Show me the Money

Currently, looking for the money in social media marketing is like asking directions in a foreign land when you don’t speak the language and don’t know how the locals connect and communicate.

Social media is commonly defined as comprising “primarily Internet-based tools for sharing and discussing information among human beings.”

As an online marketer you want to hear about ad copy and conversions. Everyone – your audience, customers, and your employees – wants you to listen, connect, and collaborate. You want to control the conversation so people click. They want you to understand there is so much more – including profits.

Here are three models that are working and speak to business in terms it can understand – cost savings, marketing, advertising, customer service, and lead generation – as well as terms it may not yet understand like passion, heart, transparency, sharing, not controlling, and being there for your customers. These are business models that go beyond mere advertising.

Business Model 1 – Social Product Development

Why hire employees to develop new products when you can have the audience do it with you, and both of you get paid? Even better, what if you could involve all of your audience to share, participate, and spread the word, and get them paid as well?

This is the new world of virtual currency or creating value out of traditional points systems. T-shirt maker Threadless.com allows people to judge, promote, and even get their picture taken wearing a t-shirt, and rewards them with points each step of the way. Points can be redeemed for cash.

While MetaCafe and others have tried to incentivize content creators by paying them a fee based on ads, Threadless.com takes it to a new level where the creators and fans of their T-shirts can help spread the word and generate sales.

How They Do It

Designs are submitted to the community and printed by Threadless, who shares some of the revenue with the creator. Each action is tied to some form of currency; some of it is monetary, yet in social networks much of the social currency is how people view your reviews, your creativity, and support it.

By incentivizing certain actions and maintaining an active community, they unleash the genius of their audience and profi t.

  • Incentivize the product creators: they invite people to submit T-shirt designs. If it is selected, the person can win up to $2500, or maybe even $10,000 if it is selected one of the Best.
  • Pay the slogan creators: submit a slogan and win up to $200, so you don’t have to be able to draw to win.
  • Incentivize consumers to spread the word: Members of this social community can recommend t-shirts via email, or traditional affiliate links, and earn two credits (about $3) per sale. If they get their picture taken with their favorite T-shirt and submit it, they get one credit ($1.50). If the picture is used in the main site for promotion, they get 10 credits ($15.00). Considering t-shirts run $9-$30, that is a significant bounty for a small action.
  • Reward people for taking action: The key to Threadless is the fun community. Just paying people to promote and create is one thing; rewarding them for good behavior and excellence is the new way of product development.

Business Model 2 – Direct Response Media: Ads and Performance Marketing

This is the most common model in use, with businesses basically trying to fit the traditional marketing world onto social media with mixed results. When matched to the right audience, this can be very effective. Still, targeting will almost always decrease the overall size of the audience you are reaching, so numbers are not off the charts.

Direct media is the evolution of traditional direct response media (direct mail, DRTV, etc.) and Internet direct response like pay per click and affiliate programs into the social media space. The goal is to get a sale, and these folks have been posting ads, manipulating search engines, and building links.

How They Do It

  • Use personality to create buzz: Create buzz about product by using audio and video-driven business personalities, driving people from social media portals like Facebook and MySpace to their own sites, and even social networks, to create ongoing business.

Gary Vaynerchuk, WineLibrary.TV: Gary combines a video show about tasting wine with ongoing presence in many social networks. He drives people from these networks to his own Wine social network, Corkd.com (he bought it after being successful) and drives retail sales through WineLibrary.com, among other sites.

Gary’s personality plays against traditional wine snobbery and drives sales. Personality is essential, because in social media, how they remember you is the most important thing”and if they remember you. For retailers,this means driving repeat visits, which the video, social networking and marketing continually generate.

  • Develop new direct response ads: Allow people to interact, watch, and make selections within the advertising itself. Instead of an ad inciting people to click and leave the space they are at, these ads invite people to stay where they are, browse, and buy.

MyWeddingFavors.com has an affiliate program that uses video and a special video widget from Qoof.com. Affiliates place these ads in social media spaces, where videos can be played right on the page.

People can choose, watch, and explore while they are in the middle of their own social media experience. Basically the performance based marketing invites them to engage and interact with the ad, and pulls them away from what they are doing BEFORE sending them to the eventual site to buy the product.

Other tactics include:

Buying low cost advertising ($0.50 – $20 CPM) space on a variety of social media through ad networks. Ad buys are mostly based on straight ROI. Clickthroughs are very low. Branding ads are rarely successful.

Posting consistently to blogs, social bookmarking sites, video sites, and tag these posts with keywords in the title, tags, and description to drive search traffic.

Do performance marketing deals and pay others to promote and pay a bounty for a lead or sale. If the ad does not perform, no one gets paid. Lead generation is dominant here, especially to targeted audiences where it works best; because people are often more open to inquiring than to buying.

Business Model 3 – Customer Relationship Management and Employ Retention Management as Social Support Media

Many smart companies are using social media to better engage with their customers, and some to better engage with their employees. But social media canal so be used to manage customer relationships as well.The social media business model is very simple. Your content is your marketing tool. Sois your contact with people, either directly or watching over the discussions, questions, and interactions around your product, your brand or inside your company.

How They Do It

Zappos empowers its employees through an innovative training program which allows them to go out, via Twitter, and be available to answer questions from people and customers. A whole book could be written about Zappos customer service, and in fact it has, by the employees of Zappos (you can find it on their website). Giving employees technology will not solve your problems; inviting them to be passionate about your business does!

The key issue is trust; good employees find good customers if you teach them. Zappos sees employees as assets and ambassadors, not as a cost of doing business, and it shows. They are not afraid of how powerful their employees can become, and in fact, encourage it.

Many smart companies are improving communication and efficiency within their own company with social media, as a way to improve communication internally. Social media technologies like microblogging enable employees to follow each other for specific projects, and gives management an excellent tool to keep an eye on the growth of the business.

Best Buy claims it has drastically improved employee retention with social media. Technical firms like Cisco and Intel swear by their internal social media initiatives that foster ideas and feedback, while saving money and time. Financial firms like Wells Fargo are seeing better production by employing some social media within the company.

As you can see, there is money in terms of sales, yet also in terms of savings in social media. It is not just an advertising game, and it is one that can change business.

Be Unique

If you want to find the money you have to create your own business model. One that deals with your goals while building a relationship with your audience (and employees) that can reduce expenses and build sales year after year if you manage it right…or better yet, moderate it instead of manage it.

Social media demands a blend of heart and business savvy. You cannot have one without the other; if there’s no business, we should all ignore social media right now (like most of you, right?). If there’s no heart, if no one shows up as customers and employees get bored being employees,nothing really happens. Put the two together and you may find the magic, and profits, you are looking for… because it is the new game and it is happening right now.

Incentivize Your Audience

Budgets are tightening, and advertisers need to boost ROI- fast. The social Web is gaining value not only as a medium that delivers measurable results, but also as a resource for gaining insight a company can use to make all of its advertising (TV, print, online) more effective, to increase ROI across the board.

Social media is known for its wealth of useful information. Using relevant analytics can pinpoint audiences and learn more about them. Need to reach adults who are interested in European travel? How about people in Los Angeles who like spy novels? Done. You can even aggregate more information along the way and optimize your ads as you go, to fine-tune your reach and make your campaigns more effective.

But as important as such targeting is – and it is significant – there’s another valuable aspect to social media: the level of engagement of the consumers with the social “medium” itself (compared with any other medium – TV, radio, print or even traditional online).

People choose to spend time on social sites. They’re not passive observers – they’re active participants. They’re playing games, sending messages, reading blog posts, poking their Facebook friends, commenting on someone else’s photo, and the list goes on. They’re typing, thinking, laughing, and conquering their enemies (only in the games, we hope). They’re engaged.

