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Are Web Services on the Horizon for Affiliate Marketing?

As affiliate marketing continues to grow in the enterprise, many firms say they are looking at Web services to fuel innovation and future growth.

The practice of affiliate marketing is popular especially among startups with very small marketing budgets. The advertising practice allows for site "A" to feature buttons from site "B", and then site "A" gets a portion of any sales generated for site "B".

One of the largest affiliate marketing networks is the Be Free/Commission Junction network which came about as the result of a merger that was announced in October and completed in December 2003. Among its many clients are companies like Overture, PalmOne, Real Networks and eBay. Lisa Riolo, VP of Client Development at Be Free/Commission Junction told internetnews.com that the merger has gone well.

"We've had good momentum closing out 2003 and that trend has continued into Q1, both in terms of revenue and new client acquisitions," she said.

But there are a number of evolving factors that have been driving affiliate marketing growth and success over the last several years including increasing emphasis on performance metrics.

"Affiliate marketing continues to evolve. We've seen increasing sophistication with both the advertisers and the publishers," Riolo said. "We've really gotten away from just what many people had perceived as just 'banner advertising' and getting into a much more comprehensive approach of how you're going to promote a product on a pay for performance basis."

The distribution models now include Web sites, search and e-mail marketing methods. Email in particular is on the rebound in 2004 according to Riolo, partially due to a positive impact of the "Can-Spam" Act.

"In 2003, the general approach was to back away from it quite a bit, there was some hesitancy prior to the legislation," she said. "We've seen almost a sigh of relief, that now they now what's expected of them and we can go about promoting."

The interactive marketing industry as a whole continues to post impressive numbers. According to recent numbers from TNS Media Intelligence/CMR and earlier numbers from Price Waterhouse Coopers, 2004 is projected to be a 'banner' year for the interactive advertising revenues.

Riolo believes that success will only help affiliate marketing, as it should be viewed as complementary to traditional interactive advertising.

"It's not so much that your publishers are providing you the same audience as you might get with a Yahoo! AOL or MSN, it's that you're going to get a whole different group and it's the aggregate sum of those relationships those partnerships that get you the extra reach," she said. "You're getting eyeballs that you normally wouldn't get to see."

According to eBay's Senior Director, Internet Marketing, Vaughan Smith, eBay's affiliate marketing program is doing phenomenally well so far in 2004. eBay migrated to the Commission Junction platform in January 2004.

"We're regarded as the world's biggest affiliate program and we're very confident that we're driving a lot more economic activity through our program than Amazon, which is usually held up as a benchmark," he told internetnews.com.

Amazon's program, known as "Amazon Associates" has been in place since 1996 and is generally attributed with creating the online affiliate marketing industry. Despite repeated attempts over a three-week period by internetnews.com, Amazon officials were unable to confirm or deny eBay's claim of affiliate marketing superiority.

According to eBay, their largest affiliate earned over $1.3 Million dollars in January commissions, the largest amount yet in their affiliate program's history. Their top 25 affiliates average over $100,000 per month each and the top 100 affiliates earn almost $25,000 each per month.

"eBay is a little harder for an affiliate to understand than say Amazon but the earning potential is greater," Smith said. "At the end of the day that's mostly what they care about and that's been working well for us."

Smith acknowledged that the affiliate marketing industry would be maturing even further in 2004.

"People are appreciating the value in affiliate marketing," he said "The word 'maturing' is a good one, it's still immature but it's getting more sophisticated reasonably quickly."

Part of that increasing sophistication is expected to come from the adoption and innovation that Web services enabled affiliate marketing is expected to provide. Both eBay and Amazon have Web service initiatives in place. eBay's Smith however admitted that eBay's Web services platform is not yet integrated with its current affiliate marketing program.

"Web services is a big opportunity in 2004 but it's something that has not been rolled out yet," he said. "It's on the technology roadmap."

Amazon said its Associates program is currently making use of Web services allowing affiliates to make unlimited calls to the API . Using Web services, affiliates marketers can make full use of Amazon's catalogue and e-commerce capabilities, the company said.

According to Amazon.com, "With Web services, Associates can give their site visitors more product information, which in turn leads to a better buying experience and more educated and satisfied customers."

ZapThink analyst Jason Bloomberg suggests "Amazon has been pretty successful and has quite a large affiliate community that uses Web services to access their e-commerce capabilities." Though, Bloomberg notes that he hasn't yet seen broad adoption of Web services in the affiliate marketing industry it is something that he views is likely to happen. One of the issues he sees in the Web services industry is how to make money with publicly available services.

"What we see happening is a lot of different companies trying out different business models," Bloomberg said. "Amazon is making money because their affiliates are selling their products so they don't have to make money directly with someone paying to use the Web service."

According to Riolo, Be Free/ Commission Junction has a strong interest in Web services as well is expected to make an announcement about its Web services initiative in the second calendar quarter of 2004.

"There is no doubt that Amazon has been a trailblazer with it," Be Free/Commission Junction's Riolo told internetnews.com. "When you hear about Web services what that really tells you is, here's an opportunity to enable success and empower affiliates across all the distribution methods."