Be Free Debuts Software, Expands Efforts to Reach Affiliates
"We make money only if these networks make money; and if these networks are making a lot of money, we obviously make a lot more money," said Tom Gerace, Be Free's co-founder and vice president of business development. "We have a real incentive to grow the network."
Affiliate programs are designed to place ads on individuals' and companies' Web pages that are most relevant to a particular merchant's products. A Web page for audiophiles, for example, might choose to carry an ad for a stereo equipment company. Affiliate sites install links to e-merchants they choose, and they receive a commission on any sales they generate for the merchants. Be Free also gets a cut. Because of their targeted nature, affiliate networks have about double the response rate of regular banner advertising, which tends to be ignored by longtime Internet users.
The new software package, BFAST 3.0, lets affiliates apply to multiple merchant programs from a link in the company's www.befree.com site called FastApp. Applicants enter their URL, mailing address and brief personal information, then designate where they would like their commission checks sent. Tax information also is handled through the site. Merchant programs include Fogdog Sports, barnesandnoble.com, Go Shopping Online, Electronic Newsstand, GoTo.com and American Greetings. Be Free began a test run of the software last month.
Be Free, Marlborough, MA, said it holds 87 percent of the total affiliate market in terms of the number of sites on its network. The company has more than 100,000 affiliates and adds about 1,100 daily, Gerace said. Be Free has seen 100 percent growth since the fourth quarter of 1998. Since September, the company has grown to 70 employees from 17.
"We've focused historically on increasing conversion," Gerace said. "With this announcement, we're now also focusing on reach. We call it the 'good and plenty strategy.' You need good affiliates and you need plenty of them."
Be Free's business model previously involved building affiliate networks that were branded for their clients, but BeFast lets the company recruit for its merchant partners. Be Free advertises the service on URL registration pages and other sites that attract Web site developers.
Though smaller affiliate networks are in operation -- notably LinkShare, Commission Junction and Nexchange -- Gerace said Be Free's greatest competition comes from affiliate programs developed internally by large online merchants. The Web's biggest affiliate network is operated by book selling giant Amazon.com Inc. Once a company like Amazon has invested money and time developing its own network, it usually wants to avoid the hassle of altering its technology to join a network like Be Free.
Affiliates' slice of the revenue pie varies by product category. Booksellers like barnesandnoble.com typically pay between 5 percent and 7 percent, while toy merchants might pay up to 15 percent. Fogdog Sports ran a pre-holiday promotion through Be Free where it paid 20 percent on sales. On the low end of the spectrum, companies such as travel firms that have narrow margins might pay a fraction of 1 percent. Candidates are shown full terms when they apply to a network, and Be Free sends the specifics to affiliates again with approval e-mails. Typically, Be Free's commission is 2 percent or 3 percent.
Prominent affiliates in the Be Free network include sites operated by CNN, Lycos and USA Today, but many network members are individuals who created Web pages that concern small interests and hobbies.
Be Free was founded by brothers Tom and Sam Gerace in 1997, and the company established an early, pivotal relationship with barnesandnoble.com, the online arm of the books and music retailer, in September of that year.
The privately held company touted itself primarily as a technology firm until August 1998, when Be Free landed $17.6 million in private venture financing. Since then the firm has broadened its e-commerce services, including beefing up its tracking capabilities.