Are we talking about a certain Asian country that we both know pretty well? If so, CJ tried testing the waters there years ago. (We actually took an exec around and introoduced him to several online players.) Perhaps the market is different now, but I wonder if the underlying problems will ever go away.

At the time, there was limited understanding (on the publisher side) of how affiliate marketing works. And there was less interest on the advertiser side. Many of the online merchants had such low margins that they couldn't afford to offer more than 2-3% commissions, and who wants to work for that? And in fact, many of the merchants weren't interested in even paying commissions because they felt they could do everything themselves.

I agree with you that the opportunity is wide open. But unless a lot has changed, the potential is limited. Or rather, the potential is also huge, but I don't see it reaching its potential any time soon. I'd love to be proved wrong though.

My guess is that if you have the resources, the best way to go about things is to be "the game" as you say, growing it from infancy into something approaching critical mass. Once it reaches critical mass, then you can sell it to CJ or a competitor. I don't think CJ or other are going to come in until they actually see the market, not just the potential market.

Even if the merchants are working on low margins and could not afford to pay 2-3% I believe alot must be spending their advertising money somewhere. You could pitch it to them that instead of spending their dollars and time on marketing themselves, let the affiliates market the products for them, then they would be just shifting their spend from marketing to paying commission, and commissions only need to be paid where there is a sale, so they know for sure they are getting something for their spend, unlike offline marketing where it is hard to gauge ROI.

I would definetly say be the GAME if you can speak another language besides english, and AM is just starting in that country.

I wonder if it could be proven that affiliate marketing is more effective than marketing yourself? You see with AM you have hundreds of guys running around for you all with different ideas on how to get sales, where as if you're doing it yourself, you're spending your own time and will only have a limited number of ideas.

Are we talking about a certain Asian country that we both know pretty well? If so, CJ tried testing the waters there years ago. (We actually took an exec around and introoduced him to several online players.) Perhaps the market is different now, but I wonder if the underlying problems will ever go away.

I remember you mentioning that. let's just put it this way.... yah, VERY different now. ^_^

As far as I can tell:
1. CJ came in waay too early. just like PPC player zingu... too far ahead of the curve. it closed out while still educating the market. overture and google just swooped in with big money guarantees and deep pockets and it was done.
2. they tried to do their way too much. As you know as well as I, if you don't home grow it, you are going to lose 9/10 times here (unless you dump millions in guarantees like aforementioned overture et al). I have a feeling even coming now would leave everyone with headaches due to culture clash.
3. its crucial what "players" you talked to at the time. curious as to which players you mean... portals? yah, that wouldn't work or at least not the way it does ROTW. still... educating the market is rough in itself, good thing the hard of part that is done at this point (though still with HUGE room for growth, imo).

At the time, there was limited understanding (on the publisher side) of how affiliate marketing works. And there was less interest on the advertiser side. Many of the online merchants had such low margins that they couldn't afford to offer more than 2-3% commissions, and who wants to work for that? And in fact, many of the merchants weren't interested in even paying commissions because they felt they could do everything themselves.

like i said... not a problem anymore. and it wouldn't exactly work like that now. eg: I'm sitll

I agree with you that the opportunity is wide open. But unless a lot has changed, the potential is limited. Or rather, the potential is also huge, but I don't see it reaching its potential any time soon. I'd love to be proved wrong though.

my posit was a bit purposefully understated... there are some significant players and quite advanced in techique and implementation (even more "fancy" than in the US as is usually the case for Korean internet)... I have one line to a few with plenty of publishers (one with over 47,000 sites in its network) with all types of implementation techniques.

you still have your CJ contact? ^^;; maybe just brokering a deal would be earier. lol.

Even if the merchants are working on low margins and could not afford to pay 2-3% I believe alot must be spending their advertising money somewhere.

very true. as it turns out in any case, there are plenty of big fish advertisers with HUGE offers here (tbh, I'm working with one now) and plenty of publishers (my feeling is the bottom rung of critical mass....so lots of room) to push the products.

man, too bad there is so little crossover.

