Overstock takes affiliate management in-house and sees program revenue soar

As affiliate programs grow in size, online retailers are trying out a variety of approaches to handle an increasingly complex marketing channel. Discount retailer Overstock.com Inc. last year made the decision to pull most of the hands-on management of its affiliates in-house. Since then, it’s expanded its staff of dedicated affiliate managers from one to four and grown revenue from its affiliate program fivefold, vice president of sales and marketing and CTO Shawn Schwegman tells Internet Retailer.

Overstock has worked with affiliate network provider LinkShare since last year, and Schwegman credits LinkShare with a large measure of the success of Overstock`s affiliate program. “Because of the power of LinkShare’s network we are able to acquire somewhere between 1,000 and 1,500 new affiliates per month. We now have about 28,000 affiliates,” Schwegman says. LinkShare also tracks affiliate transactions for Overstock and helps affiliate managers identify new business opportunities.

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But after also initially using complete program management services available from LinkShare while it accustomed itself to the provider`s platform, Overstock staffed up internally and resumed more of the day-to-day handling of its affiliate program, with LinkShare’s ongoing support. Schwegman says that model works the most effectively for Overstock given the specific nature of its business.

“Our inventory changes very dynamically. We add about 2,500 new products every week or two and half the inventory purchases we make are one-shot deals. Because our product basis changes so quickly, we have to be very careful in our communication to our affiliates, and it’s a lot easier to just manage that in house than train an outsourced manager to do that for you,” he says.

With the new provider network, expanded in-house staff and a compensation program under which affiliate managers receive incentives for extra performance, the affiliate program’s contribution has soared and now represents about 15% to 18% of Overstock’s revenues, Schwegman says.