B2B Marketplaces: Super Affiliates?

Affiliate marketing has had an incredible run. From Amazon.com to thousands of other merchants, the impact on consumer e-commerce B2C has been incredible.

It has the lowest average acquisition cost of any channel. It drives upwards of 20 percent of total revenues for most merchants. Services like Moreover.com and my own EchoFactor.com are now focused on bringing this same power to content sites like WebMD, Quokka and CBS Sportsline. But what about B2B? What does B2B affiliate marketing look like?

How do business marketplaces like aviationX or e-STEEL or Foodtrader.com harness the power of affiliate marketing? Then it hit me. Marketplaces aren’t merchants. They’re simply affiliates. What drove the conclusion home was a recent article in The Industry Standard, “B-to-B: Evolution, Not Revolution.”

The Standard was trying to make a point about how online marketplaces are getting squeezed from all sides. This pressure is apparently driving some marketplaces to transform themselves into ASPs (application service providers). But in reading the examples, it became apparent that many marketplaces are nothing more than super affiliates beholden on one side to suppliers (merchants) and on the other side to bidders (customers). And isn’t that what the typical affiliate value chain looks like? Not convinced?

Consider the case of ForRetail.com, a marketplace for the home furnishings and giftware industry. The San Francisco-based company signed up 400 manufacturers (merchants) and 25,000 retailers (customers) but wasn’t earning enough revenue from the five percent transaction fee (affiliate commission) it charged its manufacturers…

Marketplaces could be having such a tough go because most manufacturers already know who their trading partners are. Not so with many B2C companies. Because of this, less value is derived from the network (the relationships already exist), and more value is derived from the infrastructure necessary to interact seamlessly with these trading partners. That’s just it: The value isn’t in expanding the number of trading partners, but rather in tightly integrating existing partners more efficiently.

As a result, marketplaces are shifting their focus to delivering applications that power private networks for existing trading partners. For example, PurchasePro.com now runs 33 cobranded web sites for companies like Office Depot and Sprint. Look for the shakeout to continue in the B2B space as marketplaces move from being glorified super affiliates to ASPs and providers of other services and solutions.

Speaking of a Shakeout…

Literally overnight, Affinia closed up shop. A visit to the Affinia web site on Friday, September 1, pointed users to a lone email address: affinia@yahoo.com. No explanation. No warning. There’s been surprisingly little chatter or fallout at least so far. A few mentions at ReveNews, but the conversation just sputtered.

Of course, by the time you read this, Affinia will have also shut down its servers stopping service on both Storefronts and in its Product Placement Network. The result: lots of 404 errors web-wide. If the notice on the front door of the site didn’t get any attention, broken links may wake up the folks who left early last week for the Labor Day weekend.

Overall, Affinia had a number of elegant solutions for getting topical sites up and running in no time. Time will tell if vendors like Vcommerce and Nexchange will win over Affinia’s former 70,000-plus storefront owners…

Coming Events & Other News

Commission Junction is holding its second CJU event later this month. I’ll be hosting a session on “Rewarding Your Affiliates” that will look at some of the ways you can get more from your affiliates through the use of additional awards and incentives.

In October I’ll be participating in online chats about affiliate marketing and the power of content with the Los Angeles chapter of Webgrrls and CashPile. Please look me up. If you have an affiliate marketing-related event you’d like included in future columns, please let me know.

My start-up, EchoFactor.com, continues to forge ahead. Briefly: EchoFactor.com is a content traffic exchange, driving traffic to top Media Metrix web sites by offering free headline feeds to affiliate webmasters. For those keeping tabs, we’ve been fortunate enough to garner some great recent press.

Last week TechWeb reported that most webmasters find content to be their biggest problem, and focused on how EchoFactor.com can erase this problem by finding relevant headlines from top web sites and making them available at no charge. Earlier, dbusiness.com focused on EchoFactor.com’s “scraping” technology as a means to driving traffic to content sites. I welcome your thoughts.