eBay’s Second Affiliate Program

Who doesn’t know eBay? Founded in September 1995, eBay is now the world’s largest online trading community. It has nearly 30 million registered users (RUs) and is the most popular shopping site on the Internet when measured by total user minutes, according to Media Metrix.Matthew Lawrence, eBay’s business development manager, joined in January 1998. Recently he’s added eBay’s two affiliate programs to his growing list of responsibilities. What’s amazing is that Matt was employee No. 51. After some reflection, Matt figures attrition and retirement has moved him up a dozen or so spots closer to employee No. 1 status.

Matt noted that even though the company has gotten much bigger, the culture hasn’t changed that much. “People still come to work in the morning because they love what they do, because they’re excited about building the eBay community.”

Online Offers

What’s even more amazing about eBay is that it really doesn’t offer visitors any incentive to join. No $5-off coupon. No free-shipping deal. People join because they want to. What’s more, eBay manages most of its online advertising in-house. There is no agency of record.

However, Matt was quick to steer the conversation back to affiliate-related developments. eBay is really pressing forward on the creative front, offering affiliates the ability to link to specific category sections. Matt added, “We’re getting set to roll out a number of SmartZones.” (SmartZones are a special banner rotation and optimization technology through Commission Junction[CJ]). Search boxes are on the horizon, too.

Affiliate Program Background

After a late start, eBay finally launched an affiliate program with ClickTrade in April 2000. It offered affiliates a commission of $3 per RU. That program is still live and has grown to about 20,000 affiliates over the past year.

On March 3, 2001, eBay launched a second affiliate program with CJ. At the same time, it raised its payout at both ClickTrade and CJ to $4 per RU. Over the course of its first weekend with CJ, eBay signed up nearly 3,000 affiliates. Six weeks after launch, more than 12,000 affiliates had signed up.

One week in May, its CJ program generated an incredible 500,000-plus click-throughs. Matt commented, “The pace hasn’t slowed. We’re just blown away at how quickly things are ramping.” At the same time, he conceded, “We are seeing some migration of former ClickTrade affiliates to the CJ program.”

According to eBay’s 2001 first-quarter earnings release, its overall average cost per RU was $14. No wonder the affiliate program looks so good.

Affiliate Team Structure

Matt said eBay breaks its online advertising into three buckets: Internet marketing, word of mouth, and public relations. The Internet marketing group includes portal agreements, niche partnerships, search engine placements, and affiliate marketing. The entire Internet marketing group is only about 15 people, including three in business development. Because the group runs so lean, it has to be creative.

Over the years, eBay has amassed over 400 niche partners, each with one-off RU deals. This means ongoing manual reporting, manual check requests, and lots of hand-holding. So far, Matt reports that the biz dev team has been able to move more than 200 of these partners — sites such as TheForce.Net — into its affiliate program.

Affiliate Recruiting

One of the other things eBay has done right is cooperate with its subsidiary Half.com, which has built a best-of-breed affiliate program on a shoestring. For example, as part of the CJ program launch, eBay and Half.com (see my review of Half.com’s affiliate program) were able to do some special engineering whereby signing up for the eBay program prompted affiliates to opt in to the Half.com program — and vice versa. The result was new affiliates for each.

Additionally, Matt is working with Todd Kevitch, Half.com’s affiliate manager on cross promotions in their respective newsletters. Another interesting recruiting angle is a new program inviting eBay’s “PowerSellers” who also have free-standing Web sites to join as affiliates. eBay’s move into storefronts opens up new possibilities for affiliate recruitment as well.

Matt’s goal: 200,000 affiliates over the course of the next 12 months.

The Future of Internet Marketing

As for the future, Matt expects “more of a shakeout. I think we’ll see a broader base of sites driving a higher percentage of the traffic.” Matt also envisions a new kind of affiliate. “I expect sites in the future will find new and creative ways to drive very specific users.” Sounds a bit like an e-broker.

Matt also had some keen insight on the struggle between acquisition and retention. He remarked, “Even with 30 million members, eBay still stresses the importance of our community at every level in the organization. We treat our community as if it were only 30 members, not 30 million. We don’t want to lose a single member.”

Results

eBay is perhaps the Web’s best success story. In the first quarter of 2001, it earned a profit of $21 million on $154 million in revenue; its users transacted just under $2 billion in gross merchandise sales.

Overall, the company added 7.2 million users during the first quarter, bringing its total RU base to 29.7 million. Moreover, eBay’s balance sheet remains very strong. The company ended that quarter with consolidated assets of $1.3 billion, including $850 million in cash and investments.

By Joel Gehman, The ClickZ Network