I'd throw my current project I'm on into the affiliate mix if it was at all relevant to markets outside my stomping grounds. NO worries at all (absolutely none) about getting the payout from the advertiser either.

btw, this all still belies the question:

how does one go about starting to build a network? +_+

I would start it by building my affiliate network site first, so it would have sales and impressions tracking, merchant banner/links management, statistics, etc. Doesn't seem too difficult any programmer can do this for you. What's difficult is promoting your company, you would have to constantly contact publishers and merchants letting them know and convincing them how your site can help them.

I think what I've learnt over the years of creating sites is that it's so easy to build a site (or get it built for you) the hardest part is promoting it, it's a common misconception among people I talk to who have great ideas for websites but don't realize there is a lot of work to do once the site is ready, they think getting the site built and finished is the hard part.

To build a network:-

1) Build and run aff sites yourself to prove that it will work in the country/industry.
2) Add other affiliates by recruiting through forums, word of mouth etc.
3) Add merchants in the same market to ensure demand as your volumes increase. Add new markets to ensure diversity of income streams.
4) Build contacts in online media buying and other online marketing industries
5) Implement tracking and payment systems that work for both merchants and affiliates
6) Delegate as you grow to ensure that service doesn't suffer
7) Care as much if not more about the affiliates than the merchants
8) Bank the monthly profits or sell the business

That's what we did anyway and it's worked for us.

[edited by: Michael_Anthony at 9:31 am (utc) on Dec. 12, 2006]

it's a common misconception among people I talk to who have great ideas for websites but don't realize there is a lot of work to do once the site is ready, they think getting the site built and finished is the hard part.

true dat. but I'm' not worried about that part. I got that wired here in this mrt. ~_^

To build a network:-
1) Build and run aff sites yourself to prove that it will work in the country/industry.
2) Add other affiliates by recruiting through forums, word of mouth etc.
3) Add merchants in the same market to ensure demand as your volumes increase. Add new markets to ensure diversity of income streams.
4) Build contacts in online media buying and other online marketing industries
5) Implement tracking and payment systems that work for both merchants and affiliates
6) Delegate as you grow to ensure that service doesn't suffer
7) Care as much if not more about the affiliates than the merchants
8) Bank the monthly profits or sell the business

That's what we did anyway and it's worked for us.

awesome step-by-step! great info.

but hmmm... on number 1, "build and run affiliate sites yourself", isn't that kinda defining a word with the word? what is an example of a few small affiliate sites I would build and run to prove it works? like a small product site and make a deal with a merchant? isn't that cart before the horse?

sorry I'm a hopeless noob in this area. still getting my brain around the first step basic concepts.

If you're not already a member of CJ, LinkShare, etc., I'd join (as an affiliate) and get an idea of what they offer as far as online tracking & reporting, customer service (or extreme lack thereof), promotion, etc.

Joining on the other side (as a merchant) is more difficult/expensive. But maybe you can find some other merchant partner willing to join and test the waters for you.

This will give you an idea of what to offer on both sides of the equation.

CJ (and now I guess LinkShare is doing it as well) has an annual "CJ University" that brings together affiliates and merchants for several days for seminars & networking. Great for meeting the people behind the scenes and CJ staff (I went to the first one year ago). Hey, if you decide to go, let me know and we'll get together for that brew- CJ's HQ is just down the street from me. (Well, the street is a highway, and it's about an hour down the highway, but that's beside the point.)

This would be an excellent experience to interact directly with people on both sides of the equation and get their feedback about their likes/dislikes and wants for future enhancements. It may even get you some information about the inside workings of the middle process.

My CJ contact has long since left the company and is running a completely different business in Hong Kong these days.

If the Korean market has really matured as much as you say, we'd definitely be interested in working with you if you go forward with this project. We're stretched a bit thin development-wise these days, but I think we could still contrinute quite a bit.

can korean sites join as affiliates?

good idea about the networking meeting, but I think I'd want to test out the whole thing first before committing to that. like I said, might just be easier to make some direct introductions. ;) but I'll take ya up on the brew in case. lol ^^

Yup- we joined CJ when all we had was the site about Korea and were in Korea at the time. (Had a U.S. address & bank account. However, neither are needed any more.) And that was long before when CJ only had U.S.-based metchants.

If your site's not in English, then there's probably not much you can find in CJ or LinkShare or others. And some of the programs only pay for purchases/leads in the U.S. and a few only want mostly U.S.-based traffic.

