AFFILIATE, MULTI-AFFILIATE AND NETWORK MARKETING DEFINITIONS

AND LEGAL RAMIFICATIONS

Rod Cook B.sc., M.A., M.B.A.

A recent study proposed that 4 million new NetWorkers joined our ranks in the last year! Most of them probably don't know that they are in "MLM" programs! You need to get your fair share! Understanding the differences in types of programs can help you enjoy this bonanza!

What? The Internet "Affiliate Rush" is driven by the power of "Viral Marketing" the human word of mouth (or word of electrons). A recent study indicates 139 internet Multi-Affiliate companies signed up over 10 million new distributors in the last year (more by the time this goes to press). It was estimated using "Bayes Theorem" that fully 40% were not in NetWork Marketing before. New blood! Great!

WHAT IS AN AFFILIATE PROGRAM?

What is an "Affiliate Program? It is a way businesses or individuals to earn a commission by referring more affiliates or customers to a business. In some form the Affiliate performs an activity that generates income. From there the split falls into the following major categories:

1. The Affiliates earn money by performing services for the parent company.

a. Watching advertising on a browser while surfing the web (example). There are many forms where the affiliate performs a service and gets paid. This is a new twist in MLM.

b. Referring others to do the same (in some cases).

2. Referring others to buy products or services.

a. Refer someone to Amazon.com from your website and you get a per-centage of the sale.

b. Refer some to sign up for a service such as AOL ($50)

3. Anything that doesn't fall into 1&2 (the web is spawning new things daily!

WHAT ARE THE KEYS TO AN AFFILATE PROGRAM?

The accepted Internet definition of an affiliate program involves the following both of which mean that the program is "Free" to participants. Historically "broker agreements" to collect commissions from referrals have been common. The culture of the Internet (FREE) and electronic simplification have carried this commission structure to new heights of popularity.

1. No consideration (money) is given to join the program

2. No consideration (money) is given to collect commissions.

Affiliate programs started as one person, the referrer to a good or service "getting the commission. They are now known as One Tier" programs. Then two tier programs developed. The person referring the person who did the selling got a small part of that commission. Affiliate programs all use some type of website software to identify the affiliate who causes an activity that generates money. Most companies use a tracking code tacked on the back end of their URL. For instance www.mlmconsultants.com/389 usually means if you signed up as number 389 any Internet website traffic coming with that code means you will collect a commission if the surfer buys a product, service or performs a service under your code. The more friends you refer with your code or the more often people use it from your website, the more money you make.

THE BOOMERS! MULTI-AFFILIATES

What is the common Internet definition of "Multi-Affiliate" programs?

1. No consideration (money) is given to join the program

2. No consideration (money) is given to collect commissions.

3. Commissions are paid on more than two levels (3 or more levels) of people you help join.

The hottest Affiliate programs on the Internet are Multi-Affiliate. NetWork Marketing Lifestyles published an article last month on the Boom. (see research article at www.mlmconsultant.com/library). Today there are probably over 6 million Multi-Affiliates in the United States. At the current rate of growth the companies in Multi-Affiliate Marketing will have memberships encompassing 1/10 of the web users. Jupiter communications (a leading web research company) recently noted that by 2001 20% of the web sales would be by some form of Affiliate marketing! Nothing like this has been seen since the term "Viral Marketing" was coined after the "Hotmail" explosion on the Internet! Does this exclude normal MLM companies from joining the rush? NO! It is a new model to learn from!

THE BOOMER

Compensation plans need to be modified and product positioning considered.

Questions & Answers

Question: Can my Network Marketing company be a Multi-Affiliate company?

Answer: Yes, if some part of their compensation plan allows a person who has not paid anything to join or paid money to collect commissions.

Question: Then my company can't ever be an Affiliate program since we have to purchase products to collect commission checks?

Answer: Yes it could be by changing to a bifurcated compensation plan and having Affiliates in one category and distributors in another. Affiliates could operate only in one part of the compensation plan designed for them. Distributors can work in both.

Question: My company calls us Internet Affiliates, whats' wrong with that?

Answer: Legally absolutely nothing, but in the Internet culture it is going to mark it's distributors as being less than truthful with the stream of web custom. We have enough trouble with NetWorkers spamming and hurting our reputation. Let's do the best we can, to be a "respected" power on the Internet!

Question: What would be the advantage of that?

Answer: Exposure of your products to a larger arena and awareness by "viral marketing." Some of the of the affiliates will eventually want to make more money!

Question: Make more money? What do you mean? I thought Multi-Affiliates made money?

Answer: Right now in the majority of cases most "Multi-affiliates" make a lot less than NetWork Marketing distributors. The great thing about the Multi-Affiliate boom is that people are going to learn about the power of building residual incomes via harnessing the efforts of others.