Going Out Is In

Companies are outsourcing affiliate managers to fuel online marketing programs.

Former London-based freelance writer Rob Palmer knew he was on to something when he launched the affiliate program for his FreelanceWorkExchange.com subscription site. For several years he ran the program in-house; revenues were decent, affiliate applications were steady, but “there simply weren’t enough hours in the week for me to manage the program and deal with all the other management issues which required attention,” says Palmer from his new home in Australia. Plus, “the freelance market is massive and growing fast, but most affiliates hadn’t realized this can be a very lucrative source of commissions. I felt there was huge potential in the affiliate sector that we were not making the most of.”

His solution? Like the employers that use his site to outsource writing, programming, design and other freelance functions, he set out to find an external source of his own: an outsourced affiliate manager. Palmer found it with affiliate-turned-OAM Greg Rice.

Outsourcing isn’t new. Companies have done this for years, primarily to – according to a Dun & Bradstreet study – maintain competitive edge, focus on core business and improve service quality.

“But it’s new in comparison to the overall market that we’re in,” says Andy Rodriguez, an OAM and affiliate management consultant who will host a third OAM training conference in Chicago this August. “There just aren’t that many [OAMs] around. In the past, a lot of merchants hired a manager and said, ‘Here’s the affiliate program.’ Then they discovered what they really needed was someone that can lead a virtual salesforce, managing a large group of people by phone, by email and by instant messaging, who has a background in technology and knows how the Web works. That’s why so many merchants are now correcting their mistake of just hiring anyone in-house, and going out and hiring the best [OAM].”

Industry watchers informally estimate there to be a few hundred OAMs – either on their own or as part of an OAM agency – worldwide. And that number seems to be on the rise.

“The demand for OAM is large,” says Linda Woods, former Commission Junction affiliate manager and founder of the six year- old OAM agency PartnerCentric in Santa Barbara, Calif. “Our biggest challenge over the past year has been to find top-quality, experienced AMs.”

Others agree.

“Outsourced affiliate program management is a very new and, hence, an extremely exciting sphere to be working in these days,” Evgenii “Geno” Prussakov, a St. Petersburg, Russia-based OAM who manages programs for such U.S. clients as RussianLegacy.com and FantasyJewelryBox.com, says. “Many online businesses are in need of good affiliate program management, yet the number of experienced [OAMs] around the world is very limited. The competition between [OAM] firms is certainly growing, but the market is still very new and fresh.”

PartnerCentric’s OAMs hail from affiliate teams at Orbitz.com, Gap.com, 1800flowers.com and other “upper echelon” merchants; each having at least one year of full-time AM experience.

Even the term “outsourced affiliate manager” is somewhat nebulous. Few OAMs operate on their own; many have staffs of three or more assisting with new clients. “To find one person with a blend of all the skill sets needed is pretty rare: recruiting, selling ability, keywords, optimization,” says Peter Figueredo, CEO and co-founder of NETexponent, a NYC agency running affiliate programs for NYTimes.com, FinancialTimes.com, PuritansPride.com and others. (He has 13 on staff, and is hiring more “online media managers” to fit the OAM bill.) “We approach it as a team, bringing different people with different skill sets together to work with our client accounts.”

That’s the case with OAM agency PartnerCentric.

“Very few [merchants] have the internal expertise to run an affiliate program to the level that it needs to be run today,” says Woods. “It’s incredibly complex now because of all the new issues involved: fraud, spyware, conversion rates, EPC, competition. Two years ago, there were one or two furniture companies with affiliate programs. Now there are 40. Affiliates used to have a few hundred merchants to choose from in a network; now it’s a few thousand. The tracking has become more complex. And there’s even competition for clients from OAMs, especially if a merchant feels one AM can give them more exposure. That’s the kind of complexity we face every day, so managers have to really know what’s going on.”

