Monday, January 12, 2009

Affiliate Summit, what happens in Vegas....

can spread like wildfire world wide. This Summit was sold out with an estimated 2,900 attendees, representing a 40% growth from the prior year and based on the number of small vendors, and entrepreneurial pitches, seems to resemble the Wild Wild west.

Previously, I posted about the success many internet businesses have enjoyed by adopting affiliate sales as a component to their sales strategy. The ability to instantly track sales, customer conversion rates, and gather demographic information enables companies to minimize the % of marketing/sales expenses that are inevitably wasted. With 50-60% of a company's expenses devoted to sales and marketing, leverage here is probably the most significant area for a CEO to concentrate.

Significantly, affiliates are compensated only if customers perform a desired activity (click through or purchase via CPA, CPC or CPA agreements). This capital efficient model is somewhat balanced with the velocity of turnover as high traffic affiliates will likely drop vendors rapidly if the real estate they lend for a particular action does not generate sufficient returns. Think of it as a compression of time in today's retail department store where a vendor's products need to produce instantly, as a 'season' can be as short as a few weeks, to earn continued shelf space.

Vendors often choose to recruit hundreds of affiliates either directly or through one of the popular affiliate networks such as Commission Junction or Linkshare. An emerging market is developing around efficiently paying these affiliates. It is not straightforward when often payments have many, if not all, of the following attributes:
* micro sizes
* international (often third world)
* they are made to a non-US bank account
* live customer support is required

Historically, payments were made via direct deposit or via Paypal. However, a proper vigilant regulatory environment, coupled with the efficiencies of debit cards has enabled a more effective payment method, specifically adopted to the affiliate world to take hold. Payoneer, a fast growing vendor (where I am an investor) epitomizes the opportunity that entrepreneurial companies have to fill a market vacuum.

The Company offers a co-branded MasterCard that adheres to compliance procedures, for customers who regularly pay affiliates; many of whom are located around the globe. With more than 175,00 outstanding cards, hundreds of companies participating, and tens of millions of dollars transacted per month, Payoneer is emerging as an early market leader.

I suspect that the affiliate channel will attract a host of other entrepreneurial offerings besides its own trade show (and magazine), networks and payments, to support its dynamic growth.

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