Affiliate Marketing | Direct Marketing Observations

I’ll tell you why. Last week I checked out their site and was impressed by their product, their site and their plan of action. What I didn’t like was the business model. It wasn’t solely based on affiliate marketing but enough of it was to throw it in that direction. I wasn’t so much railing on their business model as I was the whole notion of affiliate marketing in general as a business model. I just have never been wild about having to rely on other peoples traffic for the success of my product or business.

Well after saying as much, about an hour later or so I received the following email from Thomas Zawacki the Co-founder and CEO of Lemonade.com:

I read your blog and appreciate your opinion. Like you, I have been in the internet marketing industry for a long time. I agree with you that relying on an affiliate program as your sole source of income is a very difficult business to be in. That is exactly why we have built the Lemonade Social Commerce Server to be able to receive data feeds from a variety of revenue generating opportunities. Currently, we have integrated revenue from commissions from sales (affiliate deals), cost per acquisition offers (CPA deals), cost per click ads (CPC) and cost per thousand online advertising offers (CPM deals). The Lemonade Social Commerce Server also has the flexibility to add auction based revenue streams (e.g., Ebay) and revenue a user might get from selling their own products. All coming soon. In addition to aggregating revenue streams in our flexible back-end, the user experience must allow for three things to happen: 1) easy to join and set up the application (e.g., widget or Lemonade Stand); 2) easy for the consumer find what they want and interact with; and 3) the Lemonade Stand owner must make a significant amount of money per month to make it worth while – this is a combination of impression levels, click-through rates, conversion rates, etc.It takes under 3 minutes to set up a Lemonade Stand. Lemonade Stands live at http://www.lemonade.com and/or as a widget/application on Facebook, Blogger, and other key distribution points. This means that there is a built in amount of traffic to the stands that our users can monetize. Lemonade Stand owners can then make money via four different revenue streams, commissions from sales, CPA deals, CPC or CPM ads. This aggregated revenue is what makes it worth it to the user, not solely the returns from affiliate deals.Thank you for validating our model. We hope millions of people have fun setting up their Lemonade Stands, enjoy the social community aspects of http://www.lemonade.com, and make a bit of money along the way to pay their cell phone bills, donate to a good cause, or buy that gift for the holidays that their loved one really wants.

TRZ

So riddle me this. Here is the CEO of a company, taking time out from his busy daily schedule to actually reply with thought, meaning and honesty on a) why I was partially right and b) why I might be wrong. And yet, he feels that it is worth his while to respond.

This tells me a few things. First, here is someone that knows what the viral effect of blogs can have on a company. Second, rather than getting defensive, he decides to point out why he thinks their product will bet better. So now, instead of me saying, “boy what a jerk”, he gets, “Boy, what a class act”!

I don’t know if his widget will set Web 2.0 on it’s ear, but if I were to teach how to be the CEO of a company, what he did would certainly be a lesson. he took the time to address a blog that mentioned his company, spun it in his favor and didn’t burn a bridge in the process. He made an ally. So what if he only responds to one a day, or whatever. The fact is, he took time out, to handle a little guerilla marketing on his own. A little hand to hand, if you will. Good Job TZ.

I came across this site just recently, Lemonade and a couple of things came to mind. The first of which is that essentially any name can be turned into a website anymore. Oh to have cybersquatted on hundreds of generic terms back in the early 90’s! My second thought was though at first a novel idea, Lemonade has highlighted a nagging pet-peeve of mine and that is the assumption or ascension of affiliate marketing as the way to go in regards to making money online. It may have worked for Amazon and for a handful of others but to me it just seems like a tough road to hoe for the average site owner.

I suppose that the efforts made by the Advertiser is nill and equally as such for the Publisher, bearing in mind that it really is the strength of the network that makes it work, along with price, quality and payout…(lots of intangibles there don’t you think?) but to have it as the sole business model for your site to make money, just seems to be looking at the world wide web through rose colored glasses.

The first and foremost issue with most affilate programs is that they don’t pay. If you are looking to join an affiliate program you need to know that you are not likely to have a huge sales volume. The problem lies in the fact that any affiliate marketing system you do use needs to get good results for both the advertiser and the affiliate. So You have to identify sites that target similar audiences and have traffic. But here’s the kicker: You have to make sure you pay them enough to make it worth their while.” There is a but here, but wait there’s more…

Even for for the serious players, affiliate marketing should be looked at as a way to market products and services without utilizing the reseller channel. The affiliate’s job is simply to generate qualified leads, in the case of Lemonade, they are looking at affiliates to push the products of the participants in its network. So really no sweat equity for them. The serious “Playa’s” can save money on marketing, increase branding to core audiences, broaden the reach of current marketing campaigns, decrease dependance on resellers and increase the amount of leads flowing to the sales team, and or flat out, sales.

So does it work? yes and no. If you have the product, then yes it can work. If you have the traffic, yes it can work. If you have one without the other, it will not work. But the product has to fit the type of traffic you’re getting. If I have a knitting website and I’m trying to push printer toner, what do you think will be the result?

One other thing, like MLM’s, what works best is an awsome affiliate, someone who has the viral capability to make your product fly off the shelves. Pay them well, and they will evangelize the hell out of your product to their network. But these are few and far between.

So will Lemonade work? In this Web 2.0 world it’s hard to say. I suppose it’s a matter of how many widgets can your site, blog, page sustain? With some affiliates or folks who have the right trafffic and are selling the right product, they might be able to hit the ball out of the park. For others, go ahead and put up your Lemonade stand and watch the lemons whither.