Use social media to provide access to enough data about demographics, traffic, interests and social actions to pinpoint a target audience and understand them better, and the attention that users give to this medium while they’re engaged.

What you get is the potential to gain unprecedented levels of information about your audiences and your messages by offering people incentives to give some of that attention to you.

The Payoff: Increased ROI

The idea of incentives isn’t new. Most of us have handed over our contact information for the chance to win a trip to Hawaii (or name your destination), or responded to a handful of survey questions to get a free soda with our next meal. The virtual world is no different. In this virtual economy, people still have wants – someone playing a game wants extra points, someone with a virtual pet wants extra gold to buy toys for it, someone in love wants to send a gift of a dozen virtual roses.

The new opportunity for advertisers is to apply the principle of incentives that we’re all familiar with offline to the virtual economy. Offer game points, gold for virtual pets, or a free gift, in exchange for taking a certain action.

It’s in this action where the real gold lies, thanks to the two characteristics of social media mentioned above. No longer are the actions limited to collecting a consumer’s mailing address or surveying for opinions that aren’t tied to any demographics.

The action is to view your ad (banner or video) and answer a few questions about it. The incentive is whatever the publisher is offering as a reward (the points, the gold, the gift, anything).

The payoff to the advertiser is intelligence that will help you increase ROI within all types of advertising.

Your survey can be designed to measure consumer perception:

Awareness – Who has heard of my brand?
Attitudes – How do people feel about my brand?
Favorability – Do people like my brand?
Intent – How likely are people to purchase my products or services?
Preference – Do people prefer my brand or products over others?

The right analytics partner can couple those results with user demographics like age, location and gender, along with interests and social actions. For example, anonymous User A is a 45-year-old woman who lives in St. Paul, reads murder mysteries, plays Scramble on Facebook and says she is “very likely” to see the next James Bond movie.

That is a significant amount of actionable intelligence for any company. In our fictional example, using aggregate (and always anonymous) audience information, the movie studio might discover that while it’s been concentrating ad dollars on reaching the male audience, perhaps there’s value in targeting females that match certain demographics.

Beyond its significant value as an advertising channel in and of itself, the social web is becoming a giant testing ground for companies to discover who their audiences are and how to more effectively reach them – from any medium.

The social space is evolving into a place that offers advertisers an efficient way to understand audience behavior and perception – and to reach people with precision targeting like we’ve never seen before. You couldn’t ask for a better incentive to get social.

Video Goes Viral

Thanks to social networking sites such as YouTube, online video has quickly become an everyday part of the online experience. While marketers have been slow to capitalize on video so far, the low cost of producing content and potential for increasing reach will make it essential to performance marketing.

The audience that watches Web video skews younger, but nearly everyone online is doing it. According to market research firm comScore, nearly 75 percent of U.S. Internet users watched video during the month of May, viewing more than 8.3 billion video streams. Consumers are interacting with video more frequently in a wide variety of destinations, from “newspaper” websites to social networking to blogs. The most popular viral videos can garner millions of views, and video ads have proven to be more effective than their static counterparts in prompting user actions.

In 2008, more than half of the total U.S. population will be watching video online, according to eMarketer, and advertisers will spend more than $775 million in 2007 on video ads, up 89 percent over the previous year.

Since interactive video will catch and hold viewers’ attention longer, marketers are beginning to use the technology in four ways: on their primary websites; on microsites designed for specific campaigns; syndicating them through advertising networks; and releasing them to video search engines in the hopes that they go viral. The first step is to create professional and compelling content.

The Medium and the Message

Video starts with a camera, and MiniDV (digital video) is the industry-standard format for recording video on tape. MiniDV or hard-drive-based cameras are the best match for transferring video to a PC. To make it easy to transfer the video to a computer for editing, the camera should be able to record in MPEG 2 or 4 format and pass it through a FireWire (also known as IEEE 1394) or USB 2.0 (universal serial bus) connection.

These cameras range in cost from a few hundred to several thousand dollars depending on the features, including optical zoom; size of the LCD panel to preview the video; and the technology used to steady the image. Sony, Panasonic and Canon offer high-quality digital video cameras at a variety of price points and options.

For companies that want to tell a personal story in a vlog style, Jim Kukral, who blogs about using video at HowToDoVideo.com, recommends purchasing a set of lights that cost between $150 and $400 and a photo background (or green screen) that sells for approximately $50. Kukral, who produces videos and distributes them via YouTube, also recommends buying a tripod to provide a steadier image than with handheld shooting.

Kukral says videos about a company provide a more personal experience than blogs, and posting them on YouTube can drive traffic to your website. Publishers can “engage customers and illustrate things with video as opposed to [relying on] bullet points,” he says. Kukral posted videos on YouTube with tips on creating videos that generated new clients, several of whom commented that from his videos they “got the feeling that I knew you.”

Editing software ranges from free to more than $1,000, depending on the sophistication of the special effects. Macs include the intuitive iMovie, which provides basic functions for cutting and splicing together clips, adding titles and controlling sound. Similarly, Windows Vista PCs include a drag-and-drop video-editing application, Windows Movie Maker 6.

QuickTime 7 Pro ($29.99) is available for Mac OS X and for Windows, and includes more sound- and video- editing features, including the ability to export videos to iPhones. SimpleMovieX ($30) from Aero Quartet is a QuickTime competitor for Macs that works with more formats and larger files.

Marketers willing to learn more sophisticated programs so that they can add effects such as modifying the lighting, integrating multiple audio tracks and working with more file formats have several not-so-inexpensive options (see sidebar on page 048). Adobe Flash is becoming ubiquitous as a browser-friendly application that enables publishers to integrate interactive elements into their videos.

Kukral says the biggest mistake companies make in creating videos is insufficient branding. Videos should introduce the company at the beginning and reinforce the brand within the content.

For videos that are distributed outside of a corporate website, adding the URL in a title card at the end of the video is recommended. The videos should also be tagged with the URL and contact information, and keywords should be added to optimize the videos for search engines.

Marketing videos can range from a few seconds to several minutes in length depending on the type of content and target audience. Keeping the message short is essential to retaining the viewer, according to Michael Hines, the U.S. manager for network Zanox. Videos that are to be distributed as ads “can’t be 30 seconds long,” Hines says. He recommends that video ads be no longer than 10-15 seconds in length, while videos that introduce a company or illustrate a technology can be longer.

Publishers looking to create video marketing content without investing in editing software or expertise can refine their videos with a drag-and-drop online tool. Launched in August, Digital Canvas is a Flash-based service from Flimp Media that integrates interactive elements into a marketing microsite, according to company CEO Wayne Wall. These customized pages, also called flimps, can be shared as viral content, and built-in tracking mechanisms enable measuring their effectiveness, Wall says. The videos can tell the story of a company, or be used as an interactive component of marketing collateral, he adds.

Companies that lack video expertise or desire the highest-quality production values should consider using a video production service familiar with the optimizing content for the Web. Many of the companies that produce corporate training videos or video news releases are adding online services, with costs ranging from a few hundred to a few thousand dollars depending on the complexity of the shoot.

Putting Videos Online

Putting videos online that have been created on a website is not difficult, but finding an audience for them often requires manually uploading them to other sites or hiring someone to do so for you. Videos in the most common formats (MPEG, QuickTime and Windows Media) can be embedded on Web pages with a minimum of coding. As a more sophisticated alternative, embedding a Flash player on a site provides access to multiple videos and enables publishers to link to other interactive components or Web content.

For publishers with substantial traffic, adding videos provides an opportunity to retain visitors and to satisfy those who would rather watch than read content. If the videos become a runaway success, however, you may need to purchase additional bandwidth from your Internet service provider. Although the video quality can be compromised, uploading videos to YouTube and embedding their video on your site can reduce Web-hosting costs, according to video guru Kukral.

