Reduce Risk By Diversifying

One of the major attractions of becoming an affiliate is the small amount of risk involved. Affiliates have little or no...

• product development expenses

• advertising costs

• inventory to maintain

• overhead expenses (salaries, physical location, etc.) In other words, affiliates do not have millions at stake. But you do have one big risk...

If a merchant, backend provider, or affiliate intermediary go out of business, they take you with it. Let's talk briefly about how to minimize this risk...

After you review the affiliate directories, backend providers, and affiliate intermediaries, you should have a good selection of programs. How many programs should you choose? How do you know which ones are solid?

You don't, really. Yes, you can weed out the dogs by doing the basic research outlined below. But most of us just don't have the ability or time to thoroughly analyze a company, its financials, and its business model. And then predict success or failure.

So your best bet is to diversify among as many programs as possible that fit with your Site Concept. But there are the some important qualifiers to this policy...

1) If you represent 15 programs, don't put them all on the same Keyword-Focused Content Page. Only work in the few that are tightly relevant to the content of each page.

2) Pick the best-of-breed from each category of merchant. For example, if you plan on representing a Net marketing company, SiteSell.com would be the obvious choice (ahem!).

If you plan unusually heavy support for a given category of product, you might want to represent the best two merchants. For example, suppose you foresee hundreds of book links on your site. It might be a good idea to choose the best 2 online bookstores -- if Bookstore A and Bookstore B fit with your concept and both seem to be stable companies, then use these two. Not more, though...

3) Don't over-diversify. Tracking each program takes time, so 10-15 programs is probably a good balance. If any one of them dies, you don't lose too much.

4) Your best results will come from focusing on a smaller group of quality programs (from within your longer list). Their products must...

• be complementary with, even enhance, each other

• be from a rock-solid company. Since you will give these companies more attention than the others, you must feel very comfortable with their business prospects.

Also, don't pick merchants that "belong" only to BeFree or only to CJ or Linkshare. What happens to your business if one of these backend providers folds? Same policy goes, too, for the affiliate intermediaries.

Here's the bottom line...

Don't give too much emphasis to any single program, unless you have some special reason to feel unusually comfortable with it.

Things happen. So protect yourself by diversifying.

Of course, you can also reduce your risk by weeding out the dogs through some basic research...

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