In April, PartnerCentric acquired AMWSO, a Thailand-based OAM agency led by Bangkok-based Chris Sanderson. “By being able to work with a U.S.-based OAM agency, we can benefit our team here,” says Sanderson, pointing to programs his team already runs for Shopster.com, WesternUnion.com and 18 other international merchants. “That’s the personal touch we wanted.”

PartnerCentric manages affiliate programs for about 50 merchants, including TheCompanyStore.com catalog company, NationalGeographic.com, DigitalRiver.com (a half-billion-dollar e-commerce software company) and recently ClubMom.com. It’s had 300-percent-per-year revenue growth for the past three years, and Woods expects to double its revenue in 2006. PartnerCentric now has 20 on its team, plus eight other staffers; a move Woods says is “definitely moving towards the big boys.”

Some affiliates, however, are often going it alone until they’ve built up enough business to start adding staff.

For instance, the new outsourced program manager for FreelanceWorkExchange.com, Greg Rice, was once a superaffiliate for TigerDirect.com. He’d been an affiliate for seven years running a shopping mall site, and made the switch after going through Rodriguez’s mid-2005 OPM training. Currently, Rice owns CommerceMC.com and manages four programs, including ITHeadhunter.net.

“Working as an affiliate, you have contact with a lot of affiliate managers,” Rice says. “You get to see firsthand what works and what doesn’t work – and you get to see firsthand the opportunities that exist because most AMs don’t have a clue other than putting links up there and walking away from it.”

Another affiliate who’s going the OAM route is Kevin Webster, owner of outsourced B2B affiliate marketing agency OPMWeb.com, near Rochester, NY. For five years he ran a site called CorporateLeverage.com, stocked with his own articles on business-to-business sales and affiliate links to relevant products. In late 2005, he left his day job selling Cingular and Verizon cell phone plans to businesses, sold his affiliate content “for a scant $1,500” and launched OPMWeb.com.

“The rumor is that this industry is underpopulated,” Webster says. “It’s my intent to grow this organization slowly and smartly, ensuring that each new client receives all the focus their program deserves. That’s critically important at the launch of an affiliate program, and never really changes.”

Webster’s first client is SimpleGuardian.com, a notification security and medical alarm company targeting real estate agencies and arenas; two other contracts are in the works, he says.

“Simple Guardian had a very traditional brick-and-mortar sales model before this point,” Webster says. The company is very new to e-commerce, so this is a real test of a lot of things. Our main focus is B2B, which in my opinion has only been done with limited success up until this point. Plus, the merchant uses a content management system where I’m able to log in on the back end to tweak things for those landing pages. They’ve given me access to basically their entire organization – I can pick up the phone or send an email to just about anyone, from their database guy to their graphics department to their sales team. Not all merchants are going to be like that.”

While some OAMs fulfill otherwise-disregarded fundamentals, others are using technology as their edge. From a home office with a DSL connection, AvantLink co-founder Gary Marcoccia works with three other home-based OAMs in the Salt Lake City area to distribute data feeds from 16 merchants to several hundred affiliates. They do it all thanks to an integrated “deep-linking tool center” supported by Web service technology, RSS publication of affiliate ads and content and a simplified management interface. New merchants include ToolKing.com, Altrec.com and CampSaver.com; tools are free for affiliates to use, and merchants pay a flat $1,200 for its “start-up package.”

“Merchants really warm up to the start-up package,” Marcoccia says. “Once they realize that they really do need someone to manage the affiliate channel, it can be somewhat terrifying. Unless someone has deep pockets to justify hiring us as an [OAM] at $3,000 per month, it’s daunting. A start-up package should get them off the ground.”

The package includes program detail pages that are searchengine- optimized to be crawled and indexed; “buzz” on AvantLink’s AbestWeb.com’s forum; program announcements to AvantLink’s affiliate opt-in list; a few hand-picked “quality affiliates” to start; and, soon, a press release on the merchant’s new program sent through one of the PR news wires.

