April 30, 2003, 12:00 AM

Casting a narrower net in the affiliate marketplace

Retailers are realizing that there is a cost to managing those affiliate relationships, even if itís simply the cost of storage space for information related to each affiliate.

The number of affiliate partners in a network used to be a point of pride with retailers-the more, the better, many said. But that thinking is coming under increasing questioning from retailers who are realizing that there is a cost to managing those affiliate relationships, even if it’s simply the cost of storage space for information related to each affiliate.

That was part of the thinking behind Ritz Interactive Inc.’s consolidation last month of the number of affiliate management companies it did business with. Ritz whittled the companies that managed its affiliate relationships from four to one-ValueClick Inc.’s Be Free network. At the same time, it took a closer look at the total number of affiliate relationships it maintains.

“Our affiliate relationships operate a step above the 80/20 rule,” says Fred H. Lerner, CEO of Ritz Interactive. “10% of affiliates generate 90% of traffic. We’ll be working with Be Free to identify those and work more closely with those that produce.”

Ritz ended up with four affiliate management companies after a year in which it acquired CameraWorld.com, PhotoAlley.com and WolfCamera.com, all of which had their own affiliate networks. “Those relationships were unwieldy, difficult to manage and didn’t give us the purchasing power we would have under one umbrella,” Lerner says.

Lerner says Ritz chose Be Free in part because of Be Free’s recent acquisition by ValueClick, which provides a broader array of marketing services. Lerner says Ritz, which also operates boating and fishing sites, will be able to take advantage of a suite of web-based marketing programs through one provider. In addition to affiliate management services through Be Free, ValueClick provides banner advertising, e-mail marketing and other promotional services.

But simply cutting affiliate partners isn’t always the way to produce best results, some analysts say. In fact, Buy.com Inc. expanded its affiliate network in Q4 by 16% and experienced a 37% increase in affiliate sales, reports Buy.com’s affiliate management provider LinkShare Corp. Buy.com’s strategy was to target affiliates defined by LinkShare as core producers-smaller to mid-size affiliates that can be depended on to drive a few sales each month.

“Buy.com proves that the smaller to medium-sized players perform a significant role in contributing incremental sales while helping minimize costs,” says LinkShare CEO Steve Messer.

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