Niche Marketing

Niche affiliate marketing essentially involves an online merchant placing links to its site, in the form of either text or ads, on hundreds or thousands of other sites. Rather than pay for these links up front, the merchant provides a commission to these affiliate sites for every transaction that results from these links.

Advertising isn't the only way to drive traffic to a Web site. A method that is gaining in popularity is "niche affiliate marketing," which essentially involves an online merchant placing links to its site, in the form of either text or ads, on hundreds or thousands of other sites. Rather than pay for these links up front, the merchant provides a commission (usually 10 percent or less) to these affiliate sites for every transaction that results from these links.

For example, a text link to a golf-club retailer might be situated next to an article about golfing. In addition to Yahoo and other heavily trafficked sites, many affiliates are small hobby sites or even home pages. The affiliate strategy was pioneered in 1996 by two of the best-known online retailers, Amazon.com and CDNow, but now thousands of merchants use affiliate marketing to complement their traditional advertising.

A Forrester survey of 50 retailers in October found that each had,_on average, more than 10,000 affiliates. The affiliate programs generated roughly 13 percent of the merchants' revenue, and Forrester projects that portion to rise to 21 percent of revenue in 2003.

Companies that use or manage affiliate networks argue that performance based pay can provide more bang for the buck. However, that a merchant needs thousands of affiliates for this strategy to be effective. An affiliate network can be built through a third-party firm, such as Be Free, but many sites do it themselves and have "become an affiliate" sections on their home pages.

Scale is crucial because the rule of thumb is that 20 percent of the affiliates account for 80 percent of the transactions and it's hard to predict who's going to be in that 20 percent. That prediction challenge holds true at online florist PC Flowers & Gifts, for example, which has about 2,000 affiliate sites, ranging from ones centered on gifts and shopping to others related to careers and computing.

Niche Marketing |