“We have tools that are pretty advanced,” Marcoccia says. “We’ve identified effective conversion methods, and kind of promise them five quality affiliates that will get going with the program, use the tools effectively and get the program running. That’s a pretty powerful service to offer a company that’s in limbo. We solve that catch-22; these merchants are interested in starting an affiliate program, they have a good niche but they don’t have to pay an in-house AM $10,000 per month to get the program off the ground.”

Technology is also the foundation for San Rafael, Calif.- based WatchDog Affiliate Managers, which runs programs for such merchants as InteriorExpress.com, Yoox.com and MadisonAvenueMall.com.

“Lately, we’ve been writing contracts starting at around $2,100 for the smaller guys that we think have a product that will grow and where the affiliates will be attracted to because the commission is good,” co-founder Christina Lund says. “For that low of a rate though, we would ask for a little bit more in commission; maybe 1 or 2 percent more than the 2 to 5 percent we usually charge.”

This bare-bones package includes all of its full-service offerings: recruitment of program-specific affiliates; newsletter writing and distribution; use of a WatchDog-branded administrative software system that allows advertisers to make changes to creatives that are automatically fed to all of their affiliates in real time; XML-based coupon feed so affiliates automatically get up-to-date offers; plus its “Merchant Express” multilingual data feed software, which uploads up to 2,000 product descriptions and photos and feeds the results in real time to affiliate-tuned storefronts with only the types of products that affiliate wants.

“It’s a whole store in one line of Java script,” says Cory Lund, WatchDog’s vice president of product development. “The whole part of this game is to really nurture these affiliates, and make their job a lot easier. With technology, we can offer everything in the big package, but the hours are shaved a bit ” it may be 20 hours per week for an OAM to manage instead of full time.”

WatchDog has nine freelance OAMs in its fold – spread out in San Francisco; Ventura, Calif.; Minnesota; and Kansas City, Missouri.

With technology being a selling point in the OAM world, it makes sense that some of the networks are jumping on the OAM wagon. Six-year-old affiliate network ShareASale, which is historically a place where merchants run “self-serve” programs, recently started managing the programs for clients. On its OAM to-do list: day-to-day administrative management, including affiliate approval and review; coupon and promotion distribution; newsletter creation and distribution; regular traffic and sales reporting; assistance with product data feeds and basic banner creation and management; and providing unique content, keyword lists and custom merchandised storefronts for the merchant’s top affiliates.

“Management of programs is only a small part of what we offer; ours does require membership in the ShareASale network, and is really more of an ‘add-on’ to our basic service, as opposed to a true outsourced solution,” says Brian Littleton, president and CEO of ShareASale.com. “But for small-to-medium- sized business, where ShareASale concentrates their efforts, [our OAM] services can be extremely helpful in allowing merchants to focus on their best practices, while allowing the [OAM] to assign best practices to the affiliate channel based on their expertise.” Though Littleton won’t divulge the total number of accessible affiliates in ShareASale’s network, Littleton says they’ll “often research categories for merchants who inquire about joining the network in order to give them rough ideas as to what to expect.”

Meanwhile, at LinkShare, “we really go out to market with our account management and client services,” says Liane Dietrich, vice president of merchant services for LinkShare. “Most of our merchants are working with in-house AMs or outsource their program management to LinkShare.”

Still, for Chris Henger at affiliate network Performics, outsourcing is a loaded word. “We prefer to look at it as an extension of the merchant’s marketing team. ” Yes, clients rely on their Performics’ program manager to administer the program, negotiate with affiliates, field inquiries and optimize the program,” Henger says, “but we don’t view our approach as outsourcing. The advertiser maintains control and still has to make critical decisions, particularly in regards to promotions and customer quality.”

The addition of network outsourcing of affiliate program management is an interesting hurdle for OAMs.

