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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. 
Click here to see Shawn's other articles. You can contact Shawn by clicking here

Related Content:  Blogging

12 comments have been left for this article. (Click to hide comments)

BP Comment Quick Links

Darsox64

Are the people reading blogs about baseball really a new market that the MLB hasn't yet reached? With sites like Amazon, bloggers are making people aware of the quality or existence of goods they weren't previously aware of. I don't think any reading a blog about the Rays will be like, "Wait, I can buy a Kazmir jersey????"

May 07, 2009 09:51 AM
rating: 0
 
G. Guest

On one had your're right; any one reading a baseball blog pretty much knows where to go to buy the stuff that they want to buy. On top of that, they likely live IN the same market as their favorite team. Those two factors do limit the revenue.

However, you know that you can buy Coke, but Coke still runs ads. You know you can buy all sorts of things that you still see ads for. I rarely visit MLB.com or it's store so I rarely think about buying baseball stuff. If my favorite blogs and sites had affiliate programs I honestly might buy a little bit more. Not much more, but a little.

On top of that, it presents a legit way for me to support those sites. If I need a new hat, I can decide to click through via my favorite site to purchase the same stuff and help the writer. I do this often with things I'm going to buy from Amazon. This doesn't help MLB at all since it's a zero sum sale. It IS still a plus though.

The biggest factor I see are at-the-park promotions. Daily / weekly promotions on tickets ($5 upper deck night etc) would reach a wider audience and could actually generate more revenue for the game.

May 07, 2009 10:59 AM
rating: 0
 
Darsox64

People will probably still buy more, but it's not the slamdunk Hoffman is arguing it is. MLB could lose money doing this if too many of the people who would purchase tickets or jerseys through the blogs would have bought them either way. The exact proportion of those "buying it either way" customers needed for this to be a net-loss is based on what the MLB ends up paying in commission as well as the profit margin. Since we don't have that information, there's no way to say whether this proposal is worthwhile at all.

May 07, 2009 11:32 AM
rating: 0
 
chico123

http://shop.mlb.com/affiliate/index.jsp?clickid=botnav_affiliate_txt

They have it already for merchandise.

Tom
elguaposghost.blogspot.com

May 07, 2009 12:15 PM
rating: 2
 
Michael Bohn

Thanks chico, I'll check this out.

May 08, 2009 07:16 AM
rating: 0
 
comish4lif

At my church (St. Likes Episcopal), there's a small ad in the weekly bulletin to has an Amazon link to use. If you are going to buy stuff from Amazon anyway, why not go through a link that can benefit someone else in a small way.

So, if a Nats blogger has an ad, and I'm in the market for something from MLB.com, why wouldn't I buy it through the blog. As long as it is the same cost to the shopper.

May 07, 2009 12:40 PM
rating: 0
 
dom

millions of dollars of new demand isn't going to be created by having links on blogs. as said, people who visit baseball blogs are hardly a new market MLB can profit off in ways that they don't already

May 07, 2009 12:52 PM
rating: 0
 
G. Guest

I don't think that it would be a tremendous windfall for MLB, but I do think that it would quickly result in some profits; in the long term I think that it would end up being a good thing for the game and cause more interest in MLB overall.

Once you put these tools in the hands of the internet community, they'll be plenty creative in monetizing them.

May 07, 2009 13:45 PM
rating: 0
 
sturock578

"Most of us use Google Adsense or Pheedo, both of which usually produce ads for little league equipment, gambling sites, or human growth hormone"

I think this might be part of the problem. Ad 1: Click here for tickets to the Nats game. Ad 2 directly below Ad 1: Click here to bet on the Nats game.

May 07, 2009 15:32 PM
rating: 0
 
Richard Bergstrom

Eh, we see how MLB is possessive about its trademark and its war with fantasy sports. If I was a blogger attached to MLB's website, I can imagine a scenario where I am pressured to retract an article I write that might be critical of MLB's processes. Or, on the flipside, I can see MLB being wary of sponsoring bloggers in the event that a blogger says something inflammatory, derogatory or slanderous and since they host the site, might also be held liable if a lawsuit arises.

May 07, 2009 17:43 PM
rating: 0
 
CD

Unfortunately I don't think people reading sports blogs are likely candidates to make a purchase. I think the readers intent is to get the quick scoop or news about their team (or sport), and it's hard to convert them into sales. That's also partially why adsense pays so little on sports blogs.

May 08, 2009 07:50 AM
rating: 0
 
lynchjm

While I think Shawn's ideas aren't usually poor, the marginal revenue projections are almost always completely overstated to a huge degree. There is no rigor or science behind any of the calculations, and I'm not sure why BP has given such a large audience to ideas that aren't nearly fleshed out enough.

May 08, 2009 13:43 PM
rating: 0
 
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