To affiliate or not to affiliate. That is the question.

Filed in archive Entrepreneurship on July 16, 2006

Blogger Dave Taylor rather interestingly chose the occasion of his own speaking engagement at the recent Affiliate Summit July 9-11 in Orlando, FL, to question whether use of affiliate programs was really a viable business for entrepreneurs at all.

For more on how the whole affiliate thing works check out these two posts and this overview from About.com.

David's argument? Though affiliate programs can put a few extra bucks in your pocket, they're not built around what he calls "sustainable differentiators", products or services that are different/better than your competitors. In short, it's a bunch of websites selling different combinations of the same thing.

I must admit I've advised entrepreneurs to avail themselves of affiliate programs. Coming from the world of newspapers, however, I suppose I have often thought of these programs as similar to advertising in a way, a method of capitalizing off of readership drawn by other content.

This would be a different view than, say, seeing them as items in a retail store where the products themselves are the only reason for visiting.

This is not to suggest that I view affiliate programs as useful only for websites geared to editorial content, though I certainly believe they can be among the simplest ways to monetize a news or other editorial site without employing an advertising staff.

I also think, however, that an even more effective use might be as a supplement to another online business, particularly if the affiliate service is, in some way, related. If that extra $30 a month will pay for web hosting and other upgrades it is definitely worth the effort from the perspective of a bootstrap start-up trying to contain costs.

Since the costs of participating in most affiliate programs are negligible for someone already maintaining a website, the risk is minimal. I try to think liberally when considering supplemental affiliate programs, experimenting to see what works. One technique is to choose services you already use in your own business so that you can offer a heartfelt testimonial.

As an advocate of bootstrapping, I too shutter at the VC sound of the term "sustainable differentiators" and believe it is generally used by people who have never seen a town with more than one supermarket or more than one coffee shop.

I do, however, agree that, just as in the world of online retail, if we all sell the same ceramic kitty and nothing else we may be in for some trouble. In this case, as with affiliate programs, I think the better term may be product differentiation. How does what you offer overall, in price, service, quality and packaging, differ from the offerings of someone else with a similar product.