1 mit’s media tech club november 1999. 2 gordon hoffstein president & chief executive officer

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1 MIT’s Media Tech Club November 1999

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Page 1: 1 MIT’s Media Tech Club November 1999. 2 Gordon Hoffstein President & Chief Executive Officer

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MIT’s Media Tech Club

November 1999

Page 2: 1 MIT’s Media Tech Club November 1999. 2 Gordon Hoffstein President & Chief Executive Officer

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Gordon HoffsteinPresident & Chief Executive Officer

Page 3: 1 MIT’s Media Tech Club November 1999. 2 Gordon Hoffstein President & Chief Executive Officer

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Agenda

What is affiliate marketing? Be Free history What is the opportunity? How are we doing? The competitive landscape Leveraging our leadership position

Page 4: 1 MIT’s Media Tech Club November 1999. 2 Gordon Hoffstein President & Chief Executive Officer

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What is Affiliate Marketing?

Affiliate MarketingAffiliate marketing allows online merchants to promote their goods and services within the content of tens of thousands of web sites – paying a commission only when a sale is made.

Page 5: 1 MIT’s Media Tech Club November 1999. 2 Gordon Hoffstein President & Chief Executive Officer

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Who Is Be Free?

We power the infrastructure for the next generation of online marketing:

Affiliate Marketing

Page 6: 1 MIT’s Media Tech Club November 1999. 2 Gordon Hoffstein President & Chief Executive Officer

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How Affiliate Marketing Works

Content Sites Partner With Merchants

Page 7: 1 MIT’s Media Tech Club November 1999. 2 Gordon Hoffstein President & Chief Executive Officer

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Place Promotions in Context

How Affiliate Marketing Works

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Earn Commissions Based on What Is Sold

New York Yankees righthander DavidCone has become the second Yankeein as many years to throw a perfect game, as he blanked the MontrealExpos on Sunday at Yankee Stadium. The Yankees won the game, 6-0, on Yogi Berra Day

How Affiliate Marketing Works

Page 9: 1 MIT’s Media Tech Club November 1999. 2 Gordon Hoffstein President & Chief Executive Officer

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Click-through rate

Non-portal traffic

The Need for Affiliate Marketing

80% of online trafficbypasses portals

Traditional online marketing is not effective 99.5% of banners are ignored

80%80%

0.5%0.5%

Page 10: 1 MIT’s Media Tech Club November 1999. 2 Gordon Hoffstein President & Chief Executive Officer

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Be Free History

Founded in 1996 by Sam and Tom Gerace

First customer launched in September 1997

First round of venture funding in September 1998

Second round of venture funding in March 1999

IPO -- November 3,1999

Page 11: 1 MIT’s Media Tech Club November 1999. 2 Gordon Hoffstein President & Chief Executive Officer

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$0

$50

$100

$150

$200

1999 2000 2001 2002 2003

USEurope

Business to Consumer Online Sales

What is the Opportunity?

Source: Forrester Research and Jupiter Communications

In Billions

69% CAGR

Page 12: 1 MIT’s Media Tech Club November 1999. 2 Gordon Hoffstein President & Chief Executive Officer

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What is the Opportunity?

Worldwide OnlineAd Spending

Source: Forrester Research, Inc., August 199915A

15%

50%

1999

2003

Performance-basedOnline Advertising

1999

$3.3

2000 2001 2002 2003

$6.5

$10.9

$16.7

$24.1In Billions

Page 13: 1 MIT’s Media Tech Club November 1999. 2 Gordon Hoffstein President & Chief Executive Officer

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Q3 '98 Q4 '98 Q1 '99 Q2 '99 Q3 '99

New customersExisting customers

How Are We Doing?

1327

53

109

192

76% Growth

Our Rapidly Growing Customer Base

Page 14: 1 MIT’s Media Tech Club November 1999. 2 Gordon Hoffstein President & Chief Executive Officer

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Our Customers – Category Leaders

Page 15: 1 MIT’s Media Tech Club November 1999. 2 Gordon Hoffstein President & Chief Executive Officer

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Our Customers – Category Leaders

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Page 16: 1 MIT’s Media Tech Club November 1999. 2 Gordon Hoffstein President & Chief Executive Officer

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Number of Affiliates

1,075,000

1,469,000

400,000

67,00031,000

Explosive Growthof Our Customers’ Reach

Page 17: 1 MIT’s Media Tech Club November 1999. 2 Gordon Hoffstein President & Chief Executive Officer