If you want videos to drive traffic to your website, they need to be optimized for search engines and syndicated through a growing number of video-hosting and search sites. As part of the upload process for submitting videos to search sites such as You- Tube, Revver, DailyMotion and Blip.tv, and syndication sites including Veoh, Brightcove and Maven, publishers fi ll out forms on each site and enter tags, descriptions and keywords. This painstaking process can take hours to reach just the most highly trafficked sites.

Companies such as TurnHere and Medialink work with networks of local video production companies to create the content and will also take care of the upload and submission process to sites including Google, AOL, MSN and Yahoo.

Through a partnership with RSS distribution company Pheedo, Turn- Here distributes content to sites looking to add video, including blogs such as BlogCritics and AlarmClock, and publishers including Slashdot, Red Herring, InformationWeek and ABCNews, according to CEO Brad Inman. Inman says travel, automotive companies and book publishers are among the early adopters marketing through online videos. TurnHere client Simon & Schuster has created hundreds of videos with authors talking about their latest books, and Inman says the top authors’ videos are viewed 50,000 times per month.

Local publishers are beginning to experiment with using video to tell their stories directly to customers. Superpages and CitySearch have recently introduced videos into their local listings. Marketing videos are “… really about long tail – not about a million streams, but [marketers] want 100 relevant streams,” Inman says. He recommends local business owners get in front of the camera because “no one can tell their story better.”

Getting the media and bloggers to write about or incorporate your videos can create signifi cant brand awareness and drive traffic to your website. Medialink, which has more than 20 years of experience in connecting companies with print and broadcast media, has video distribution services that start at $2,500. Medialink will host and present a video online and distribute it to local and national media including bloggers, and will also distribute the videos to aggregation and syndication sites, according to COO Larry Thomas.

In the fall of 2007, Medialink is launching Mediaseed, a Web platform that hosts and optimizes corporate marketing and communications materials for distribution. The platform contains tracking features for measuring a video marketing initiative’s reach online as well as on broadcast TV.

While accurately labeling videos will increase exposure on YouTube and the other top video sites, how to optimize content for video or general search engines remains largely a mystery. Google’s incorporation of video results into its universal search will increase the exposure of videos, but search engine marketers are still catching up.

Browsing videos and referrals from other users remain the most common methods by which people discover new videos. Being found on video search engines is not that easy, according to TurnHere’s Inman. People had a “false sense several months ago that ‘I can create a video and have it go viral on YouTube and it will go big,'” according to Inman. The reality is that most videos submitted to video sites will languish in obscurity. “The key is to start creating and experimenting,” he says. Search engines will take 18 months to catch on to the importance of video and properly index the content, according to Zanox’s Hines.

This fall Zanox will launch Zanox.tv, where publishers can post videos that will be used to attract partners. “The intent is to allow publishers to do an alternative to a text ad to encourage people to join as an affiliate,” says Hines. The video ads will likely pay on a cost-per-action basis, with Zanox and publishers sharing the revenue, according to Hines.

Ad Networks Monetize Video

Advertising networks are matching content companies with publishers large and small who are looking to use video to increase their audience. Startup video ad network Affliated.net is betting on a new video advertisement form opening a door into affiliate marketing. The borderless videos hover next to content and feature an actor or actress pitching a product or service. Since the video ads reside in the pixels along the edges of a Web page, publishers don’t have to give up their existing ads, according to Affiliated.net president Chris Skretvedt.

The videos, which range in length from 30 seconds to 5 minutes and will be paid for by Affiliated.net, are created to prompt user action such as generating leads or making a purchase, Skretvedt says. The ads launched in August and are to be sold on a CPA basis. The company is pursuing relationships with the major affiliate networks.

Tremor Media has combined forces with video distribution company ClipSyndicate to match content with relevant advertising. Tremor Media inserts in-stream ads with videos from sites such as DrPhil.com and making the content available to publishers, according to vice president of publisher relations Daniel Scherer.

Scherer says online video is hampered by a lack of technical standards in how to publish content. De facto standards for formats exist, but there is “no standard that supports integration of in-stream dynamic advertising,” he says. Content owners today are stuck in the struggle between controlling the advertising and monetizing their videos, according to Scherer. “The big puzzle is the upside-down reliance on You- Tube,” he says. If you want a video to be popular, put it on YouTube, but then you can’t monetize it; and if you want to control the ads, then you can’t put it on YouTube, says Scherer. Within the next year, You- Tube parent Google is expected to roll out a new video advertising service to address this problem.

Another opportunity for monetizing videos is to make them interactive so that the products featured within can be highlighted and sold via performance marketing. VideoClix provides technology that makes areas of a video clickable, according to Brent Stafford, the vice president of business development. “If you don’t make [your ads] interactive, you are underutilizing the medium,” he says. VideoClix has created ads for Levi’s and Honda, and shares revenue through CPA, CPC or CPM campaigns.

Once the science of increasing the search rankings of video has been significantly refined, publishers will rapidly increase their efforts to acquire or produce videos to place on their website. This strategy will be similar to how images of celebrities or top search terms are currently used to attract an audience, and will assure video’s place in the spotlight.

John Gartner is a Portland, Ore.-based freelance writer who contributes to Wired News, Inc., MarketingShift and is the editor of Matter-mag.com.

Shaping Up Your Business

Facebook, of course, is the social networking site college students used to call their own. Since the site opened up to the general public, its profile has definitely been on the rise. Bay Partners’ Facebook program – called AppFactory – will be aimed at giving entrepreneurs microbursts of funds as they need it, from $25,000 to $250,000 in as little as a few days’ turnaround.

That venture capitalists would sustain a program for such a niche field as social network applications on a single website speaks volumes about how strong the tech sector is these days.

In fact, most non-manufacturing businesses are riding pretty high. Venture capitalists are bolstering this image with their wallets, putting $25.5 billion into companies in 2006, according to PricewaterhouseCoopers, Thomson Financial and the National Venture Capital Association. That’s up 35 percent from the previous year. While that is less than the $52-plus billion VCs put into firms at the height of the dot-com boom in 2000, it is still 85 percent higher than the lowest of low points for investment five years ago.

In the online advertising and performance marketing industries, there is similar reason to celebrate. Venture capitalists and equity firms are in a buying mood, too, as they realize that many start-ups are making their funds last longer, having learned their lesson from the outrageous burn rates of the go-go late-1990s – companies such as Pets.com went through $110 million in about two years.

While start-ups are getting less from VCs (about $8 million, on average; down from $11 million in 2000), their ideas are better, fulfill better-defined business goals and, more importantly, stay lean enough to make them very attractive to larger companies looking to buy adjunct technologies and services. ValueClick, for example, owners of Commission Junction, Search123 and others, has acquired several companies this year and “are clearly not done yet,” according to company officials.

This wild west of mergers and acquisitions in the online advertising and performance marketing space means great opportunities for smaller and mid-size companies with three to five years since launch and profits or a road map to profits. Of course, it isn’t that simple. Start-ups can’t just have a cool technology and a funny mascot anymore. Being acquired or becoming a target for acquisition is a lot more difficult than calling up a big ad network and asking if they are interested.

It’s About People

More often than not, VC firms are the ones spearheading these complicated dances and advising smaller companies with an innovative technology or compelling business plan on what to do to make themselves attractive to buyers. Consultants say that one of the most important signs of a strong company, ripe for acquisition, is a talented team. Sara Holoubek, who consults with companies looking to be acquired, says, “Strategically you need the right vision, but tactically you need – especially if you are the sole owner – to know what you need when you sell. Do you want to sit on a beach or do you want to stay and grow the company?”

