May 7, 2009

The Biz Beat

Affiliate Programs

by Shawn Hoffman

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Perhaps the future holds another project for us on which to waste massive amounts of time. For now, we'll leave the site and the archives up as a testament to the fact that if you work hard enough, and blow off enough social occasions, and stare at the internet enough, and get nerdy enough, and repeatedly ignore entreaties from your friends and loved ones to please God stop blogging about Bill Plaschke and get out of the house it's a beautiful day!, then you, too, can... have a blog.
-Ken Tremendous, Fire Joe Morgan

Being a blogger is an interesting existence. You can spend hours each week on something that isn't your job, and brings no financial return. Trying to make any money off of Google ads is like trying to make lemonade out of tomatoes-after a year and a half and almost 300 posts on Squawking Baseball, I'm just now reaching the coveted $100 level, at which point Google will actually be willing to send me a check.

No, it's definitely not about the money, but most bloggers will still jump at the chance to monetize their sites, even if it's just a couple hundred bucks. If nothing else, it helps us to rationalize the amount of time we put into it, and it usually just involves finding a place for some small text links, paid for by quasi-sketchy sites looking to boost their SEO juice. But some opportunities are more legitimate: SB Nation has built its business on the premise that bloggers will work for almost nothing, which, of course, usually works out to be like getting a raise. Sites like Amazon and Netflix go even further, with both companies having distributed sales and advertising programs, where bloggers or 'affiliates' push products on their sites, and are then paid commissions when people click through and buy them. The concept is rather simple, and the result is a win-win, since Amazon and Netflix get free advertising on thousands of sites, while bloggers and small web companies are able to bring in some actual cash.

Do you see where I'm going with this? I've written repeatedly that MLB should be leveraging the blogging community in ways that would expand baseball's reach and open up new revenue streams for MLB Advanced Media. But the Amazon/Netflix model could create millions of dollars for the thirty teams themselves, helping them sell huge quantities of tickets and merchandise without increasing their marketing budgets by a single cent.

Here's how it would work, in practice. Bloggers could choose items that they want to advertise on their sites-River Ave Blues could push Yankees tickets, DRaysBay could have Rays jerseys, Beyond the Box Score could have a general ticket store, and on and on. Every time a user clicks the links from those sites and buys something on MLB.com, the blogs get a commission, based on a tiered scale similar to Amazon's: the more you sell, the higher your rate. The introductory level could be five percent, growing to ten percent or more for power sellers.

The economics would work out very well for both sides. Even if the average commission is as high as ten percent (it would probably be a bit lower), that means that only 10-15 percent of the resulting sales would have to be incremental (i.e. they wouldn't have happened otherwise) in order for the program to make money. Above that level, the teams' ROI is extremely high, as much as $9 returned for every $1 put in, with no money being spent up front. That's a very high-reward, no-risk program, which would exponentially increase MLB's total online ad presence without any up-front investment from the thirty teams.

In fact, the only initial "investment" would be the time it takes for MLBAM to create the system, but MLBAM itself would also end up profiting in a couple of different ways. The company gets a service fee every time someone buys something from its online store, so the more purchases, the more MLBAM takes in. They could also use the program to sell their own products, particularly MLB.tv. Imagine, for a moment, that MLBAM takes my advice and makes it possible to embed MLB.tv. The affiliate system would give bloggers a direct financial incentive to embed the videos and encourage their readers to buy the package. This is recommendation marketing at its best.

In terms of potential market penetration, you might have to look long and hard to find a baseball blogger that wouldn't want to take part. Most of us use Google Adsense or Pheedo, both of which usually produce ads for little league equipment, gambling sites, or human growth hormone (seriously). If anyone is clicking on these ads, it's usually either by accident, or because my mother is harassing her friends until they do it.

Needless to say, an affiliate program would have much better results, both for the publishers and the advertisers. MLBAM and the teams would be paying a fantastic CPM rate of around zero dollars on millions and millions of impressions, while outsourcing all of their creative functions. Meanwhile, the bloggers could finally begin to capitalize on their audiences-selling even a few hundred tickets over the course of the season would result in a four- to five-digit payday, which is a lot more than most long-tail blogs can ever hope to make with the existing technologies.

If there's a consensus objection among the people in baseball who I've discussed this with, it's that MLB's deal with StubHub somehow precludes it. But that argument is really a nonstarter. StubHub is MLB's official ticket reseller, and presumably has exclusive rights on all secondhand tickets. But this program would only affect firsthand tickets, sold directly by the teams. The blogs, or affiliates, would only be advertising the tickets, not selling them.

I don't think that there's any doubt that a program like this could work for MLB, and what better time to take advantage than when the economy is down? The system would take some time to develop on BAM's end, but the upkeep would be minimal, aside from sending out commission checks. Considering the potential upside-one million incremental ticket sales in the first full year would be a reasonably conservative guess-I'd say it's definitely worth BAM's time.

Shawn Hoffman is an author of Baseball Prospectus. 
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