"The Desktop Global Marketer" (tm)

   A free on-line newsletter of Sidereal Designs, Inc.,
   for Internet Entrepreneurs, and those who are
   considering becoming one.
_____________________________________________________

                     April 26, 1999

In this issue: "A major new business model is emerging from
web technology, and you should at least evaluate its
relevance for your enterprise."
_____________________________________________________

   "The Desktop Global Marketer" is free, and may be 
   re-published freely with permission. We encourage 
   you to give it to your friends.

   For subscription (or un-subscription) details,
   and other information, please see the end of the 
   newsletter.

   For any other purpose, please write to:
   	jamie(at)siderealdesigns.com
   Or visit us at:
   	http://siderealdesigns.com
_____________________________________________________

The web is a whole new marketing ballgame.

Of the top fifty most active web sites in the world, only
four are owned by traditional companies, according to a
survey by Media Metrix. New enterprises have formed the
ranks of successful web marketers, while internet sites put
up by established companies have gone nowhere.  The only
pre-net company in the top twenty is Ziff-Davis, while
previously unknown - and in fact non-existent - upstarts
like Amazon.com have taken over. 

Trying to use old-style marketing skills can apparently be a
hindrance when the rules are changed, and the rules are
being changed in a dramatic way that will alter the norms
for commerce from now on. This presents unprecedented
opportunity for the small operator and newcomer with vision
to experience rapid growth.

There are a number of new approaches to marketing
evolving. By understanding them and using the ones that fit
your business you will be well-positioned to succeed. I'll
be discussing several in subsequent issues. In this issue
I'll examine a web-marketing technique known as "Affiliate
marketing."

Consider a traditional franchise approach. A business such
as a chain of bookstores, or a fast-food restaurant chain
with a successful brand will license you, for a price, to
use it's advertising, marketing, and product development to
start your own business. You provide the physical location,
the staff, etc. Hopefully you choose a good location with
lots of traffic (for which you have to pay a lot) and both
you and the franchiser profit.

On the Internet, something similar can happen, but with a
whole new twist. It's called "affiliate marketing." Huge
numbers of companies are turning to this approach, but let's
look at Amazon as an example since they were one of the
pioneers. 

What assets do they have with which to make money? A means
for taking and processing book orders, connections with book
publishers and wholesale distributors, and a delivery
system.

What do they need to turn this into dollars? They need
people to come to their web site to transact business, and
they need knowledgeable people to select, review, recommend,
and promote books to potential customers. If you can attract
a niche clientele to your website and offer them
value-added with your recommendation and evaluation of books
of interest to them, and if you would further agree to send
these people to Amazon to buy the book in a convenient
manner, then Amazon needs you and will pay for your help.

It works something like a franchise, except there's no out of
pocket startup expense, and getting a "good location" means
being clever enough to draw traffic to your site, not paying
for a store front in the mall.

After you sign an affiliate agreement with them, they let
you use their logos, book reviews, cover pictures, and other
materials to advertise books on your site. You get a cut of
the profit if someone buys a book from your site, but you
don't have to handle the transaction or worry about credit
card sales or delivery. They can do all that because, thanks
to the Internet, their order-processing machinery is just a
link from your page.

Typically there are several kinds of arrangement possible.
You can just display a link to their site and get about 5%
of any sales they make from people who click through from
your pages. At the other end, you can put in the effort to
add value through your own efforts by researching, selecting
and recommending specific books and installing links
directly to those books in Amazon's on-line catalog. In this
case you get a 15% cut.  Other affiliate programs work
similarly.

It's a win-win situation; the customer pays no more, Amazon
and you both profit by your investment of time and expertise
and by your ability to draw a targeted audience to your
site. The client profits by your ability to discover and
recommend books of value to them. Financially it's as if
Amazon were the wholesaler and you were the retailer, except
they're handling order processing and delivery to the
consumer. Because overhead is so low, and communications
instantaneous, it works.

There are three reasons you might want to consider such an
affiliate program. The first and most obvious is making
money by getting a percentage of book sales. To be honest,
making much money this way requires that you have a rather
special type of website. The key is volume of traffic. If
you can't pull thousands of hits a day, and if only a small
percentage of your visitors actually buy a book, you'll make
a few bucks but not get rich. Some websites do pull enormous
numbers of hits - news, weather and sports-information
centers, for example. 

If you're not that kind of operation you can still do well
if you are attracting visitors of a particular type and can
offer selected books that are targeted to them, and if they
have other reasons to trust your expert recommendation. You
will have fewer visitors, but a higher percentage will make
a purchase. Still, if your volume isn't up there it's not
going to be your principal source of revenue.

A second way to profit from an affiliate program is
indirectly. If it is presented as a service that adds value
to your site it will encourage people to come. If you
regularly add new things it will encourage them to come
back. If they do, your chances of selling your primary
service increase.

We have always stressed the importance of having pages of
free, useful information, links, written materials, and
other items to keep people returning to your site. Your 
store of expertise is inexhaustible and costs you nothing; 
give it away for free and people will come.  A list of
recommended books with reviews fits very well into this
program. 

We have put up a page of books on web-marketing on our own
site at http://siderealdesigns.com for precisely this
reason. We even use it as a place to hang a brief tutorial
on affiliate programs on a side-bar. If someone finds the
books interesting they will come back, and they may read
about affiliate programs and have us build one into their
own site.

Finally, the third way, if you have the right sort of
business, is to consider running your own affiliate
program. Offer other web sites a percentage (or a fixed
"finder's fee" if that's more appropriate) for everyone who
buys your goods or subscribes to your services, provided
they come to you from a link through the other site.

If you market this idea to sites that are related to you but
not competitive, much as you would reciprocal links, they
can use it as value-added for their clients. For some
businesses such as book sales, almost any other site is
potentially relevant. For other businesses it may take
greater effort to find highly-relevant affiliates; but then
the probability of sales is also higher.

Setting your site up to be an affiliate is not terribly
difficult. Running your own affiliate program is a bit more
complex, but your webmaster can advise you on the costs of
setting up either. It looks like a major new business model
emerging from web technology, and you should at least
evaluate its relevance for your business.

Best,

Jamie

_____________________________________________________

To subscribe, send email to: 
	newsletter-request(at)siderealdesigns.com
and include the word   subscribe   as the only item in
the body of the letter.

To unsubscribe, send email to: 
	newsletter-request(at)siderealdesigns.com
and include the word   unsubscribe   as the only item in
the body of the letter.

If you have problems with either of these, write directly
to jamie(at)siderealdesigns.com for prompt attention from
a human.

If you would like to re-publish any of our newsletters,
at no cost, please contact jamie(at)siderealdesigns.com.

"Sidereal" is pronounced sy-DEER-ee-all, and means "of
or pertaining to the stars, the heavens, etc."
______________________________________________________________________________
Sidereal Designs, Inc. "Making The Web Simple."   http://siderealdesigns.com