WHAT YOU WILL LEARN
In this lesson, you will learn how affiliate programs have evolved as the means of advertising for e-commerce. You will learn how the Internet created an entirely new channel for selling goods and services and how the multitier commission structure supplies the missing link to make this new channel fully effective.
THE EMERGENCE OF THE WEB
Ten years ago, there was no such thing as e-commerce as we know it today. Although the Internet has been around in some form or fashion for many years, for most of its history it was used only by the military and research scientists. As the technology became friendlier, others began to use it. The key event to the popularization of the Internet was the creation of the World Wide Web—especially the capability to show pictures and play sound from the Web, which became available around 1994. Adding that multimedia capability to the Web made it inevitable that the Internet would eventually pervade business and commerce. It did not take long.
The graphical Web was shortly followed by the capability to transmit credit card information securely online, which was shortly followed by the ability to process the card payments in real time online. A new venue to sell products and services had arisen seemingly overnight.
A NEW DISTRIBUTION CHANNEL
The Internet provides a new and quite different distribution channel for vendors to sell their products and services to consumers. Consumers can learn about, view pictures of, and order products from anywhere at anytime from the comfort of their home or office.
To sell anything, though, a vendor needs to get traffic to his or her Website through advertising. This was first approached from the old model of TV, radio, and print ads. That is, vendors went to popular Websites and offered to pay for placement of their ad for a period of time. Since the Internet is different from the old broadcast media, however, new more efficient methods of advertising were sought. It is relatively easy to determine the size of a TV or radio station’s audience. The same is true with the circulation of print media such as newspapers and magazines. It’s not as easy with a Website, however. Sure, there are counters, but they can not always be trusted.
Plus, a Web page being retrieved from a server (and thus adding to the counter) does not necessarily mean it will be seen by a human being. Bots and automated processes can retrieve pages that are never seen by any human being. It became important to know whether the page views were coming from the same source or whether they were “unique views”—i.e. new people rather than the same few over and over or some automated process. Another problem was that unless the ad is placed prominently and in context on the host site, it will not draw traffic, even from a large audience of unique viewers to the host site. So, paying a flat fee for displaying an ad on a Website for a set period of time turned out to be undesirable.
Rather than paying for a set period of time, advertisers began to prefer to pay according to the number of clicks on their banners. Standard sizes evolved for banners used to advertise Websites on other Websites. The banners can have words, pictures, and animation and serve as a link to the advertised Website. When you click on the banner, you are taken immediately to the advertised site. Thus, with “pay per click” if you did not get any traffic, you did not have to pay. This motivated the host site Webmaster to place the banner effectively on the site so it would draw traffic. Even “pay per click” had its problems, though. Clicks could also be automated and unscrupulous hosts could cheat. Clicks also needed to be from “unique viewers” to be effective.
Thus, vendors ultimately came to prefer paying only when a sell was actually made or someone at least interacted with the site by joining an opt-in program. The vehicle for paying only for sells or opt-ins on your site from persons sent from the host site became known as “affiliate programs.”
As the popularity of affiliate programs has grown, services, such as LinkExchange, Commission Junction, BeFree, and many others, have arisen to provide centralized locations where Webmasters can pick and join affiliate programs. These services also monitor the vendors and keep them honest. They provide standardized software and interfaces to run the affiliate programs so that each new vendor does not have to re-invent the wheel when they start up an affiliate program.
As a Webmaster, you can go to one of these sites and pick out the programs you want to join. You fill out a form providing information about yourself and your Website and then you download the “banner code” to place on your site. When someone clicks on the banner from your site and buys something from the vendor, the sale is tracked and they pay you a small commission. Most provide online reporting so that you can see your how your sales are going at any time.
While these affiliate services help to promote affiliate programs for the vendors, and provide some efficiency for the Webmasters, vendors are still looking for better ways to promote their affiliates’ programs and Webmasters are looking for more profitable arrangements.
BUYING FROM YOUR OWN STORE
Only a small percentage of the millions of Websites on the Internet actually draw any significant traffic. ISPs and other services provide free personal home pages and many people have designed sites more for their own amusement than any serious purpose. Nevertheless, it is advantageous to vendors to have their affiliate banners on as many pages as possible. Even the sites that do not draw significant traffic have the benefit of the loyalty of their own Webmaster. If you have put the Amazon.com affiliate banner on your site, you will go there to buy your books rather than Barnes and Nobles because you get a little commission back when you buy from your own “store.” Because of this, most vendors make it as easy as possible to join their affiliate programs and want affiliates even with low traffic sites.
After the new wears off, however, most Webmasters realize it is too much work for too little value to keep affiliate programs on their low traffic Web pages. Because vendor sites are constantly being redesigned, your banner stops working and you have to download new “banner code” and replace it on your site. As promotions change, the vendors make you change your code or the pictures stop showing up. A few of the major vendors with affiliate programs have gone bankrupt and the links just quit working. It turns out to take a lot of time and effort to keep affiliate banners working on your site. Yet, it would benefit both the vendors and the Webmasters of the low traffic sites if this could be more conveniently and more profitably done.
