(art)(sa) "Affiliate marketing"; A few case studies..
I came across this article out of The Industry Standard magazine while flying down to New Orleans today. I thought it raised some interesting points regarding 'affiliate marketing' and how some other companies are trying to implement the model. Fortunately, I was able to locate the article online. I've put in bold face what are IMO particularly salient points.
thestandard.com
January 31, 2000
A Painless Way to Fund the New Gym
A handful of sites hope to do well by doing good. Shoppers are the key.
By Dan Goodin
Amid all the million-dollar stock options in dot-com paradise and an economy that just won't quit, a growing number of upstarts are trying to make a buck by helping to spread the wealth. The idea is simple: Click through to an online merchant via a link on one of the do-gooder sites, make a purchase and a portion of the transaction goes to your favorite charity.
The model builds off of "affiliate marketing," in which a vendor like Amazon.com (AMZN) pays independent Web sites a fee every time a visitor clicks on a link and buys a book. Most of the companies on the charity scene have tried to attract customers by providing them with a seemingly endless list of charity choices. But Schoolpop.com, the latest newcomer to the affiliate charity space, is narrowing its focus: It helps schools.
"We're betting that parents love their kids more than the whales," says Rea Callender, who founded Schoolpop along with CEO Bob Wann. More than 30 million families in the United States have at least one child in grades K-to-12, Callender says, meaning Schoolpop's potential customer base is plenty big. What's more, he says, school moms are easier to target than are, say, defenders of the spotted owl, because parents naturally congregate around schools. That means it costs Schoolpop less to acquire customers.
Add to the mix hundreds of top-tier e-retailers ? from Webvan to Amazon.com ? who agree to pay any of the participating 15,000 schools between 2 percent and 25 percent of a transaction, and Schoolpop says it will become a "frictionless" way for parents to fund a new school gym while buying the new Alice Walker novel. Parents, says Callender, "are buying a lot of goods and our goal is to get in the middle of every purchase."
Of course, Schoolpop is in it for the money. The Menlo Park, Calif., firm, which has received nearly $8 million in capital from Accel Partners, Ron Conway and other investors, plans to generate revenues by keeping a portion of what it takes in from each merchant. Schoolpop says its cut is generally no more than 25 percent of the total rebate and that's on top of what it gives to the schools. In other words, when Schoolpop promises that 10 percent of a customer's long-distance bill will be funneled back to his or her local school if they switch to Qwest Communications, Schoolpop charges a commission in addition to that fee. Schoolpop also supplies schools with posters, banners and other fund-raising materials.
The concept is tried and true, but it hasn't exactly taken the world by storm. Working Assets, a long-distance carrier that donates a portion of its revenues to charities and political causes, has gained a loyal following among political activists, but its market share pales compared with that of AT&T and MCI/Worldcom. That's not stopping an increasing number of companies from trying their hand at the practice online. Working Assets, for instance, has launched Shopforchange.com, while GreaterGood, a Seattle firm with more than $20 million in capital from Arch Venture Partners, Olympic Venture Partners and others, allows members to donate to any of 700 charities while shopping at more than 80 online merchants. GreaterGood recently jumped into school funding with a second site called Yourschoolshop.com.
So why do Web upstarts smell a fortune in a concept that has yet to soar in the offline world? For one thing, it's the power of affiliate marketing. "It's a tremendously efficient advertising mechanism [because merchants] pay only when people buy stuff on their site," says Paul Wasserman, CEO of Ebates.com, a company that passes rebates from e-retailers directly to users. (Ebates differs from the Schoolpop crowd, however. "We kind of go for the greed factor and enable people to do what they want with the cash," Wasserman adds.)
Another difference is that while Working Assets requires the socially conscious to deal with a little-known brand, the Net allows people do good while still shopping with top names. "If you don't shop this way," says Callender, "you'll feel guilty." |