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Q3 '98 Q4 '98 Q1 '99 Q2 '99 Q3 '99

Number of Promotions ViewedIn Millions

Dramatic Growthof Our Customers’ Promotions

221338

541

825

1,156

Page 18: 1 MIT’s Media Tech Club November 1999. 2 Gordon Hoffstein President & Chief Executive Officer

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The Competitive Landscape

If you spend $20,000 2,000,000 banner ads

assume $10 CPM 10,000 clicks to your site

assume 0.50% click-through rate 100 sales

assume 1% conversion rate $5,000 in gross sales

assume $50 average saleassume $50 average sale

Banner Advertising

Spend $20,000Sell $5,000

Affiliate Marketingcommission-based model

$5,000 in gross sales $500 paid to affiliates

assume 10% commission rate $100 Be Free service fees

assume 2% service fee

Spend $600Sell $5,000

Page 19: 1 MIT’s Media Tech Club November 1999. 2 Gordon Hoffstein President & Chief Executive Officer

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Most Effective Marketing Methods

Source: Forrester Research, April 1999

Affiliate Marketing Works!

1 Affiliate programs11 E-mail to customersE-mail to customers 33 Public relationsPublic relations44 TelevisionTelevision55 Outdoor advertisingOutdoor advertising66 E-mail to opt-in listsE-mail to opt-in lists77 Direct mailDirect mail77 MagazinesMagazines77 RadioRadio

1010 SponsorshipsSponsorships1111 ButtonsButtons1212 BannersBanners

Page 20: 1 MIT’s Media Tech Club November 1999. 2 Gordon Hoffstein President & Chief Executive Officer

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Competition – In-house Development

An Outsourced Infrastructure for Affiliate Marketing

Benefits to Merchants Eliminates development costs Allows focus on core competencies Capitalizes on our expertise and knowledge Shortens time to market A strategic sales channel that online

merchants own and control

Page 21: 1 MIT’s Media Tech Club November 1999. 2 Gordon Hoffstein President & Chief Executive Officer

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Our Dominant Leadership Position

Number of CustomersAmong Top 50 Sites

Closest Competitor

Be Free

Source: Media Metrix, July 1999

3

11

1

All Others

Affiliate Market Share

Source: Be Free Analysis, September 1999

20%

75%

5%

Closest Competitor

Be FreeCustomers

All Others

21

Page 22: 1 MIT’s Media Tech Club November 1999. 2 Gordon Hoffstein President & Chief Executive Officer

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Leveraging Our Leadership Position

Expand our customer base Expand internationally

Launch of bol.com (Bertelsmann) in Europe Provide new products and services

B-INTOUCHSM — E-mail affiliate marketing Private branded networks — Visa Partners Network,

SmartAge Profiling technology for targeting promotions

Page 23: 1 MIT’s Media Tech Club November 1999. 2 Gordon Hoffstein President & Chief Executive Officer

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MIT’s Media Tech Club

November 1999

Page 24: 1 MIT’s Media Tech Club November 1999. 2 Gordon Hoffstein President & Chief Executive Officer

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Our Affiliate Marketing Infrastructure

Affiliate Merchant

PromotionsViewed

Click-Throughs

Sales

Click-Throughs

Recruitment

Management

Tracking

Decision Supportand Analysis

Page 25: 1 MIT’s Media Tech Club November 1999. 2 Gordon Hoffstein President & Chief Executive Officer

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Critical Success Factors

Attract, develop and retain the best associates Create the infrastructure and internal processes that will

allow us to provide the highest level of customer satisfaction Attract customers with the commitment and resources to

build highly successful affiliate sales channels Continue to develop reliable, intuitive and scaleable

technology that meets our customers’ evolving needs Obtain the necessary financial resources to achieve our

business objectives Develop new products and services in a timely

and consistent manner

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Critical Success Factors

Position the company as the leader in affiliate and database marketing through aggressive and ongoing public relations and marketing programs

Create a corporate culture that rewards innovation, creativity and teamwork in order to stay at the forefront of industry trends and changes

Create strategic alliances that will enhance our position in the marketplace

Contribute to our customers’ success by educating them about the industry’s best practices in marketing, affiliate outreach and affiliate management

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Hosted Services Accessible Through the Internet

Be Free’s Solution

A Robust Infrastructure for Affiliate Sales Channel