“A lot of people go directly to the networks because they don’t realize there’s a whole region of independent managers out there that can manage their program independently as well, if not better,” says OAM Shawn Collins, who runs affiliate programs for PaylessShoeSource.com and Snapfish.com. “Yet I get a lot of calls from headhunters wanting affiliate managers to run a program inhouse, and they’re just not around. The in-house talent pool has been moving to the agency side – because they can manage multiple programs which can potentially be more lucrative.”

Which brings up the subject of money. OAM firms usually work on monthly retainers of anywhere from $2,000 to $7,000 for only a few products, and up to $35,000 for rollouts of a big-merchant range of affiliate-sold products. Remember, however, that the retainer could be funding the cost of several managers and, in the case of NetExponent, even OAM health benefits.

While the numbers may seem large, merchants are recouping that several times over from affiliate sales. The highest-paid OAMs also often come with the most to offer: “All that money that was spent in the dot-com blowup went toward educating a lot of staff people,” says former BarnesAndNoble.com AM Stephanie Agresta, who’s now an OAM at Commerce360, a Pennsylvania-based agency that guides merchants through the LinkShare platform. “You can’t replicate that just anywhere, for any price. If you live in Kansas, you may be able to find someone who can work for $30,000 per year – but in areas with lower labor cost, there’s more of a chance you won’t be able to find the expertise. At a minimum, we’re talking salaries of $60,000 to $100,000. For that same amount of money you can buy an OAM solution that comes with expertise and relationships.”

For now, costs continue to climb, as the existing OAMs in greatest demand gain more experience and more relationships with super-affiliates that they’ll bring in tow, observers say. In time, costs are likely to level out as more OAMs enter the market.

No need to fear, says Prussakov. “Competition only benefits the industry. It constantly makes OPMs think of new ‘outside the box’ ideas to enhance affiliate performance and draw more quality affiliates to their programs.”

The advent of aggressive outsourced program managers brings certain advantages to affiliates, namely the ability to work directly with managers who’ve once been affiliates themselves.

“It’s absolutely imperative to have affiliate experience,” Rodriguez says. “You cannot help someone build a house unless you’ve built a house before. You can’t help someone ride a bike unless you’ve ridden a bike before. At the same time, in no case should an affiliate manager compete in the same business as their affiliates. They have access to very sensitive information, and this is a trust industry.”

Given recent flap over affiliate managers at the big networks leveraging affiliate strategies to start competing affiliate sites, this is a fair warning. If you’re concerned, simply ask your OAM to add a noncompete clause to your contract. Many already include it. Some avoid even the appearance of a conflict of interest by working with only one client in each type of industry. Others count their expertise with multiple, similar programs as their strength. The choice is yours. Meanwhile, the lure of the money that can be made from the OAM price tag is already leading to some problems, as a few OAMs overload their plates and end up shortchanging everyone.

“You need two people full time, or four people half time to fully service one affiliate program,” Figueredo says. “The quality of work required to have a really robust and aggressive program comes out to that amount of work, at least.”

For FreelanceWorkExchange.com, adding one more was the perfect number. “Greg [Rice] has done a great job of taking on all the important tasks that had been neglected in the past, from liaising closely with affiliates and managing bonus schemes, to writing our affiliate newsletter and recruiting new affiliates,” says FreelanceWorkExchange.com’s Palmer. “The hardest part of the process was making the decision to let an outside party handle such an integral part of our business. But once that decision had been made, the only issue was choosing the right consultancy for the job. I didn’t want to find myself paying high fees to a company that just delegated our account to a junior with little experience. We were looking for someone who could deliver high-level expertise at a reasonable cost, and that’s what we found with CommerceMC. In every other respect, it has been pluses all the way – we now have a more professional and more efficient program that is attracting new affiliates daily.”

JENNIFER D. MEACHAM is a freelance writer who has worked for The Seattle Times, The Columbian, Vancouver Business Journal and Emerging Business magazine. She lives in Portland, Ore.