many companies using affiliate marketing programs to push products and reach new customers online. EBay (EBAY) and Apple Computer (AAPL) also are big users of the technique.
And affiliate marketing will continue to grow as more companies decide they want to advertise online, says Stephen Messer, chief executive of LinkShare, a leading online marketing company. LinkShare manages affiliate marketing programs for Avon and others.
"Today, we manage over 11 million relationships between our merchants and Web sites that are in the network," he said. "It makes it easier for their customers to find their products."
Avon's affiliates include such sites as iVillage.com, a Web portal for women, and Ebates Shopping, a rewards site.
EBay is also enthusiastic about its affiliate program. In an earnings conference call last year, eBay executives said affiliate marketing was one of the strongest drivers of consumer traffic to the company's online auction service. But they declined to provide details.
Apple has used affiliate marketing to drum up customers for its iTunes online music service. After launching in April 2003, iTunes served up its 200 millionth song download in December. Apple also declined to discuss its affiliate marketing.
Success in affiliate marketing largely depends on finding the right mix of partner sites. In the music category, recording artist Web sites that attract fans are a good bet to generate music sales, says Messer.
"The key Web sites for iTunes are those sites that have fans, because that's where the buyers would be," he said.
Amazon.com, (AMZN) the world's largest online retailer, eschews TV ads in favor of online advertising ? including affiliate marketing.
Amazon wants to reach consumers who are already online, says Frank Sadowski, vice of consumer electronics for Amazon.
"Affiliate marketing is very effective," he said. "Just being pervasive on the Internet and having Amazon.com come up on thousands of sites is very significant."
Like other online retailers, Amazon won't say exactly how many sites are in its affiliate marketing program. It also won't name any of the sites or say how much it spends on affiliate marketing. Companies want to protect their marketing secrets. A partner site that attracts customers and boosts sales is like gold, says Jeff Pullen, executive vice president of operations for ValueClick. (VCLK) ValueClick owns Commission Junction, which provides affiliate marketing and other services for 1,500 customers.
"It's a significant portion for us," said Sadowski.

Companies want to protect their marketing secrets. A partner site that attracts customers and boosts sales is like gold, says Jeff Pullen, executive vice president of operations for ValueClick. (VCLK) ValueClick owns Commission Junction, which provides affiliate marketing and other services for 1,500 customers.
Companies want to protect their marketing secrets. A partner site that attracts customers and boosts sales is like gold, says Jeff Pullen, executive vice president of operations for ValueClick. (VCLK) ValueClick owns Commission Junction, which provides affiliate marketing and other services for 1,500 customers.
"Once you get a productive publisher, you don't want to lose him," said Pullen, who was chief executive of Commission Junction before ValueClick bought the company in December 2003. "If they are sending you new customers and they are helping you generate revenue, the last thing you want to do is post on your Web site which one of your sales people are the best." Companies want to protect their marketing secrets. A partner site that attracts customers and boosts sales is like gold, says Jeff Pullen, executive vice president of operations for ValueClick. (VCLK) ValueClick owns Commission Junction, which provides affiliate marketing and other services for 1,500 customers.
In most affiliate marketing programs, advertisers pay their affiliate partners a percentage each time a consumer passes through to buy a product or service.
For example, if a consumer comes through an affiliate site and buys a $100 pair of shoes on a retailer's site, the affiliate partner gets about 10% of the sale.
ValueClick's Commission Junction gets about 30% of that fee, or $3.
The company's revenue from affiliate marketing program rose 37% in the third quarter vs. the year-ago period, Pullen says.
"What that tells us is that we are attracting new customers and existing customers are having success with the program," he said.
Affiliate marketing programs work differently than paid search programs, which require advertisers to pay a search company each time a consumer clicks on their ad listed in search results.
In affiliate marketing, a consumer must not only go to a site but also make a purchase. No cash changes hands unless a consumer completes a transaction, says Pullen.
"If the customer doesn't buy something ? or fill out an application or become a registered user or whatever it is the advertiser is looking for ? the affiliate doesn't get anything," he said. "Affiliate marketing is not a traffic aggregation strategy."
But is affiliate marketing better than the paid search approach?
Advertisers seem to like both.

A survey of 150 retailers by Shop.org and Forrester Research found that 59% used paid search in 2003. Nearly 50%, meanwhile, said they used affiliate marketing programs.
Retailers rated paid search as 96% effective in 2003. Affiliate marketing programs received a 94% effectiveness rating, the survey found.
Each approach has its advantages, analysts say. With paid search programs, advertisers can bid on key words or phrases in search results. A consumer typing in that phrase could likely end up on that advertiser's Web site.
In contrast, advertisers in affiliate marketing programs must hope that a consumer who clicks through to their site will be looking for something to buy, says Steven Kaufman, vice president and media director of Digitas, (DTAS) a marketing services company.
"It's a different world," he said. "You don't have a lot of control with affiliate marketing, and in a lot of cases, you get what you pay for."
In other words, affiliate sites don't always bring in good sales leads.
That's why advertisers say it's important to ditch ineffective affiliates.
Last year Avon reduced the number of Web sites in its affiliate marketing program to 2,500 from 10,000 in 2003. Avon cut the sites that didn't generate sales, says McAdams.
"We decided it was cleanup time," she said.

Now the company sees affiliate marketing as more effective than the paid search approach.
With affiliate marketing, customers are coming directly to Avon rather than searching among several rival products, says McAdams.
Other advertisers like both approaches.

Wine.com, an online retailer of wine and related products, spent about $1 million on Internet marketing services over the Christmas shopping season vs. $200,000 during year-ago period.
So far, results from affiliate marketing and paid search have been pretty even, says George Garrick, chief executive of Wine.com. And both were far more effective than plain-old Internet advertising, he says.
"What doesn't seem to work well is regular banner ads," Garrick said.

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