This was exactly the problem we had when we took CJ around in Korea- no Korean affiliates (besides ourselves), so no incentives for Korean merchants to join. No Korean merchants, so no real incentives for Korean affiliates to join. A classic chicken & egg scenario!

At the time, Sellpia (remember them? ;) ) seemed to be a good match with a critical mass of merchants & affiliates (although with a different model) and we felt they would be a good match with CJ. But neither side seemed to think much of the other after the meeting.

yah. there is a thick and palpable walll between korean and english sites. there is a market in there for crossover, but I was thinking more a CJ type biz model just for within the korean market and for English sites to access korean market (excluding sites that don't want the traffic from korea).

but again, there ARE sites like this now. just still tons of room.

so brings me back to teh beginning. so let's say I got:

- a site that sells something,
- a site that is a community,
- a site that provides a service
- a site that is just a company site
- and a advertiser willing to pay at a good sized CPA
(rinse and repeat)

is that enough to start down the affiliate network road? I assume there is something there to work with in terms of affiliate marketing... . just not sure where to begin.

as mark said, prove it works... but where to start in the set up process?

[edited by: GrendelKhan_TSU at 5:59 pm (utc) on Dec. 12, 2006]

I completely agree about the potential for a crossover market- we've been working on tapping into it ourselves for years!

In addition to the basic problems with setting up an affiliate system in general, you have several additional issues directly related to this particular situation:
1) Language- many Korean sites would love to get English (and Japanese & Chinese for that matter) speaking customers. But most don't have the language skills to A) promote their products/services, B) have online order processing, C) provide customer service before/during/after the sale
2) Payment processing- as we've discussed before many sites used to require Korean ID numebrs that foreigners either don't have or the foreign IDs didn't match the checking algorithm. Some Korean processors have problems processing non-Korean cards.
3) Shipping- international postal rates and customs duties make a lot of products to expensive for a B2C model. You can't just call a quick service motorcycle to come and pickup for almost instant delivery across toen.
4) Culture- international custoemrs have a little different buying mentality than Koreans.

So a CJ-like affiliate model will only address 1A, as everything else is still on the merchant's web site. That's why we thought Sellpia would be a great partner- their model addressed some of the other issues as well.

As far as the affiliate system itself (for tracking links, orders, payments, etc.), that could be done relatively cheaply. But for it to really take-off, I'd say you'll need a big investment to solve the other issues. Having a central processing office for customer support, translation, payment processing, and shipping would be one way to go (and a good way to burn through money- I believe that was Sellpia's demise, and they didn't even have solutions for many of the issues).

Far from trying to discourage you from going forward, I would love to see someone able to solve these issues.

Yes, sorry, should have added a first point - find a merchant to buy your traffic/sales/leads, then start some sites of your own.

" a site that sells something,
- a site that is a community,
- a site that provides a service
- a site that is just a company site
- and a advertiser willing to pay at a good sized CPA
(rinse and repeat)"

What you have there is an affiliate PROGRAM. A network would need to offer a diverse range of products and services to be sustainable.

From the dialogue above, it seems to me that the online market may not be sufficiently mature to warrant an affiliate network at this stage. No point not trying, but to me it seems that it may take a good few years to achieve.

We tried something similar in France, and it was a very hard upward climb, again due to cultural differences and the people's attitudes to online purchases.

So yes, go for it, but don't expect an easy ride.

And don't expect CJU to offer anything other than CJ hype - it's certainly not the place to get any direct business relationships started.

[edited by: Michael_Anthony at 8:16 pm (utc) on Dec. 12, 2006]

I completely agree about the potential for a crossover market- we've been working on tapping into it ourselves for years!

I've been living off it for the same. heh. ;)

In addition to the basic problems with setting up an affiliate system in general, you have several additional issues directly related to this particular situation:
1) Language- many Korean sites would love to get English (and Japanese & Chinese for that matter) speaking customers. But most don't have the language skills to A) promote their products/services, B) have online order processing, C) provide customer service before/during/after the sale
2) Payment processing- as we've discussed before many sites used to require Korean ID numebrs that foreigners either don't have or the foreign IDs didn't match the checking algorithm. Some Korean processors have problems processing non-Korean cards.
3) Shipping- international postal rates and customs duties make a lot of products to expensive for a B2C model. You can't just call a quick service motorcycle to come and pickup for almost instant delivery across toen.
4) Culture- international custoemrs have a little different buying mentality than Koreans.

very good summary of the cross-over market problems with asia and "the west". not just korea. yet more reasons why "going local" is so essential.

but we talking about a lot of different things at this point....so since I am still interested in...well...all these topics...let me see if I can break it down a bit.

