Sunday, January 3, 2010

Affiliate Marketing, Links, And Silicon Valley

A guy wrote a blog post which drove 535 visitors to Amazon, and he got $25.20 for it.

My blog post drove a lot of value to Amazon that is not totally captured by the 40 purchases...or even the 118 transactions that were done by those visitors in the past two days. The value of that link, in my opinion, is significantly greater than $25.20 and as a result bloggers and other users of affiliate services are getting undercompensated for the value they are providing.

He then brings up research that shows repeat viewings sell things.

Caterina Fake, in the comments:

This is why all the money goes to Google and whichever sites can position themselves in the last moment before a purchase is made, at the end of that process...

The "introducing" sites are not being tracked or compensated at all. But companies that are able to figure out which those introducing sites are, and spend their advertising dollars on those sites will have a significant advantage over sites that are spending most of their SEM dollars with Google not knowing the original referrer was AVC. They might find that advertising on cNet -- or AVC-- brings in more actual new leads than Google.


And some other tech blogger responded:

100% correct...

Big problem, and big opportunity for those who can figure it out!


Yes. Those who can figure it out have a huge opportunity. Especially those who can figure out that this is already a solved problem.

Some links in this post are affiliate links, which pay small sales commissions.

Reiterating Caterina's initial comment:

all the money goes to Google and whichever sites can position themselves in the last moment before a purchase is made, at the end of that process...

The solution to this is simple: you position yourself at the last moment before a purchase is made. There's a whole business model around that. It requires very little effort. (I've only made $25 with it myself so far, but it's a tiny side business, I just got started, other people have made a lot more, $25 is more profit than many startups ever see, and again, it requires very little effort.)

You'll never hear about this business model from any other tech blogger but me - it's cheesy, it's cheap, it's not prestigious, VCs can't invest in it, people at Silicon Valley parties don't think it's "cool", nobody in a sweater vest will ever care, and in short, it's not good for anything except making money - but it's really this simple: these Silicon Valley people are talking about the brave exciting future we're going to live in when somebody solves a problem that has in fact already been solved.

Caterina's referring to the process of learning about a product, hemming, hawing, thinking about it, and then finally googling it and buying it. This business model captures and harvests that traffic.

Back to the rest of Caterina's comments:

The "introducing" sites are not being tracked or compensated at all. But companies that are able to figure out which those introducing sites are, and spend their advertising dollars on those sites will have a significant advantage over sites that are spending most of their SEM dollars with Google not knowing the original referrer was AVC. They might find that advertising on cNet -- or AVC-- brings in more actual new leads than Google.

The original poster started things off talking about a blog post where he reviewed a book and included an affiliate link to Amazon. But here, Caterina's talking about paid advertizing, which is a completely different animal. Also, the whole argument here is that you're better off advertizing on the site which introduces a product, but doesn't lead to a person buying it, than you are advertizing on the site which leads to a person buying something, but doesn't introduce them to it.

I don't understand that logic at all. Do you want people to hear about your product, or buy it? Why would I be happier buying a mention than a sale? I think Caterina's reasoning is incorrect. You save paid advertizing for the venues that bring in sales. You set up affiliate programs because they sometimes work and they cost you nothing. Caterina's reasoning that the advertizer gets more bang for their buck has nothing to do with affiliate programs; affiliate programs have no bang-to-buck ratio in any case, because the buck is zero. You can't divide by zero.

Last but not least, as far as I can tell, all this reasoning is meaningless, because when I make affiliate sales on Amazon, lots of people buy things that are totally unrelated to what I'm blogging about. I suppose that means it's not even about the product you refer, it's about driving traffic to Amazon - but I'm not sure yet, and I don't care. Amazon affiliate sales are like looking at a picture of a puppy, apropos of absolutely nothing. It doesn't have to make sense to make you happy.



PS: If you're a subscriber to my paid, private blog, I'm going to give you a rundown of how I'm doing with this business model. (If I don't remember to do it soon, please nag me about it.)