She says larger companies looking to acquire prefer when a founding executive team wants to stay and grow the firm. A start-up might have a good idea, she says, but the founders might be very young and not really know when to hire people smarter than they are. Early on in the life of a company, a few people do nearly everything and often they have a hard time giving up those roles. But, she says, those workers are more likely to stay on and be passionate about the business.

Mike Kwatinetz, a founding partner at Azure Capital Partners, which invests in early-stage companies, says the hardest decision to make is to determine whether a CEO and founder can “take it all the way.” In a transition from founder CEO to IPO, the easiest road to success is to have the founder stay. But it’s an unknown quantity, he says.

Sam Paisley, chief administrative officer at ValueClick, who has spearheaded about 13 of the company’s recent acquisitions, says, “Our criteria are that it must be complementary to the online performance marketing world. Our aim is to be a full-service company.” Beyond that, ValueClick is definitely interested in the people at the businesses it buys. “Sometimes you think that when you acquire an entrepreneurial company you expect them to stay nine months,” Paisley says. “And some stay three years or more and some others are still here.” He says it is the people who know how to make the assets work.

Profits Get Noticed

Profitability is also very important and crucial for a deal – with ValueClick anyway. “We love companies that are growing even faster than us,” Paisley says.

Profitability helps a company receive a strong valuation, ultimately making for a better purchase price for the seller. “We love unfinished businesses that can finish it with us. We put heavy emphasis on postclose and integration. We have a reputation of being fair with the deals. We pay a fair price that treats them fair and our shareholders fairly.”

ValueClick has vetted more than 700 companies to close on 14 deals. Holoubek, who was iCrossing’s chief strategy officer, says while her advice is solely strategic and not financial, profitability is way up there on her list, too.

Profitability and a great outlook to profits driven by rapid growth could mean a greater valuation and indeed a higher purchase price. Paisley says that they “insist that a potential target have a same profitability growth as us,” if not more. He admits that a target company with a better valuation will ask for a higher purchase price and that they may be willing to pay more, especially if you fill a need the company may have strategically or technologically. He says ValueClick recently paid $95.5 million in cash for Mezi- Media because of its presence in China.

Azure’s Kwatinetz says he advises companies that want to be sold that they should never say they are for sale. “We will try to form strategic partnerships with companies that may be buyers down the road,” he says. “You get yourselves known to buyers without putting yourself on the block.”

Holoubek confirms, “Nobody really wants to know that you are looking to sell.” Kwatinetz says that there is a lot of danger for an entrepreneur who can make a mistake by trying to appease someone who could be a buyer later. “It’s hard enough building a company without going down a rat hole.”

Todd Dunlop, president of British Columbia-based online marketing company Neverblue, brought in KPMG to help advise them when they thought they were ready for acquisition.

“We wanted to see what would be the best market condition,” he says. “When would be the best time to be acquired? We leaned on them a little bit.” Direct marketing services company Vertrue bought Neverblue in February. During the six to eight months it took to close the deal, Dunlop says the hard part was staying focused on “keeping the company going forward while doing this process.”

Get Your House in Order

Going forward means keeping your financials in order. Devon M. Cohen, COO of Customer Acquisition Network and who was CEO of FordDirect, says having a strong financial and management reporting system will make a deal more seamless. “Lots of companies are built on QuickBooks [accounting software],” he says. “And that’s OK, but realize that if you are acquired, you need good financial statements and that they will be reviewed.”

Bruce Kreindel, CFO of Customer Acquisition Network, adds that “young entrepreneurs know their business but don’t know how to measure their own operations.” He says a beautiful core diamond could be muddied by bad bookkeeping.

Conversely, says Holoubek, a company can look great on paper but the principals stumble over explaining the business. This is especially true in marketing companies where services and products can be somewhat intangible. “Marketers are the worst marketers,” she says. They sometimes have “a hard time explaining what their company does.” You want everyone to talk about you but in a positive way, she says.

“Everything is a story,” says Cohen. “What are you selling and what are you buying? What are the strengths and weaknesses of your business? How can we strengthen them together?” Holoubek says to “get your story down tight and understand the process before talking about it. Bankers can’t be fooled.”

Speaking of bankers, a common mistake entrepreneurs make is inflating revenue when they sit down with investors, banks and suitors. Holoubek says that may work well at industry conferences when no one is checking your numbers, but doesn’t when the books are open. She says that a banker may get a call from a company who says it is probably worth $2 million to $5 million, but that banker’s going to say to come back when they are worth $10 million. “If a CEO can’t admit that he doesn’t make $100 million, I walk away,” she says. Kreindel says that, “We may still buy them if they aren’t ready, but the valuation will be different.”

Make Sure It’s a Match

Just as the talent is really with the people behind a company, Cohen says that corporate culture is more important than first thought. “Blending corporate cultures can really be bad for the merger,” he says. His first business sold to Mercedes- Benz but when it came time to integrate the teams, they could not blend them together. ValueClick’s Paisley says, “If you don’t ever have that chemistry, you will never close.” Entrepreneurs who are one of only three people in a company may have a more difficult time not being in charge, not being the one to run the FedEx packages down the street, not being able to pick up the lunch check without approval. Neverblue’s Dunlop says that the similar corporate cultures helped close the deal between them and Vertrue. “We were both very entrepreneurial companies.”

Part of that start-up culture may include a determination to grow the company without any outside help – VC or otherwise. One downside of VC money is the potential control they take of your idea. Just ask Jim Kukral, online marketing consultant who runs AskTheBlogger.com. He hates the idea of start-ups taking VC investment. A recent blog included: “Taking money from anyone besides yourself is risky and complicates the issue. Yes, yes, yes. Perhaps you must take money to grow to a certain level, etc. In my experience, owning what you build is 1 billion times more important in the long run than the money you raised and the control you had to give up to get it.”

Along those lines, experts suggest that just because a VC firm is willing to invest in a company doesn’t mean they are doing so wisely. A company should also do just as much due diligence on the funding firm as they do on you. Equity investment firm Golden Center for Private Equity and Entrepreneurial Finance at the University of Illinois Urbana-Champaign says companies should ask for references from a potential investor, meet up with other CEOs the firm has invested in and grill them on how involved the investors are – do they meddle, do they know the industry, do they come to meetings knowing about your business?

Neverblue’s Dunlop acknowledges that when being acquired, the greatest fear is fear itself. “Fear was around every corner that there would be a problem,” he says. “Or if you let your guard down the acquirer would take advantage of it. We were lucky and smart in our choice of acquirer. Vertrue bought seven or eight companies over the last several years and we talked to some of them. They gave us great insight.”

There were 399 company acquisitions or mergers in the media and information industries in the first half of this year, on track to beat out last year by more than 20 percent, according to The Jordan, Edmiston Group. “Are you ready psychologically and strategically?” asks Holoubek.

Marketing Reality: Q & A with Joel Comm

Joel Comm has been building websites for over 12 years. He sold his first business to Yahoo in 1997 and it became Yahoo Games. Comm is the author of several best-selling e-books, as well as The AdSense Code, a New York Times best seller. His next venture is as the creator and producer of the online reality show “The Next Internet Millionaire.” The show, which is an “Apprentice”-type reality show being filmed in Loveland, Co., will air only online. The show features 12 contestants vying for a $25,000 prize and chance to start a business with Comm. It began taping in late July and started airing on the Web in mid-August. There will be 12 episodes and the winner will be announced in November. Comm spoke with Revenue Editor-in-Chief Lisa Picarille about the stigma of e-books, why the time is right for an online-only reality show and why viewers find marketing as compelling as he does.

LISA PICARILLE: Given the success of your books, are you making most of your money as an online marketer or as an author?

JOEL COMM: Many people got caught with their pants down when the bubble burst in 2000. I learned my lesson and have become a believer in multiple revenue streams. I now generate revenue through books, affiliate programs, courses, content sites, public speaking and advertising. The more you can position yourself as an authority, the more options become available for monetizing your brand.