1. how do you get network going? (whereever you are)

- Step One: find a merchant to buy your traffic/sales/leads, then start some sites of your own. (thx mark^^)
- Step Two: other stuff that one worries about if they get passed Step One
- Step Three: profit ^_^

2. the local market has huge potential
3. crossover market has huge potential.
4. is the market "mature" enough to have an affiliate market?
5. is the market "mature" enough to have a cross-over affiliate market?

I think this is an important distinction. Cause I think the blanket statement that the market doesn't seem mature enough for affiliate marketing network is misstated.

ie: We seem to be talkign about three things here.

I. building a network locally (local market sites to local market sites (in this case, korean))
II. building a crossover network that supports either:
- A. ROTW selling to local (Korea)
- B. Local(Korea) selling to the ROTW

I say this cause "is the market "mature" enough to have an affiliate market?"

absolutely. And as I said, it current does already and it does very good business. And as is true for so much of the Korea internet market, it is probably even mnore sophistated, or at least, more robust in its offerings and implementation.

I was just saying based on what I've seen around, I think there is room for some more players in the game, (locally grown) especially if one of those players could offer more "crossover" potential as a supplement to that.

This is more what I was asking about orignally actually.

as long as we are talkigna bout it....

"5. is the market "mature" enough to have a cross-over affiliate market?"

yes and no. depends which direction and if its primary or supplemental biz.

eg: if you (mark) mean by "mature", whether a crossover affilate market is feasible/cost effective in and of itsself as a primary service ... I'd say "NO". Simply because overhead and logistics would kill it, as delineated by LifeinAsia. HOWEVER, I should point out....MANY of those problems have come a loong way or have been solved for all intents and purposes. LifeinAsia's list is good, but a bit outdated in some regards.

That said, a crossover affiliate network as a supplement/competitive advantage to an existing local affilaite market network?

heck yah! the market and infrastructure is there. just a matter whether it could be expanded or how.

If you mean by "mature" market...
critical mass, technology, infrastructure, user internet savviness, intenet/broadband penetration, number of online shoppers etc...then you are just flat out incorrect.

Korea is way AHEAD of that curve. One could easily make a strong argument for Korea THE hotspot for new internet tech and the crystal ball for the "west" for all that stuff (except for raw market size). Many of the new internet services, tools, and applications you see in West are actually benchmarked based on successful Korean internet biz models.

Actually, I'd bet good money some of you guys in the biz could probably pick up a ton of ideas from how it is being done here, though I wonder whether the internet out there could handle it though. Remember, we are on 100mpbs lines AT HOME here, and use BROADBAND mobile phones for shopping just as much. So our sites and services tend to be much much much more media rich out here. But that's another issue.

[edited by: GrendelKhan_TSU at 6:34 am (utc) on Dec. 13, 2006]

"Many of the new internet services, tools, and applications you see in West are actually benchmarked based on successful Korean internet biz models. "

Maybe, but where did Amazon, E-Bay, Google, Yahoo etc come from? It's not about complexity or media richness of technology, it's about potential for online purchasing from the population.

The US has a head start in this area - they have a huge consumer appetite and a huge internet comfortable population. This is the critical factor here, not how advanced the technology is.

where did Amazon, E-Bay, Google, Yahoo etc come from? The US has a head start in this area

well now ya done it... ya done called me out! =P
E-bay is here and does fine once they integrated with local start-up Auction .co .kr (supports fact koreans shop online fine and localization is gooood), amazon didn't want to compete/couldn't here so haven't, Google has 0.7 percent of the search market (yes, LESS than 1% after 5+ years), and Yahoo WAS first when it first came here and was alone in the portal market, but now is a diiiistant third to locally grown Korean portals (about 20%?).

yikes! that's gotta be a record or something.

