KaChing: How to Run an Online Business that Pays and Pays (23 page)

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Authors: Joel Comm,Mark Victor Hansen

BOOK: KaChing: How to Run an Online Business that Pays and Pays
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Publishers call themselves
affiliates,
Amazon calls them
associates,
and people more used to selling in the offline world tend to use a simpler term:
sales rep.
 
The offline term is wrong. Amazon’s term is wrong, too, even though the company was one of the first to offer an affiliate program back in 1996. Affiliate systems have developed a lot since then.
 
An affiliate isn’t quite a sales rep. Sales reps have no say in the products they sell. Their companies give them a suitcase full of samples and tell them they can keep a share of whatever they earn. They are
employees...
even if their income depends entirely on their sales skills.
 
Affiliates are really
entrepreneurs.
They choose which products they sell, they build their own markets, and they decide on the best way to persuade people to buy. They also don’t rely on those sales to make money from the market.
 
That affiliates are independent business owners in their own right is important. It means that sellers have to treat them with respect—and pay them far more than they might be willing to pay an employee. And it also means that affiliates have to take responsibility. Your earnings as an affiliate will depend to a large extent on the quality of the product you’re selling, but they will also depend on your connection with your market and your ability to lead your readers to buy.
 
The concept behind affiliate selling is very, very simple. You choose a product, present it to your market, and you take a share of the sales price when one of your users buys. (Although you might find a few affiliate sellers offering payments on a cost-per-action or even cost-per-click basis, around 80 percent of affiliate systems are believed to operate according to cost-per-sale basis, the model whereby you earn a commission.)
 
Making a lot of money out of affiliate selling requires a little skill. That starts with finding the right merchants to work with.
 
Choosing Merchants that Match Your Market
 
Office Depot, Gap, Target, Toys “R” Us,
Amazon.com
,
Zappos.com
... if you can name a big retailer selling online, in the real world, or both, you’ll find that they have an affiliate program that lets anyone help move their inventory.
 
Why shouldn’t they have an affiliate program? There’s no risk—they only have to pay if someone actually makes a sale—and if they don’t offer an affiliate program, a publisher working in the field will put a competitor’s ads on that site instead. Retailers that don’t have affiliate programs risk losing market share.
 
That means you’re spoiled with choices. But it also means that many of those choices will be bad. Some products will always sell better to your market than others, and some sellers will suit you and your users better than others.
 
The first challenge you’ll have as an affiliate seller is trying to predict which items you should be recommending to your audience—and from which sellers.
 
In theory, that’s not as difficult as it sounds... and yet so many people get it wrong. In a survey of 450 affiliates conducted in 2009 by
AffStat.com
, part of affiliate guru Shawn Collins’s Affiliate Summit, 23 percent of respondents said that they chose affiliate merchants based on their management systems. A similar number made their decision based on brand awareness, and almost a quarter made it based on the company’s payout level.
 
Only 3 percent chose a merchant based on its relevance to their web site. That might explain why almost half of those affiliates were earning less than $500 a month. However, 4 percent were making between $10,000 and $20,000 a month, and 17 percent said that they were making more than $20,000 every month. If you get your affiliate system right, you really can make your business KaChing! But you have to get it right.
 
That starts with choosing your merchants.
 
You really have a choice of two different routes. Affiliate networks like Commission Junction and ClickBank act as clearing-houses for merchants. You can browse around, look for a product that suits your content, and add it to your site.
 
This approach works best when you have lots of sites on lots of different topics and are hoping that affiliate revenues will give you a little extra each month. From the publisher’s point of view, the process couldn’t be simpler: Sign up, pick a product, and place the ad on your page. Whatever sales you earn will be a nice little bonus and could mount up when placed across a large network of different sites.
 
The alternative is to take the ads directly, either from a trusted retailer or from the producer. I’ve already explained how you can create your own affiliate network to promote your product, but not all producers do this, especially when their products are physical. While creators of handcrafted wooden toys might be fine about shipping off their goods to occasional buyers brought in by affiliates, large producers usually prefer to send their products in bulk to a wholesaler or to large retailers. They then rely on those businesses to bring in the buyers.
 
If you want to sell an information product, it’s likely that you’ll be able to join the producer’s own affiliate program. If you want to offer the kind of product you can find in stores, you’ll probably be looking at the affiliate programs of major retailers—giving you a bit of a headache as you try to weigh up the benefits of each.
 
Whichever approach you take—whether you’re looking at an affiliate network or the programs of different retailers—you’ll find there are lots of different criteria that you can use to judge their programs. Different affiliate merchants will offer different sales percentages, have different kinds of ads, provide different minimum payout levels, and offer customer service of variable quality.
 
All of those things are important. But none of them are as important as whether your customers trust the merchant enough to buy.
 