LP: How do you get your books noticed with all the noise out there?

JC: I think it’s important to stand out from the rest of the crowd by creating a product that is more than another “me too” book. You have to give people original content and deliver it in a way that makes it accessible to a larger portion of the population. Of course, it never hurts to have great affiliate partners who believe in you and are eager to promote your products.

LP: Also, there is somewhat of a negative stigma associated with e-books as get-rich-quick schemes. What do you do to combat that image?

JC: There have always been snake-oil salesmen. There will always be snake-oil salesmen. Just like the television preachers who make legitimate evangelists look bad, there are so-called marketers who use legitimate techniques for illegitimate business models. People can frequently see through the game of the charlatans. I would hope the public would not throw out the baby with the bathwater. The best I, and other legitimate infopreneurs, can do is provide quality products that really help people. That’s one reason I post testimonials on my pages with full names, and audio when possible. It lets people know that there are others who are really succeeding with my material.

LP: Just curious ” there are many people who sort of bash the ‘gurus.’ What you think about people out there like RichJerk.com?

JC: It’s all just a show for those guys. I don’t care for RJ’s style of marketing. I guess there is money in condescending to people, but I sure wouldn’t want to have that as my claim to fame. If what I do doesn’t have a positive influence on people’s lives, I should probably be doing something else.

LP: You have a coaching club. Explain exactly how it works and what prompted you to start it.

JC: Once people have my book or course, they sometimes request assistance consuming the material. Having a coaching club where members can receive new material and teaching on an ongoing basis can make a huge difference in whether or not they succeed. It’s one thing to have information that can make you money. It’s another to implement what you have learned and take action on it. The same thing that attracts many people to making money online is the thing that can become one of the biggest obstacles to success. In other words, we want to be able to work at home in our pajamas, but it is difficult to stay motivated and disciplined when you have no one to answer to but yourself … in your pajamas. A coaching club and other continuity programs help people stay on track so they can reach their goals faster and with greater efficiency.

LP: Your newest venture is ‘The Next Internet Millionaire.’ How did the idea come about?

JC: Early this year, I began playing with the concept of producing my own reality show. As a reality TV fan, I realized that no one had attempted to do a competitive show on the Internet. As I spoke with my joint venture partner, Eric Holmlund, I discovered that he had a desire to get into video production. Our discussions led to planning, and here we are with the world’s very first competitive Internet reality show.

LP: Why do you think the time is right for this show right now?

JC: Reality shows are a cultural phenomenon. Video on the Internet is all the rage. And regular people are looking for ways to leverage the power of the Internet to bring in some extra cash. It’s a perfect storm whose time has come.

LP: Do you think that having the show air only online negates some of the legitimacy? If it is a good idea, why not try and get broadcast TV to pick it up?

JC: Broadcast TV is losing viewers faster than you can say dot.com. The Internet is the new medium of choice, and one of my goals is to prove that there is a significant audience who is eager to embrace original programming on the Web, provided it is compelling and professionally produced. I don’t believe that anyone has created a production solely for the Web that is of the scale that this project is. If the TV networks want to pick up the series in syndication, I’d be interested in speaking with them, but I’ve never considered selling the show to a network out of the gate. I guess you could say that I am on a mission to prove that the time is right for this concept.

LP: OK, I hate to admit it but I’m a reality show junkie. I’m also a marketing junkie. Yet I’m not sure that I’ll actually watch this show, because it is only online. What do you say to those who may share my opinion?

JC: You’ll be missing out. Having spent the past two weeks of my life on the set with my guests and crew, I can tell you that this is going to be an incredibly entertaining and educational series. Every speaker and sponsor who has visited the set has been overwhelmed at the scope, uniqueness and professionalism of the production, with several people staying longer than intended just to hang out on the set! We’re breaking new ground, and those who watch will see a historical event online unfold before their eyes. Yes, it’s that cool.

LP: What is the target demographic for the show? Who do you think will be watching it?

JC: Our obvious base is the Internet marketing and affiliate marketing crowd. However, we have designed the show and our promotions to appeal to a more mainstream audience. I have never wanted to spend time in misery on a desert island, but I enjoy “Survivor.” And most people will never be pop icons, but millions watch “American Idol.” In the same way, “The Next Internet Millionaire” will appeal to a broad segment of the population, with the additional benefit of reaching an audience on the other side of the world via the Internet.

LP: You have a group of a dozen well-known marketing folks (teachers) who are working with you on the show. What is their role?

JC: I wanted to expose our contestants and viewers to some of the most successful marketers in the world. Unlike other reality shows, I wanted the content of “The Next Internet Millionaire” to go beyond entertainment into the educational realm. The experts who have been on location have been teaching our contestants about product creation, copywriting, branding, viral marketing and a number of other strategies and techniques for building a successful online business. These contestants must then apply their newfound knowledge to a relevant and entertaining challenge each day. It has been a privilege to work alongside such legends as Mark Joyner, Armand Morin, Marlon Sanders and Perry Marshall. The experts also play a role in the judging of challenges, as well as advising me on who they believe should be eliminated from the competition.

LP: The show runs 12 weeks, but you only spend a little over two weeks to film the entire show. Is that enough time to see the traits you are looking for in a winner?

JC: Yes. In fact, I’ve been amazed at how quickly we’ve been able to observe these traits. The contestants bonded on the very first day and the intensity of the competition has continued to increase. You really get to see what people are made of when put under a strict time crunch to complete a task. There are so many excellent qualities in our contestants, that while I’m certain we will end up with a great joint venture partner for me, each of the contestants will most likely go on to do some very significant things in the future.

LP: The winner of ‘The Next Internet Millionaire’ will receive $25,000 and get to start a business venture with you. Do you have a particular idea in mind already?

JC: No. I went into the audition process and the actual competition looking for a person, not a project. As I got to know the contestants on the set, I began thinking about what kind of project would be the ideal fit for each individual. Marketing is marketing. The key is to have the right partner. Once you’ve got that, there are always more ideas than there is time to execute. So I’m confident that my new partner and I will put together a fantastically successful product.

LP: How much input and financial investment does the winner have in the venture to be launched?

JC: The partner will have significant input in the venture, as well as a time investment. We will work closely together to develop the product concept and execution. It’s going to be very exciting to see it all come together.

LP: The show is called ‘The Next Internet Millionaire.’ That sort of puts the idea out that the winner will make at least a million dollars. But what if the venture doesn’t live up to those expectations?

JC: I’m not concerned about that. We make it clear that the winner will receive $25,000 and an opportunity for a joint venture with me. Certainly, I and my team will do everything in our power to build another success story with our winner. But my very first deal wasn’t a million-dollar deal. It was, however, a step in the direction that led me to where I am today. My goal is to build a success story with our winner. And while there is always the chance that we won’t make a million dollars right away, I’m confident that our work together will set the winner on the path to being the next Internet millionaire.

LP: You’ve enjoyed years of success. Does that make you more or less anxious about how this new show might be received by the public and your peers?

JC: Not at all. Once again, every one of my peers who has visited the set has been completely blown away at the scope and professionalism of this production. Several of them decided to hang around longer after they got a taste for what is happening here. The buzz is just beginning and I’m confident that we have a groundbreaking hit on our hands. How many people will have the opportunity to say that they created the world’s first competitive Internet reality show? Just one. Whether the public accepts it as a pop culture phenomenon or not, I can’t imagine ever regretting this project. If you aren’t willing to take significant risks, you will never reap the significant rewards. Besides, I’m having a blast.

Sex Education

You may or may not approve of what they are marketing, but nearly everyone can learn something from the strategies that the adult industry uses to capture consumers online. The thriving adult industry has a history of pioneering many online marketing techniques and continues to provide useful lessons in how to attract and convert an audience.