It ain't who did it first and longer...its who is doing it better in this market...NOW. And the evidence is clear..in Korea, 99% of the time, it ain't the "outside" guys who did it first.

Koreans are leading the web 2.0 generation, are wired from birth and all on broadband lines at home, in 50,000 PC rooms and two mobiles per person... US still deals wtih 56K and still design for 800x600 screens worrying about flash file size.

Bragging rights aside, first is great, but sometimes second (and learning from the first guy) and doing it better is even better. ^^

they have a huge consumer appetite and a huge internet comfortable population. This is the critical factor here, not how advanced the technology is.

agreed. btw, I'm not trying to make this a US vs Korea thing (that was just a little dig for fun ^^..I gotta foot in BOTH markets). I'm just saying that the market in Kroea is plenty mature in terms of the exact same things you marked as criteria (and by proportion...BETTER):

1. huge consumer appetite
(even more so in Korea actually than US by comparison/percentage for online shopping usage)
2. and a huge internet comfortable population.
(again, even more so by proportion.)
3. and a head start in the tech end and new services (broadband penetration, web 2.0 like products, broadband mobile, digital media broadcasting/TV mobile, etc etc).

only thing US has hands down is actual population size and imo, but with 30 million SAVVY online netizen (and all with broadband), Korea ain't nothing to shake a stick at. But China will wipe that off the board sooner or later (and korea sites are a much easy jump to China than US ones).

I figured it was just implied that such advanced internet tech stuff wouldnt' even be possible if parts 1 and 2 weren't there.

Again, what I was wondering specifically:
- how to go about setting/building affiliate marketing site/network (thanks again for yoru tips!) given the market IS there.
- THEN posited the idea, that GIVEN a cross-over market IS wide-open and ripe for teh picking, pursing an international affiliate deal might be worthwhile if language and logistic barrier could be overcome.

NOT whether korea market is ready or mature enough to handle it or vice versa. Both are top of the game and lacking in there own ways. ^^

how to make a middle ground is the REAL challenge.

so going back:

1) Build and run aff sites yourself to prove that it will work in the country/industry. ...

What you have there is an affiliate PROGRAM.

so based on what you said, isn't that a good place to start?

A network would need to offer a diverse range of products and services to be sustainable.

that is, if I prove it with one program, isn't that good grounds to get more sites/merchants to join my "network"?

And isn't sustainabilty like, step 2? based one good program, I could then, in theory, then try to convince a test with good online mall with a bunch of products (for immediate diversification) and thus, build to step-by-step to sustainablity?

or did I get that wrong/missing something?

argh, I'm gettin confused... +_+;;

No, you're spot on. Every network starts with just one program. One merchant and one affiliate is how it all started, wherever you are in the world.

The trick, like when you go for a run, is to take that first risky step out of your front door.

Life's not a rehearsal - go for it.

As has been mentioned, start with a network of one.
1) Build a tracking system- you need to be able to follow a customer going to an affiliate site, clicking on an affiliate link, redirecting to a merchant site, and performing a commissionable action (buying something, filling out a lead form, etc.). How will you verify commissionable actions from the merchants?
2) In your network of one, if you can act as a merchant, setup some affiliate sites and make sure everything works. (If you can't act as a merchant, expand your network to 2 and find a merchant willing to work with you.) Do LOTS of testing in many different scenarios, then make the sites live and hope you get real customers.
3) Now work on different admin systems for merchants & affiliates to use for providing links, showing stats, communicating between merchants & affiliates, registering & approving new merchants & affiliates, etc.
4) After you get everything working, make sure your system is scalable! You don't want everything to crash and burn just as things are taking off.
5) Define all the fees, rules, policies, dispute resolutions, etc. for your network. This will probably be the bulk of the offline work, although there are online components (payments, tracking limits) as well. Again, look at other networks and thoroughly pick through all their policies and feedback from users. Remember that you're walking a fine line between the merchants and affiliates- you have to please everyone, while not showing any bias towards either. :)
6) Work on A & B simultaneously- you're in chicken & egg mode.
A) Start contacting other merchants to join your network.
B) Start contacting other sites to join your network as affiliates.

awesome tips both of you!

thank you...
guess now there is only one way to go about this at this point.

<< puts to in water... ready to dive.

I'll let you all know the progress. ^^