In an effort to expand payment models for electronic commerce, LinkShare Corp. launched new software last week that adds options to its traditional revenue sharing business model.
With Synergy software version 2.0, the 4,000 Web sites and 80 retailers in the LinkShare network can use cost per thousand, cost per click and cost per subscription as payment models. When LinkShare was launched last October, it offered only a cost per sale revenue model.
Putting multiple models in one package presents opportunities for both content providers, which like the dependable cash stream CPM model, and retailers, which prefer the lower-risk, upfront cost of the revenue share model.
CPM RATES A NECESSITY
"We like the idea of revenue sharing, but we understand in the long run you'll have to have CPM, too," said Tom Shuadolnik, president of TKG, the parent of cigar retailer Internet Smoke Shop on LinkShare's network. "We plan to offer guaranteed minimum flat rates and revenue sharing."
Mark Peabody, an analyst at Aberdeen Group, said the multiple revenue stream software may help both sides by encouraging them to try something new, even though content providers will still rely on the CPM model as steady money to run day-to-day operations.
"Having the combination offers the instant gratification of CPM and the possibility of future profits with the revenue share model," he said. "I see sites really looking at alternate revenue. They have to do something other than [CPM] advertising, and they're trying through e-commerce, subscriptions and revenue sharing."
Stephen Messer, CEO of LinkShare, said Synergy 2.0 helps both sides quantify what each piece of the e-commerce process is worth. For instance, banners could be based on CPMs, click-throughs paid per user, and sales paid on a percentage basis.
In the LinkShare network, retailers pay for the software and system that automates the distribution of payment, while Web sites are provided free links to member merchant sites with which they would like to partner.
The retailers are exclusive to the network and include FAO Schwarz, Omaha Steaks, Avon Cosmetics and Virtual Vineyards; some of the site publishers include Lycos, Reader's Digest, Prodigy and DejaNews.
MAJORITY OF SITES WANT A MIX
Tim Fahndrich, VP-operations for Landscape USA, which is on the LinkShare network, said his company has had to serve one company that wanted a mixed revenue model by handling the CPM deal themselves.
"So far the vast majority of banners we've done are revenue sharing, but there are sites doing a mix," he said. "When we renew that [mixed revenue] contract, we'll look at adding the CPM part in."
Copyright March 1998, Crain Communications Inc.