Download - 1 MIT’s Media Tech Club November 1999. 2 Gordon Hoffstein President & Chief Executive Officer
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MIT’s Media Tech Club
November 1999
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Gordon HoffsteinPresident & Chief Executive Officer
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Agenda
What is affiliate marketing? Be Free history What is the opportunity? How are we doing? The competitive landscape Leveraging our leadership position
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What is Affiliate Marketing?
Affiliate MarketingAffiliate marketing allows online merchants to promote their goods and services within the content of tens of thousands of web sites – paying a commission only when a sale is made.
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Who Is Be Free?
We power the infrastructure for the next generation of online marketing:
Affiliate Marketing
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How Affiliate Marketing Works
Content Sites Partner With Merchants
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Place Promotions in Context
How Affiliate Marketing Works
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Earn Commissions Based on What Is Sold
New York Yankees righthander DavidCone has become the second Yankeein as many years to throw a perfect game, as he blanked the MontrealExpos on Sunday at Yankee Stadium. The Yankees won the game, 6-0, on Yogi Berra Day
How Affiliate Marketing Works
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Click-through rate
Non-portal traffic
The Need for Affiliate Marketing
80% of online trafficbypasses portals
Traditional online marketing is not effective 99.5% of banners are ignored
80%80%
0.5%0.5%
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Be Free History
Founded in 1996 by Sam and Tom Gerace
First customer launched in September 1997
First round of venture funding in September 1998
Second round of venture funding in March 1999
IPO -- November 3,1999
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$0
$50
$100
$150
$200
1999 2000 2001 2002 2003
USEurope
Business to Consumer Online Sales
What is the Opportunity?
Source: Forrester Research and Jupiter Communications
In Billions
69% CAGR
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What is the Opportunity?
Worldwide OnlineAd Spending
Source: Forrester Research, Inc., August 199915A
15%
50%
1999
2003
Performance-basedOnline Advertising
1999
$3.3
2000 2001 2002 2003
$6.5
$10.9
$16.7
$24.1In Billions
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Q3 '98 Q4 '98 Q1 '99 Q2 '99 Q3 '99
New customersExisting customers
How Are We Doing?
1327
53
109
192
76% Growth
Our Rapidly Growing Customer Base
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Our Customers – Category Leaders
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Our Customers – Category Leaders
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Number of Affiliates
1,075,000
1,469,000
400,000
67,00031,000
Explosive Growthof Our Customers’ Reach
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Q3 '98 Q4 '98 Q1 '99 Q2 '99 Q3 '99
Number of Promotions ViewedIn Millions
Dramatic Growthof Our Customers’ Promotions
221338
541
825
1,156
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The Competitive Landscape
If you spend $20,000 2,000,000 banner ads
assume $10 CPM 10,000 clicks to your site
assume 0.50% click-through rate 100 sales
assume 1% conversion rate $5,000 in gross sales
assume $50 average saleassume $50 average sale
Banner Advertising
Spend $20,000Sell $5,000
Affiliate Marketingcommission-based model
$5,000 in gross sales $500 paid to affiliates
assume 10% commission rate $100 Be Free service fees
assume 2% service fee
Spend $600Sell $5,000
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Most Effective Marketing Methods
Source: Forrester Research, April 1999
Affiliate Marketing Works!
1 Affiliate programs11 E-mail to customersE-mail to customers 33 Public relationsPublic relations44 TelevisionTelevision55 Outdoor advertisingOutdoor advertising66 E-mail to opt-in listsE-mail to opt-in lists77 Direct mailDirect mail77 MagazinesMagazines77 RadioRadio
1010 SponsorshipsSponsorships1111 ButtonsButtons1212 BannersBanners
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Competition – In-house Development
An Outsourced Infrastructure for Affiliate Marketing
Benefits to Merchants Eliminates development costs Allows focus on core competencies Capitalizes on our expertise and knowledge Shortens time to market A strategic sales channel that online
merchants own and control
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Our Dominant Leadership Position
Number of CustomersAmong Top 50 Sites
Closest Competitor
Be Free
Source: Media Metrix, July 1999
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All Others
Affiliate Market Share
Source: Be Free Analysis, September 1999
20%
75%
5%
Closest Competitor
Be FreeCustomers
All Others
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Leveraging Our Leadership Position
Expand our customer base Expand internationally
Launch of bol.com (Bertelsmann) in Europe Provide new products and services
B-INTOUCHSM — E-mail affiliate marketing Private branded networks — Visa Partners Network,
SmartAge Profiling technology for targeting promotions
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MIT’s Media Tech Club
November 1999
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Our Affiliate Marketing Infrastructure
Affiliate Merchant
PromotionsViewed
Click-Throughs
Sales
Click-Throughs
Recruitment
Management
Tracking
Decision Supportand Analysis
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Critical Success Factors
Attract, develop and retain the best associates Create the infrastructure and internal processes that will
allow us to provide the highest level of customer satisfaction Attract customers with the commitment and resources to
build highly successful affiliate sales channels Continue to develop reliable, intuitive and scaleable
technology that meets our customers’ evolving needs Obtain the necessary financial resources to achieve our
business objectives Develop new products and services in a timely
and consistent manner
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Critical Success Factors
Position the company as the leader in affiliate and database marketing through aggressive and ongoing public relations and marketing programs
Create a corporate culture that rewards innovation, creativity and teamwork in order to stay at the forefront of industry trends and changes
Create strategic alliances that will enhance our position in the marketplace
Contribute to our customers’ success by educating them about the industry’s best practices in marketing, affiliate outreach and affiliate management
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Hosted Services Accessible Through the Internet
Be Free’s Solution
A Robust Infrastructure for Affiliate Sales Channel