From the creation of the affiliate model to monetizing user-generated content, where sex sites go, mainstream marketers often follow. The selling of sex products and content has grown to become a more than $2.5 billion annual business, according to publisher AVN Online, as each year 72 million people visit the more than 4.2 million adult content websites.

Spoil Your Partners

While search marketing and display advertising provides most of the traffic in many industries, affiliates drive most of the visitors to sex sites. Adult affiliates are treated more like partners, and publishers are unafraid to show their gratitude. Keeping affiliates happy is paramount in the hyper-competitive adult world, says Clark Chambers, general manager of adult affiliate network NicheBucks.

Like many consumers, affiliates don’t have much brand loyalty and will work the partners that offer the better returns if they aren’t satisfied. Chambers, who got into the business because a friend needed someone to oversee his exploding affiliate program, rewards his best affiliates with gifts on top of their generous commissions. He has given jewelry, video games and digital music players to his best affiliates, including one teenager in Russia who makes more than $7,000 a month.

Affiliates do the primary search engine marketing and optimization, which reduces the risk for publishers and eliminates competing with them for the same keywords. Chambers makes sure that his affiliates have access to current conversion statistics and a variety of marketing tools, including a steady stream of images through RSS feeds to attract new customers. Adult sites will even host the affiliate websites for free, according to Chambers, who has been managing adult affiliates for eight years.

Adult sites will pay more than the first month’s subscription fees in commissions to keep the traffic coming, according to an adult industry consultant who asked that his name be withheld (he says his family doesn’t know where he works). The payouts are very generous to prompt affiliate webmasters to work harder for the program, and because they can easily find other content sites to promote, the consultant says. Publishers also emphasize the personal touch by being readily available to their affiliates and quickly responding to their phone calls, and by meeting in person at industry events.

Promoting Competitors

The adult industry has not only nearly perfected the art of affiliate relations, but also grows stronger through publishers earning extra revenue by also acting as affiliates themselves. “Co-opetition” is the practice of promoting competitors’ websites when visitors try to exit a website without buying something, according to Jim Lillig, president of marketing consultancy Synergy Intermedia. “It’s a last resort after exhausting all the other ways to monetize” visitors, he says.

While many publishers may not be willing to promote competitors by acting as an affiliate, Lillig says publishers may be able to earn more revenue from those who don’t buy from them than those who do. Lillig, who helped to build Mr. Skin, a subscription website focusing on celebrity nude scenes, into a successful franchise says, “98 percent of customers leave most websites without buying something.” Admitting that you may not have a product that suits every taste is a difficult but significant realization for publishers looking to maximize their revenue.

Ed Kunkel, the chief operating officer of SexSearch.com, agrees that pitching competitors’ products helps to grow sales across the industry. “[Competitors] have the audience you need and vice versa,” Kunkel says. “It’s a huge world you have access to; there is plenty (of demand) for everyone to make enough money. … Since there is no way of completely dominating a market, you might as well share the wealth amongst each other.”

Analyst Greg Sterling of Sterling Market Intelligence says that publishers who link to their competitor’s sites can benefit. “Intercepting a person before they leave a site in an unobtrusive way would be successful in capturing some number of sales,” according to Sterling. He says applications developers such as customer relations management software company LivePerson are experimenting with displaying competing products as a last resort.

By acting as an affiliate for niche adult publishers (such as sites focusing on older women or those of a specific ethnicity), publishers can also track the conversion rates of different types of content and then develop their own competing sites, according to Lillig. He recommends creating multiple niche sites to highlight areas of content as well as to learn more about consumer habits. Also, publishers who present information about competing products gain credibility with their audience, he says.

Analyst Sterling says companies can increase their reach by parsing their content and creating niche websites, such as search technology vendor Marchex’s development of local search sites from a single database. “The creation of niche sites is a good idea if it can be done skillfully and it’s not just spam,” Sterling says.

The adult industry is a tight-knit group who know each another and “form a big circle,” referring traffic to each other in the belief that it’s better if consumers buy from a competitor than if they don’t buy at all. Adult publishers who trade links with competitors can increase their traffic without having to purchase advertising, Lillig says.

However, that circle often traps customers by generating pop-up windows when customers try to exit, an annoying practice that continues to get some adult publishers in legal trouble. Lillig says that while the pop-ups may be frustrating, adult sites studied the practice and identified the exact number of pop-up windows to maximize revenue. Though pop-ups are still in use, many adult companies now ban affiliates who create pop-ups that trap users with unending windows.

Leading the Technical Charge

Lillig says Mr. Skin was one of the first companies to watermark an image and allow it to be spread around the Internet as viral marketing to enhance branding. Mr. Skin reached millions of potential customers by putting its logo on images and by embedding pre-roll ads into celebrity videos that were circulated via email and through peer-to-peer networks. “They became moving ads,” he says.

The adult industry also popularized giving free sample content in exchange for customers providing valid email addresses and co-registration, which gives customers the option of simultaneously signing up for newsletters from competing adult sites, according to Lillig. He says adult marketers took an early lead in tracking email performance, including who opened emails and where they clicked.

Adult sites have also been adept at identifying seemingly unrelated trends in entertainment and integrating them into their product. For example, one of the fastest-growing segments is “reality porn,” an imitation of reality TV programs that has prompted adult publishers to launch dozens of niche sites.

Another cultural phenomenon being integrated into adult sites is gambling (see article on page 66). Playboy.com will open its first Internet casino by the end of 2006, and 121 Gaming Inc. this summer launched GrandNevada.com, which features naked card dealers.

Publishers need to study the latest trends and find complementary ways to expand their reach, says 121Gaming president and CEO Howard Mann. “We saw an opportunity to go in a different direction with something that added entertainment value,” says Mann, of his combining gaming with nudity.

Adult content publishers are frequently the earliest adopters of technologies such as streaming video and webcams that later are adopted by other industries. “The VCR became popular because people wanted porn, and VHS won out because that was the format that porn adopted,” Mann says. Media companies who are currently evaluating which of the new high-capacity DVD formats (Blu-ray or HD-DVD) to sell should watch to see which technology the porn industry favors.

In addition to technology and cultural trends, adult marketers are also quick to turn the latest publishing trends into tools for deriving additional income. Affiliates are authoring blogs about the adult industry to increase their natural search result rankings, and publishers are creating MySpace profiles for their rising acting stars to differentiate their brands, according to NicheBucks’ Chambers.

The Upper Hand

Of course adult sites have a distinct advantage over their general audience counterparts – sex sells, and the demand for content is almost limitless. “If there is one thing that is universal, it’s that men love to look at naked women,” says 121Gaming’s Mann. Even without any marketing, millions of people will search for adult content. “I know adult networks that get similar traffic to Yahoo,” he says.

Conversion raters are higher on adult versus PG personals searches, according to Mark Brooks, the editor of Online Personals Watch. The “conversions are best when people are looking for sexual connections,” he says. Brooks, who previously worked for AdultFriendFinder, says adult publishers can make back the commissions paid to affiliates to acquire a customer within one month, while it may take three months or more for mainstream personals.

However, because of the generous payouts on adult personals sites, publishers have to spend additional time managing their affiliate relationships. “You have to look after [the affiliates], allow them to call you on the phone and take their requests seriously,” Brooks says. Publishers also have to be steadfast in making sure their affiliates do not damage their brand by being overly aggressive. While he was at the company, AdultFriendFinder stopped allowing affiliates to do email marketing because there was too much abuse.