With a maximum commission of just 15 percent, Amazon has one of the lowest-paying affiliate systems (
Figure 5.1
). Yet its program is also one of the most popular, partly because it offers a huge range of products, but mostly because people trust the company. If they’ve bought from Amazon before, they understand how it works, and they know that it won’t pocket their credit card details for nefarious purposes.
 
Figure 5.1
Amazon’s Associates program lets you offer any of the company’s products in a huge range of different ways... for a commission of up to 15 percent. In practice, the commission is usually much lower.
 
Put an affiliate ad from Amazon on your site, and the trustworthiness of the merchant isn’t an issue. The only remaining challenge will be whether you can persuade your users that the product is worth buying.
 
You can spend a huge amount of time browsing affiliate networks in your search for the perfect merchant for your site. You can lose hours comparing commission rates, reading reviews from other sellers, and trying to second-guess the kind of service you’ll get from the merchant’s affiliate manager. But when you’re using affiliate products as an additional sales channel to complement your other methods of generating a KaChing, the most important factor will be the ease with which you can move users from browsers to buyers. You want to make sure that there are as few obstacles as possible on the way to the cash desk. That means choosing a merchant you believe will be familiar to your users and one with whom they’re used to doing business.
 
Usually, that’s pretty clear. If you want to promote a book on a topic related to the subject of your article, then it’s likely that Amazon will be the most trusted retailer. Things get a little more complex when you have a real choice between similar outlets offering competing affiliate programs. Photographers, for example, can now earn a little money by submitting their images to microstock sites, which license them to publishers in return for a fee. Each of those sites has an affiliate program that reflects the sorts of users it needs most. iStockphoto (
www.istockphoto.com
), the most popular microstock site, pays a one-time $10 bounty for new customers and nothing for new photographers. BigStockPhoto (
www.bigstockphoto.com
) pays $5 for new photographers and 35 percent of the value of the first sale for new buyers. Dreamstime (
www.dreamstime.com
) has the potential to be the most lucrative of all: It pays affiliates 10 percent of what referred photographers earn and what referred buyers spend for up to three years.
 
It might seem that Dreamstime’s affiliate program offers the best deal. But if photographers don’t feel that Dreamstime will sell their photos, then they won’t sign up. And if buyers don’t feel that Dreamstime offers them a wide enough selection of pictures, then they won’t buy any.
 
When that happens, affiliates earn 10 percent of nothing.
 
Similarly, a site with content aimed at photographers, but has very few images for buyers wouldn’t make much money promoting iStockphoto, which pays nothing for new photographers.
 
These sorts of choices turn up across different fields. Amazon’s Associate program is very different from that offered by Borders or the one offered by Barnes & Noble. While Borders pays according to a performance scale that tops out at 8.5 percent, Barnes & Noble pays a flat 6 percent. Amazon, with its front-page 15 percent boast, actually makes the choices even more complicated by offering two different kinds of affiliate programs: The company’s Performance Fee structure has a scale that starts at 4 percent, and although it can reach 15 percent for
some
goods, it’s unlikely that many “associates” would see those returns; the Classic Fee structure pays a flat 4 percent, significantly less than the affiliate would have earned for the same sale had he or she signed up with Barnes & Noble.
 
However, as a Barnes & Noble affiliate, that person might struggle to make the sale. Affiliates earn a commission only for online sales, and those are more likely to come from Amazon.
 
While it’s easy to compare the details of different programs, without knowing the click-through rates of different programs and which kinds of audiences generated them, it’s always very difficult to say which program would suit your site best.
 
Fortunately, there are a couple of ways to stumble toward the best option for your site. The first is to test out different programs. That will take awhile, but it’s the only way to know for sure which program delivers the best results in practice.
 
The second way is to benefit from the experience of other publishers in your field. Lee Torrens, for example, is a microstock photographer whose blog Microstock Diaries (
www.microstockdiaries.com
) offers advice for other photographers looking to increase their picture sales. He also provides reviews and overviews of the site’s affiliate programs so that photographers with web sites can add to their earnings through referrals as well as image sales. His site has become a major resource for photographers hoping to earn a little cash—and it helps them choose the right affiliate programs for their site, shortening their testing times.
 
You should find that this sort of information is available in many fields, and if it isn’t available in yours, you know what to write your next blog about.
 
Choosing the Products that People Want
 
If assessing merchants and comparing programs can be a bit of a head-scratcher, choosing products should be a breeze.
 
The rule is: Choose products you know.
 
We’ve already seen how vital trust is in a successful affiliate program. When you feel confident that your users will get some real benefits out of using the product, they’ll pick up on your enthusiasm. They’ll also understand that every time you’re offering a product for sale, you’re not just doing it because you want to make a buck. They’ll believe that you’re doing it because you love using the product and that they’ll love using the product, too.

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