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Can anyone advise whether affiliate programs with say large suppliers actually generate any real cash (for the affiliate)
I am considering setting up a site that is ENTIRELY affiliate programs to many major travel suppliers. Is this sane or not??

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Hi Tom,
I do hate it when I answer "it depends" (well my excuse is that it normally does depend on something!)

For an affiliate you will be earning, say, 5-8% of the sale value. The chances are that the supplier will be using affiliate marketing as a means to acquire direct customers who use the web - so you may get the commission on the first sale but not subsequent ones. (This is the difference between affiliates and white labels / private labels - where, if you put a branded system on your own website, you may convince your customers to come back to the supplier, via you, in the future)

So - you now have 5-8% of a single time sale. This doesn't give you a great deal of money to spend on marketing to get web traffic.

Therefore,
1) If you already have the traffic - and just want to make money from it (what some people call "monetise the traffic") - then affiliate programs make sense (for example if you run a small tour operator website - you could add an affiliate program to sell sun cream)

2) If you are considering setting up as an affiliate - and then paying to market your website (that has no existing traffic) then you won't be able to afford to - unless you are an expert (or become one) in organic search engine optimisation (rather than paid for Search Engine Marketing) - in order to deliver free traffic to your site. There are so many affiliates who do this as their full time job (and have hundreds of websites because each one provides minimal return) - that this really is a piranna pond.

Yes some affiliate programs do make real cash - but that is the exception not the norm. Each programme will have a few "high earners" that are used to demonstrate to others that it can be done. Well yes, it can be done, but it all takes time (several years sometimes) to build a website (or network of websites) that you can use to make a living from.

Alex
Thanks Alex
It is what I suspected with the extra twist that you identified that it may be a one time sale only.
AaaaaH Well! It was just a thought and a moment of pleasure thinking what I would do with all that money!!
Scrap that idea!!
Back to plan B
Cheers
Tom
I think Alex is right. We've been playing recently with an all affiliate site (groopii.com) and have the benefit of some organic traffic off our main site, but for the majority we're using adwords. Now we're newbies when it comes to ppc traffic, so this is also a test case in some ways. We're definitely losing money at the moment on it but it's incredibly useful for learning more about what does and doesn't go when acquiring traffic that way. You need some serious traffic if you want to make any real money off of a broad affiliate program (some niches can work out if you've got the right traffic). And as a stand alone site I'd say that's impossible in today's environment where there's probably already at least a million other sites out there that are identical...
Thanks Sam. Broadly I agree but my own site is at odds with my (airline management) view in that it offers great trips but due to airfares and distance they are nor cheap. That means that we (paying ad words) wait for one or two sales to lift the cash flows whereas putting a site up that is offering smaller deals (e.g flight LHR to CDG) might only produce a few pennies but it would be a steady flow instead of the jerky bumps of a high priced site.
The obvious comparison (somewhat grander than us) is the National airlines before the low cost operators opened up. A few years ago there was a minor incident mid Atlantic to a well known national airline and what was interesting (beyond the drama created by the press) was that the aircraft, a 747, had 22 passengers on board.
The low cost boys changed all that and their cash flows were a lot smoother enabling a new breed of experts to develop called Yield Management guys, not to mention another useless group, the Quality Assurance crowd who between them brougt us automated phone systems, and airline overbooking.
I am grateful to be able to learn from this site because the jump from airlines to tour operator is a pretty big leap.
So I am quite happy to be considered a really stupid dummy so long as you all rally round and give me lectures (in simple language) about this side of the travel world. (Sigh!! Air Cargo was so much easier!!)
Cheers
Affiliate program is an excellent distribution tool. Now, from your post, I can't judge exactly what position exactly you would like to take in the affiliate channel. If you're looking to start a program for your business - bravo, but expect a lot of work recruiting and managing affiliates. If you're looking to be a broker than you should focus on technology above all (i'm assuming you have advertiser relationships that you would like to promote already). In either case I would focus on automation .. and not to be discouraged I would hire someone experienced in affiliate marketing for the leg work. If you're simply trying to be a publisher, then I agree - it's not worth it, especially that google doesn't like affiliates .. probably b/c they would like to take a piece of that industry themselves ;)
Hi Tom,

it really depends on a whole variety of factors such as

a. cost to setup website
b. cost to maintain
c. cost to generate traffic to website

Just recently I was in talks with laterooms regarding one of the websites I maintain. We were trying to understand whether it would be worth adding an accommodation section that is entirely laterooms managed (essentially outsourcing that part of the website to them)

The bottom line of that discussion is that based on about 25000 unique users (real, living, breathing, different people) coming to the accommodation section site a month (out of about 100k coming to the site as a whole) and a conversion rate of 10% laterooms stood to gain about 21000 euro a month of which we would see 6.5% - so 1365 euro. Not bad but nothing to leap around in joy about.

As Alex said, for a website whose real revenue is somewhere else (in this particular case real content, banner ads and property listings) and where no money is invested to actually get that traffic to an accommodation section - 16k for not doing very much is not bad.

For a brand new website that actually needs to invest to generate the traffic to get a 10% conversion rate 16k will probably sound very bad.

A website that is purely affiliate based would have to get very very high conversion rates to actually justify itself or offer a unique proposition - such as price comparison, etc.

However the price comparison game is also very crowded with some new entrants doing very well for themselves (e.g. kayak.com). But even such sites have had to put tons of upfront investment to build the technology in the hope to recoup sometime in the future.

Hope this helps!
Thanks Ronald
I am convinced. It was exactly the sort of thought that comes of inexperience and so you guys have saved me a lot of pain.
Wait till next week and I am sure I can come up with another wild idea.
Cheers
Tom
Hi Tom,

Keep 'em coming!

See what happens with self loading cargo! A different game!

Alex
Yes they are worth it. When I started my online travel business in 2002 I had direct commission agreements with accommodation suppliers. The potential guest had to email me, I had to email the supplier, get back to the guest with availability and price and then as I didn't handle clients money or cards the client would have to contact the supplier directly to make the booking. Yes I received more commission 8 - 15% but lost many bookings due to the long communication process and several suppliers didn't pay commission. Now I have affiliate links and the client can immediately check availability and make the booking. I am not involved in the chain and receive 3 - 7% commission.

I've written a post about choosing affiliates:
http://www.businessblogboost.com/2007/10/28/choosing-the-best-affil...

And another about the almost perfect affiliate scheme:
http://www.businessblogboost.com/2008/02/29/the-almost-perfect-trav...
Hi Karen
Thank you for you feedback from the affiliate perspective.

Yes they are worth it..... but it isn't an immediate "win" financially - and I was just trying to temper Tom's expectation.
hi again Alex
please consider my expectation tempered!!
However I looked at Karens site and I was quite taken with the idea of having a comparison site embedded into the site.Accommmodation for example.
cheers
Tom
I was burnt at the stake for ranting about affiliate advertising on a blog post last year.

A question to think about.

Could the travel site your company is advertising on damage your brand?

I have seen some horrendous travel sites slapped full of affiliate banners and links and I would hate to think that all my hard work building my brand could be damaged by advertising on some of those sites. They are sites though that work good with affiliates but I've found more that are poor.

Do you have control over who and what is advertising your brand?

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