Lessons Not Learned

The adult industry has mastered how to tempt consumers with just enough content to prompt them to purchase without compromising sales, something that most retail sites have been reticent to experiment with thus far. Adult publishers successfully convert traffic by providing affiliates with free samples of their content, a strategy that publishers should adopt, says Shawn Collins, co-founder of the Affiliate Summit conference.

In the adult world, the profits are in the video content, and affiliates lure and hook customers by showing image galleries (often thumbnails) of naked people, and then directing them to the publishers who sell unlimited access accounts. Collins says video, audio or print media companies could greatly expand their conversions by using affiliates to distribute free samples of their content.

For example, the television networks or movie sellers could distribute clips from their sitcoms or films to affiliates to pique consumer interest, which enables customers to realize the value of the content, according to Collins. Media companies have yet to exploit the power of distributing content through affiliates, Collins says, and were slow to team up with video search engines such as YouTube.com to increase their exposure.

This strategy of partnering with large search engines and requiring users to register is the opposite of the niche marketing that has been critical to the adult industry’s success. Video search engine sites have too much content to successfully promote niches (such as British comedy or period-piece dramas) that would convert well as independent affiliate sites.

“Showing teaser videos and allowing them to be distributed virally” could boost the sales of online video, Collins says. Online music stores should allow affiliates to host and play select songs for free, and Amazon should share its technology for previewing a few pages of a book with affiliates. Reuter’s news is one of the video services that allow affiliates to display its content, but the company keeps all of the revenue from its pre-roll ads, which takes away the incentive from affiliates.

As the adult industry has shown, whetting consumers’ appetites by letting them peek at the goods goes a long way in prompting conversions. Adult publishers prove that by working closely with affiliates, innovating by embracing technology and treating competitors as assets, publishers can create new products and increase their revenue.


JOHN GARTNER is a freelance writer in Portland, Ore. He is a former editor at Wired News and CMP. His articles regularly appear on Wired.com, AlterNet.org and in MIT’s TechnologyReview.com.

Keeping Design Simple

When building a Web site to convert sales, one must make the visitor very comfortable and try to avoid the frustrating pitfalls that commonly plague online merchants.

It’s important to remember that keeping visitors on a Web site and guiding them through the sales process is just as important as getting them there in the first place. Here are several simple tips for attracting visitors, retaining them and getting your site to make money and reach profitability.

Design

Aesthetically, a site should be clean, clear and attractive to the eye, saving bright colors only for important sales process features such as the headlines, offers, important details and purchase links. Avoid offending visitors with vibrant animated GIFs or flash advertisements. They are not only disruptive of the sales process and may lead visitors away from your site, but they also distract and annoy the visitor causing many to abandon your site before buying. That is not what you intended.

Dimensions

Different screen resolutions require that you test your site to make sure that all relevant information is available at as low as 800 x 600 pixels. Make your site no wider than 750 pixels to ensure that no side scrolling will be necessary. A visitor that has to scroll for every line of text will likely leave. Use your space wisely. It’s probably better to have a small amount of empty space than to cram every detail into a small area. On the other hand, you don’t want to leave out any valuable information.

Load Time And Compatibility

Be sure your site loads efficiently and correctly on all the major browsers over a dial-up connection. Many novice site designers are reviewing their work over broadband connections. Just because an image is small does not mean the file size is also small. It is recommended that you compress your images so that your site loads in less than five seconds on dial-up when it is not cached on your drive. Try using JPEG format for images containing gradients or many colors such as photographs. Use GIF-formatted images for buttons and text art containing only a few colors. Also, try to use HTML color whenever possible instead of images.

Sales Process

Clearly present an attractive offer such as a discount or free sample and establish a sense of urgency. Your offer is your hook. Make certain it is attractive or you have nothing to help you stand out against your competition. Accompany your offer with a testimonial or guarantee to establish trust and summarize the features and benefits of the product. You can provide more details about the product on a different page for those who want to know more, but it is advisable to keep the front page of your site simple and sales oriented. Purchase links should always be visible.

Purchase Process

Be sure your purchase process is simple. Remember, at this point you have the sale. You should be doing everything in your power not to lose it. A visitor should be able to get from your home page to an order confirmation in no more than three clicks. This may sound difficult, but it can greatly increase your conversion. A huge mistake that is being made in online marketing is the long and involved registering process and subsequent requirement of customers to log in. The so-called benefits of this feature are to save customer information and acquire opt-in information. However, this process can greatly affect conversion. If you must have customers register, gather their information after they have entered their credit card number and avoid having them enter the same information twice.

Billing information should always be gathered first. Make the customer commit to the purchase prior to entering shipping information or upselling to other products.

Monetization

Monetization means squeezing additional revenue from sources on your site other than your primary offer. Unfortunately, many have misconstrued this concept to mean that one should place affiliate banners throughout the site through which commissions can be earned. This is a huge mistake. Try placing related offers on the order confirmation page or exit pop-under window. This way you can sell your product and make affiliate commissions without disrupting the sales process. Additionally the purchase can be followed by auto-response emails with special offers or reminders on a periodic basis to retain customers.

You can also earn additional revenue or gather valuable information from a non-buyer. For example, if customers do not have a cookie in their browser indicating they purchased from your site, a pop-up could be displayed which offers them an entry to win a product if they sign up for a newsletter. This is an offer many can’t refuse. Choose something you can afford for your sweepstakes, and don’t give it away until you know that the information you’ve gathered is worth the wholesale price of the product. You can then promote your product in your newsletter and retain the ability to promote your offer in the future.

Monetization can also be achieved through the use of an upsell. Upselling items allows you to offer the visitor a complementary item during the purchase process. These items should require a minimal commitment on the part of the customer and minimal explanation on the part of the merchant. For example, if a customer were purchasing a snowboard online, a snowboarding magazine could be offered at the point of purchase. This should only require the customer to click on a single button indicating that they want the additional product. The information can then be fed securely from the form on the merchant’s site to the purchase form for the product on the partner’s site through an affiliate link so that the merchant can earn commissions and thus monetize the site.

GREG SHEPARD is CEO of NetTraction, an online marketing company found at GotRevenue.com. He has eight years of experience in online marketing and 16 in business development.

The Secret to Being Super

They’re called superaffiliates, but there are no secret powers behind their amazing sales. They follow the same path every other affiliate does: They publish a Web site, sign up for affiliate programs, download the affiliate codes and troll on the search engines.

But they work a little smarter, make a few more calls, send a few more emails and do a lot more testing. And what they do better than anyone else is integrate all of the standard affiliate marketing pieces – email lists, merchant relationships and showcased products – to get more people to their site and more people to buy. Their efforts net results only dreamed of by other affiliates: transactions by the thousands, and monthly commissions often measured in six figures.

To illustrate the point, Revenue decided to introduce our readers to Bob DiCerbo, a Chicago resident who never dreamed he would be working just 20 hours a week to make a very comfortable living. He started ClearSave.com with his wife in October 2002, affiliating with merchants such as Overstock.com, Nordstrom.com, QVC.com, Land’s End, FoodSmart.com and Pet Food Direct. Now he does little more than chat up affiliate managers, tweak keywords and cash checks.

ClearSave is a “check here first” site, where visitors come just to see if any of the merchants they regularly patronize are offering discounts, sales, coupons or bargains. The 2-year-old site gets a whopping 300,000 hits per day. Merchants drool over that kind of traffic. And DiCerbo and his wife pull in enough commissions to pay themselves salaries and hire a part-time assistant. Eventually, they expect their “super” efforts to send their kids to college.

What exactly is a superaffiliate? Well, it’s not one particular thing. It could be one person or 100. It could be an individual or it could be a company. It could be a site offering discounts, rebates, rewards, funding for charities, dating services, apparel, travel arrangements, downloadable music or any of the Internet’s hot products. One thing they all have in common is that they’re treated well – even heavily recruited.