A BRAIN TEASER SOLVED
There are thousands upon thousands of affiliate programs available on the Internet. A Webmaster cannot put more than just a very few affiliate programs on any one Website without losing effectiveness. (Nothing is worse than a Web page crammed full of banners.) Thus, Webmasters have become selective in choosing affiliate programs. As competition heats up among the vendors, the vendors find themselves focusing on finding creative ways to promote their affiliate programs. Affiliate programs are excellent for marketing products and services on the Internet, but how do you effectively market an affiliate program to the Webmasters?
A few bright entrepreneurs, including SFI marketing Group’s founder, Gery Carson, have come up with the answer. The answer is to have a multitier affiliate program. This solves two problems. One, it makes it worthwhile for the ordinary person to become involved in e-commerce. You can make good money even without a high-traffic Website because you share in the sales of an entire organization. Plus, you don’t have to hassle with keeping banner code for multiple programs up to date. SFI’s Catalog allows all SFI affiliates to “buy from their own store” without the hassle of trying to maintain hundreds of affiliate programs yourself. Two, the attractiveness of the multitier commissions effectively promotes the affiliate program without distracting from product promotions.
Plus, this solution involves multitier training as well. Webmasters become involved in affiliate programs not only for their own savings but also to generate income from selling to others as well. This is not easy and requires training. It would be extremely costly for each vendor to establish an effective training program, providing the one-on-one communication necessary for true results. A multitier system with Team Leaders providing one-on-one training as needed eliminates the vendors’ substantial affiliate training costs.
Thus, the next logical step in the evolution of affiliate programs in e-commerce is exactly what the SFI marketing Group has already done: a multitier commission and training structure.
NETWORK MARKETING AND THE INTERNET
When you step back and look at the history of e-commerce, you see that affiliate programs have independently evolved into something very similar to network marketing, which has been around for a long time. Ironically, though, network marketing itself has not taken well to the Internet. Most network marketing companies mistakenly believe that face-to-face interactions are necessary and that recruiting can not be effectively done online. (The research is in, however, and it shows the contrary to be true.) Another factor is that many network marketing companies do not encourage analytical examination of their opportunity, which is inevitable on the Information Superhighway. Thus, most network marketing companies only use the Internet to provide forms downloads and similar services to their existing representatives. They do not effectively use the Internet as a recruiting tool or to sell products to the general public.
Some enterprising independent representatives, however, have evolved the “downline clubs.” Downline clubs sign people up on the Internet, promising to place them in multiple network marketing opportunities based on the order in which they signed up. Downline clubs theoretically offer the possibility of a large organization below you in multiple opportunities without any recruiting effort on your part. In actuality, though, most downline clubs have been disappointing. The greed of the club founders, the hope of instant riches, and the lack of focus due to joining multiple network marketing companies have usually yielded poor results. Training and commitment are lacking, so large downlines (if they get built in the first place) often crumble even faster than they were collected.
Thus, network marketing as we traditionally have known it has not grasped the potential of the Internet and does not appear likely to do so. Plus, and perhaps because of the Internet, the old model of network marketing is less effective in any venue of late.
THE NEW PARADIGM
SFI’s founder, an experienced and successful network marketer, was one of the first to recognize that the old network marketing model quit working for many previously successful marketers around the same time that e-commerce was evolving toward a similar but different paradigm. He realized that an entirely new model was needed. He drew upon those principles of network marketing that remained viable and applied them to solve the current e-commerce challenge of promoting affiliate programs on the Internet. The results are phenomenal. SFI now has well over 7 million affiliates and the numbers of new affiliates each month is growing progressively.
SFI works because it is an e-commerce affiliate program. Unlike the old network marketing model, SFI does not require you to make unnecessary purchases or meet stringent qualifications to earn commissions. In contrast to almost all of the old network marketing companies, SFI fully embraces the powerful recruiting potential of the Internet. The SFI opportunity stands up well to the analytical scrutiny characteristic of the Information Superhighway. It is a forerunner in the next stage of evolution of e-commerce. Adding the multitier structure to an Internet affiliate program makes the new e-commerce channel of distribution fully workable. Because of this, SFI has been able to negotiate fantastic savings and commissions for its affiliates from world-class vendors and will continue to attract more and even better deals as SFI continues to grow.
The natural evolution of e-commerce has pointed to a multitier commission structure to give life to the new channel of distribution of goods and services created by the Internet. SFI is in the forefront of this new adventure in commerce. SFI embodies the most advanced stage of evolution of e-commerce. As Moore’s Law (discussed in an earlier lesson) ensures the continued growth of e-commerce, history and logic dictate that affiliate programs will continue as the distribution channel for e-commerce. It follows that SFI, representing the most advanced evolution of affiliate programs, will continue to have lasting phenomenal growth and prove profitable for all involved.
WHAT’S COMING NEXT
In our next lesson, we will focus on how you should approach finding other Webmasters to join your team of affiliates in a multitier affiliate program.