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Affiliate Program Basics: 1

Affiliate Program Basics: 1

November 18, 2005
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" Software alone cannot run a successful affiliate program "

The backbone of e-commerce, the affiliate program, is the cornerstone of profits for many online companies, especially for many who operate in the adult arena. A natural extension of paysite operations, the affiliate program is one of the most popular ways to address the Internet entrepreneur's greatest need: an ongoing and ever-increasing flow of fresh, qualified visitors to adult websites.

For those seeking to establish an affiliate program, the process can be both daunting and confusing but holds the promise of great rewards for those able to piece this particular puzzle together.

Here then is a basic overview of some of the most fundamental considerations to be made before embarking on this complex undertaking:

A Site That Converts
The first and foremost requirement for those hoping to establish a successful affiliate program is to have a stable, high-quality paysite that converts and retains members. While this might seem like an obvious necessity, potential affiliates cannot always assume this to be the case and as such should exercise due diligence when selecting a sponsor to promote, including requesting a valid username/password to enter the website or even joining it outright to see how members are treated.

Although this last bit of advice is aimed at affiliates rather than program owners, sponsors need to be aware that many savvy affiliates will be asking for entrance to their members areas - especially those being asked to send traffic to revenue-sharing programs where their income will be based upon a sponsor website's ability to keep members coming back for more, month after month.

Without this solid foundation, all of your other efforts in this regard will be in vain.

Payouts And Bonuses
One of the first considerations when developing an affiliate program is how you intend to pay affiliates, including the type of program you wish to offer (either paying a flat rate per signup, a percentage of sales or some other compensation scheme) as well as "who" will do the actual paying out (either in-house by you as the sponsor or outsourced, typically with direct payouts being made to affiliates by the billing company).

At this point, it is important to note that while per-signup programs are much desired by affiliates, the capitalization required to "front" payouts months in advance before being able to recover the money from future sales makes this a serious, complicated undertaking that is best left until you've developed experience in running an affiliate program.

The ubiquitous 50/50 partnership program is based upon the reasoning that "half a sale is better than no sale" - or in other words, if you want to send us a signup, we'll be glad to split it with you. Having said that, it's important to realize that 50/50 revshare, or whatever percentage you have in mind to offer, means different things to different people. For example, a 50/50 split could be based upon net or gross sales. With net sales figures, consider processor and other costs such as those incurred through chargebacks, which may or may not be passed on to the affiliate. A "fair" 50/50 split could include a split of processing fees (resulting in an actual 42.5 percent of sales going to the program owner, 42.5 percent of sales going to the affiliate and a final 15 percent going to the processing company), which is a true "partnership" with both owner and affiliate, thus splitting the actual payout 50/50.

While I don't personally see a problem with this approach, other approaches, such as a program offering a 60 percent payout (but then subtracting the processing fees and actually paying out the resulting 45 percent of the sale) seem a little less honest - especially if they fail to adequately disclose the true amount of the payout to affiliates. Sure, there might be a disclaimer buried deep in the TOS, but such tactics are usually seen as distasteful.

Personnel, Automation
Running an affiliate program often requires long hours of tedious, repetitive work - work that can be easily automated through the use of affiliate management software and services such as those offered by Mansion Productions' XBiz Award-winning MPA3 cascading billing and affiliate management solution, TabooRevenue's customized services or the widely-used NATS, to name a few.

Software alone cannot run a successful affiliate program, however. Sponsors need to find the right people to handle any number of tasks, including affiliate, content and traffic management. While some tasks such as promotional material creation or other design requirements can be farmed out to professionals on an "as needed" basis and content management systems can help mitigate much of the need for a dedicated staff member devoted to performing site updates and the like, tasks such as website and affiliate program promotion, trade and exit traffic optimization and handling the day-to-day needs of affiliates all will require more attention than most "one man" operations can handle - with larger operations requiring even higher levels of staffing and support expenses.

In part two, we'll examine the importance of customer service and marketing your affiliate program.


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