Being a big dog has its benefits. “Merchants reach out and help us put together creatives just for us because we’re doing so well,” said DiCerbo. Many affiliates also get higher commissions, special offers and other assistance from merchant partners.

Here are some ideas from DiCerbo and others on how you can get similar treatment.

Find the best programs.

DiCerbo believes one reason he does better is simply by keeping the lines of communication open with the right merchants. “Only a handful of merchants – Overstock, Avon, Sierra Trading Post, Blair and Eddie Bauer – will actually reach out and call and talk to you to see what it is you actually need,” he said.

Glenn Sobel, founder of AffiliateAdvisor.com and webmaster for DatingTek.com, said some of the best programs offer lifetime commissions. “The key is to look for programs that pay residual income – I’m just kicking back right now and enjoying my Internet income,” he said from his Vegas retirement home. Dating sites are a prime example. When an affiliate refers someone, many programs give a commission for the new member and each time that person renews the membership.

To help choose great merchants, would-be superaffiliates should read contracts carefully before signing up. Contracts should spell out exactly what earns a commission, when commissions are paid, how long affiliate referrals are tracked and what happens if buyers come from more than one affiliate site. If the contract doesn’t spell it out, then add it in writing. “There are a lot of issues like that that really matter,” said Sobel. “They greatly impact your income.”

Provide only those products your visitors want.

This may seem elementary, but many new affiliates spend months discovering it. A site posting sports scores, for instance, should have links to sports magazines and sports betting, not printer ink.

“We wouldn’t promote Overstock as hard as we do if our audience didn’t think it … met their needs for discounted products,” said DiCerbo. “The proof is in the pudding.” That pudding consists of $40,000 to $50,000 in monthly sales, resulting in commissions of $2,800 to $3,500 for ClearSave.

Loyalty site FreeRide.com, which gets 30,000 hits per day and affiliates with hundreds of merchants, asks visitors for demographic information when they register. “But a lot of the way we figure out our demographic is by watching their activity – What are they buying?” said FreeRide.com director Corey Newhouse. FreeRide then beefs up selection for that audience.

“Once you’ve found the ideal types of products, choose one or a handful of really good quality products and promote those well,” said Internet Marketing Center founder Corey Rudl, who built his one-man affiliate operation into a $6.6 million-per-year company. Top affiliates in his program use this strategy to earn $4,000 to $8,000-plus each month.

Email your site visitors.

Superaffiliates always collect email addresses when visitors come to their sites. They have visitors sign up for free offers, newsletters or access to more information already on the site. More than 200,000 of ClearSave’s visitors have filled in their email addresses when prompted to “sign up for exclusive deals, bargains and coupons.” DiCerbo blasts them carefully honed emails once or twice a month. Jermaine Griggs, the superaffiliate featured in our story on religion sites (see page 68), credits his email list for the success of his piano lesson sites. Visitors enter their first name and email address anytime they want to pick a free lesson, see a full music score or add a comment to the lesson forum. The options are free anyway, so Griggs turns them into selections that require visitor input: “I could automatically direct them to all 60 lessons, but ‘Choose a free lesson’ is better than saying ’60 free lessons,'” Griggs said. “This way they enter their information. We have a 60 percent conversion rate with that list, and we’re building it by 6,000 people each month.”

Finally, if you really want to win big, produce a newsletter and promote the heck out of it. Have site visitors subscribe through an opt-in section of the site’s home page, and load the newsletter with advice, news or updates on your industry. Affiliates can work great deals with merchants just by the breadth of their newsletter subscription base.

Hire help when needed.

DiCerbo has part-time help finding new coupons and codes to post on the site. He also has an IT person on retainer. Superaffiliates must either be webmasters or have one on hand. These days, even knowing HTML may not be enough. “We found that XML is much more search engine friendly,” said Rick Schneider, VP of business development for World Choice Travel, an all-affiliate travel merchant. “XML lets you more deeply integrate an affiliate product with the merchant’s brand.”

There are even small companies that are really superaffiliates. They run virtual online stores with lots of customer support, information, great design and other labor-intensive elements. That’s what FreeRide.com – which uses “tokens” redeemed for merchant gift cards to reward visitors for purchases, surveys or Web surfing – does. It’s a four-employee loyalty site run by New York-based Endai Worldwide, an online marketing and technology company with 20 employees of its own. From his loft office overlooking downtown Manhattan’s South Street Seaport, Newhouse knows this isn’t an ordinary affiliate company. But it could be a glimpse at what in just a few years might be the norm. Major affiliates are already being acquired by their merchants – Hotels.com owns hundreds of affiliate sites.

Help searchers find your site.

Keywords, search engine placement, refer-a-friend programs, viral marketing – these are a few of the steps to bringing new viewers to your site. Pay-per-click search engines let affiliates quickly test search words. Through Google AdWords, DiCerbo creates his own ads, chooses keywords to match the ad to his target Google audience and pays only when someone clicks on the ad. He said his site has the most success with high commission products like perfume and footwear. He tries words often provided by his merchants and then tinkers with different landing pages – those pages that actually advertise the product, rather than directing people to the home page – to find out which word and page combinations would help to make the most sales.

Griggs gets even more distance from his hosting service, which gives him unlimited email accounts with his domain name. “If you have an attractive domain name, you can easily offer free theirname@your site.com email addresses to site visitors,” Griggs said. “I’m getting at least 1,000 [viral] impressions a day with that strategy, because my site names appear at the bottom of every email they send out.” Griggs also suggests that affiliates search out the forums or online chat rooms where their ideal customers congregate.

Meanwhile, FreeRide.com is trying its hand at co-registration campaigns, where visitors to other sites can check a box and be added to FreeRide’s list. “So far so good,” Newhouse said.

Once visitors get to your site, keep them there through easy navigation, great design and an established sense of community. “The bottom line is, you’re selling ideas and you’re selling community,” said Web site designer Dean Peters. One way to establish community is through personal endorsements and testimonials. Place them well and make them convincing pieces of friendly advice rather than an obvious cash grab. Testimonials “could increase the response you receive by 400 percent or more,” said Rudl, who has trained 75,000 affiliates in his strategies.

Roll up your sleeves.

This is a day-and-night business. Click-through problems aren’t reserved for 9 to 5; if not cared for immediately, these problems can harm sales. Affiliates must be able to respond as soon as problems occur. That doesn’t mean you actually have to work 24 hours a day. Many successful affiliates grow with just 40 hours per week of combined staff time. But they’re regularly checking their stats, regularly checking their site operations, regularly testing new promotional methods and regularly working with merchants to improve their affiliate offerings. “It’s definitely roll up your sleeves and a lot of grunt work to see what works and what doesn’t,” DiCerbo said.

Test response rates for different affiliate banner ads and text links. Put them in different spots on your site. Try different articles and newsletters. Use different autoresponders. Test promotions on the small scale before taking them to your mass list. “While this might seem like a lot of work, it will ultimately increase their traffic and their affiliate commissions,” said Rudl.

Newhouse at FreeRide.com seconds that: “Giving people a variety of ways to take an action helps a lot.”

Be ready to respond to changes.

“I never look too far out into the future,” DiCerbo said. “The e-commerce landscape changes so quickly that I’m not going to say that the way we’re doing business now is the same way we’ll be doing it next year. Paid search is a new thing that has just taken off. The spam area is closing down. It’s hard to say what’s going to happen.”

In the end, the superaffiliate must be committed to working regularly on its site, must talk frequently with its merchants, must constantly be in touch with its customers and must be able to wait for its efforts to pan out. The buyers often don’t come running. But with the right products and the right customer capture mechanisms in place, at least they’ll be following the right tracks.

JENNIFER MEACHAM has worked for Revenue, The Seattle Times, The Columbian, Vancouver Business Journal and Emerging Business magazine.