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IQ News: Colseup - Affiliate Nation

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Commission Junction steps away from the ad network pack.
Affiliate marketing can be a win-win proposition for online retailers seeking to build their exposure, customer base and sales, and for Web sites hoping to capitalize on their traffic and monetize their content. But finding the right partners, managing the relationships and getting the desired response can be tricky and time-consuming--especially when dealing with numerous partners.
Commission Junction, a Santa Barbara, Calif., company founded in November 1998, has set up an ad network to streamline the process. Lex Sisney, Commission Junction president, says his frustrations as a one-time affiliate dealing with multiple merchants' differing systems and random payments prompted him "to build a better mousetrap" that frees members from the hassles typically involved in affiliate marketing. "The buck stops here," Sisney says.
The company creates marketing partnerships between Web merchants and content sites, serving as the single point of contact for tracking online transactions and managing revenue sharing. The network currently comprises 600 retailers, including: Tower Records, Sacramento; Patagonia, Ventura, Calif.; and PC Flowers & Gifts, Stamford, Conn.; as well as 120,000 affiliate sites, among them Ask Jeeves, Emeryville, Calif., and Infospace, Redmond, Wash.

COMPETITIVE EDGE
Commission Junction claims its "one-stop shop" approach sets it apart from rivals such as Be Free, Marlborough, Mass., and LinkShare, New York and San Francisco. Among other things, it aggregates commissions for affiliates--which deal with an average of seven merchants--and pays them directly in one monthly check. It also claims to be the only network with a totally Web-based solution for both merchants and affiliates, meaning they don't have to buy or install any software.
The network points to its pay-for-performance approach as another departure from the norm. Rather than being paid simply for delivering eyeballs on a CPM basis, affiliates earn a commission on purchases, a flat rate per click or per lead, or a combination of both. Commission Junction receives 2 percent of any fees paid. If a merchant pays a 10 percent commission to an affiliate, the network receives an additional 2 percent, which comes directly from the merchant and not from the affiliate's commission.
Affiliates, which can join the network at no cost, can earn substantial revenues, according to the company. Last year, Commission Junction paid out over half a million dollars in commissions; it has already paid out more than that in the first two months of this year, says Scott Horst, vice president of marketing.
CollegeRecruiter.com, a Minneapolis-based job site for college students and recent graduates and one of the network's first affiliates, generates about one-third of its revenue from commissions earned through affiliate programs--the vast majority of that from Commission Junction. The site works with about two dozen advertisers that offer complementary services, such as rƒsumƒ preparation or seminars.
Steven Rothberg, president at CollegeRecruiter.com, calls Commission Junction's "100 percent devotion to customer service" extraordinary. "They are customer service freaks," he says.
Retailers, who pay a one-time fee of $795 to sign up, typically see sales increase between 15 percent and 40 percent thanks to affiliate referrals, according to Horst. Dash.com, a New York-based online shopping service, is working with about 4,000 affiliates in the Commission Junction network to promote downloads of its free toolbar. The site has seen a 1,000 percent increase in downloads since joining the network last November.
"The ROI is explosive," says Keith Kochberg, director of affiliate services for Dash.com. "The improvement was almost instantaneous, and it paid for itself in a matter of days. This is by far the most cost-effective tool we've used."

CONTEXT IS EVERYTHING
To improve response and the advertiser's return on investment, Commission Junction eschews "out-of-context" banner advertising and profiling for what it calls EnContext advertising, a form of contextual advertising that integrates ad messages into related content. "EnContext lets consumers make a decision at the point of interest," Horst explains. "Why bother trying to predict someone's behavior through profiling when you can count on human nature?"
When viewers click on a text or graphical link--say an artist's name or an image of an album cover within a record review--a window pops up, enabling them to get more information or actually make a purchase without leaving the site. The resulting stickiness is a big draw for affiliates. "Most affiliates fought very hard to get people to their site, so they don't want to lose them just to get a commission," observes CollegeRecruiter.com's Rothberg. "This lets them kill two birds with one stone--they get a commission for generating leads or sales, yet they keep viewers at their site."
Results illustrate the effectiveness of this approach, Horst says, pointing to clickthrough rates of 6 percent and a conversion ratio of 4 percent for EnContext ads--many times the average of banner ads.
Rothberg believes this form of advertising will rapidly gain favor. "Within a year or so, I think the EnContext way of doing things will take over from banners, where visitors click and go away," he predicts.

NEW AND IMPROVED
This month, Commission Junction is launching a "complete revamp of its site and
functionality" that will further streamline the process of selecting and placing ads on affiliate sites, Horst says. "It will save 75 percent of the work. The level of automation and intelligence is going through the roof."
The basic process will remain the same: Merchants upload their banners, images and other links to the Commission Junction site. Affiliates can view the ads and select those they want to place on their site. The network's Web-based, real-time tracking system tracks and reports on commissions and sales. It can report up to 50 billion ads per month over the network, with a choice of over 100 customized real-time reports. Horst says the network is generating 14 million impressions per day.
Not surprisingly, Sisney believes affiliate marketing is one of the most effective ways for merchants to build business, and he expects "a quiet groundswell" as more online companies perceive its benefits.
"Not everyone has millions of dollars for offline campaigns," Sisney says. "They're struggling to run profitable online businesses. We can give retailers of all sizes increased shelf space at the point of interest where users are congregating."