In February 2009 Magic Rock began a test to see if Internet affiliate marketing is a viable sales strategy for our clients–independent filmmakers. We wanted to test two premises:
1. Can indie films be sold to the general public using affiliate marketing? (with an implied intent to also discover the quantity that can be sold)
2. What is the expected ROI for Internet affiliate marketing program?
Up until this experiment, we have seen some clients engage in limited affiliate marketing activities, mostly directed at organizations that have correlation with the film’s subject (for example, “Spirit of the Marathon” linking up with Active.com). Another client, “The Last International Playboy” ran what I thought was a fairly ingenious affiliate marketing program in a contest format, where the affiliate that sold the most films would win a cash prize (I believe it was $10,000). Most of these experiments were being done on a 1 to 1 basis, where the clients were recruiting affiliates and signing them up using Indie Clix, the web-based software that Magic Rock developed. While we have seen clients create dozens of affiliate programs and signed up several hundred affiliates, we had not seen an attempt to market indie films using the mainstream affiliate marketing networks. So, Brian and I decide to assault the beach…so to speak. We wanted to see what would happen if we placed an indie film affiliate marketing program in front of tens of thousands of affiliates, and they would in turn put the banner ads in front of millions of people (…in theory).
To run the experiment, we engaged a professional marketing company with over twenty years of experience marketing products direct to consumers, and they in turn, hired an Internet marketing firm with over six years of experience in affiliate network marketing. The primary marketing firm created the price points, website elements, and offer message, and the Internet marketing agency had the responsibility to market the program to as many Internet affiliates as possible in various networks (e.g. Google, Linkshare, etc.). We are reasonably sure that we had a great team running the experiment, and that if anyone could make the experiment a success, they could. Or conversely, if it did not work, then we wanted to eliminate the qualifications of the experimenters as a possible fail point. We created a new website called Cinema Indie. We purposely disassociated the site from Neoflix since the primary marketing company asked for a website that was more sales-friendly (read: able to more aggressively drive people to buy products).
For the test group, we selected thirty films that have a good sales history, won festival awards and/or have topics that have a broader appeal (such as a film on Bob Dylan). Some of our top selling films had distribution agreements that precluded them from the experiment; however, we had several films from our top twenty (in terms of sales volume).
This is roughly how the setup process went:
Step 1: Hire the marketing company, Internet agency
Step 2: Create the website
Step 3: Select films for the catalog
Step 4: Create/adjust offer messages to entice consumers to buy the products.
Step 5: Create the affiliate marketing program to entice affiliate networks to accept your product/program.
Step 6: Create/adjust the offer message to entice the affiliates within those networks.
Step 7: Develop banner ads and marketing collateral targeting affiliates.
Step 8: Submit to various affiliate networks for their consideration. Setup the affiliate networks who signed-up for the program.
Step 9: Make adjustments to the website, add tracking codes, test tracking code reporting for each affiliate network who joins. Receive feedback about the offer, commission payout, and make adjustment to the affiliate program as necessary.
Step 10: Continue affiliate network recruiting; once the network accepts the program, we needed to continue to market the program to the affiliate (i.e. fight for mind-share against the hundreds of new programs that are launched every month into the same networks)
Step 11: Setting up an internal process to monitor sales and commission reporting.
Step 12: Repeat steps 6 to 11 as necessary to attract more networks.
The website development, program setup, offer creation, and banner ad design/programming took about three months (March, April, May). Once the products were confirmed and offer message developed, we asked the Internet marketing agency to test the water. Their initial feedback was positive, but with caveat. There were several large affiliate networks interested. However, none of the large networks had ever seen an indie film affiliate marketing program ran on this scale, so there was both curiosity and trepidation. No one knew how it would be received by their affiliates. The only way to find out was to launch the program, which we did in June. The first week after launch, there was an initial flurry of sign-ups. In fact, over a hundred-affiliates registered for the program in the first two weeks.
The sound of crickets…
Despite the initial flurry, we saw zero sales for several weeks. We were told that affiliates can take up to ninety days after sign-up to put up the banner ad. So that meant that despite the hundreds of affiliates signed-up, very few people–not the millions in the general public–was actually seeing the banner ads. At its peak, over 400 affiliates signed-up for the program, but as the weeks wore one, the number of sign-ups dwindled to none and sales activity remained at zero. There were about fifty affiliates who placed the banner ads on their site, but most were coupon sites and added no traffic to Cinema Indie [Coupon sites are websites that list discounts/offers en masse, and visitors find them via search; they are not content driven and thus not a reliable source of consistent referrals].
In July, I attend a conference in New York to learn more about the Internet affiliate marketing industry. Aside from wanting a deeper understanding of the industry, I also wanted to speak to the networks why the Cinema Indie program generated so few sign-ups and no sales. During the conference, we learned that the potential commissions that affiliates want to earn over $10 per transaction based on a 20% commission rate. For C.I., that number was around $4 based on a $20 DVD. I thought that this differential, more than anything else, was the primary reason why we were not getting any traction with the networks (the network administrators–Google, PepperJam, etc.–also earned a commission for each sale). Later I found out the low commission was only part of the problem, the other part was more intractable–but more on that later. The fact that our agency did not mention this from the start somewhat irritated me, but in fairness, they were working within the parameters we gave them at the outset. So, to introduce higher price products, I went to a client who distributed some really great box set titles and asked for products priced around the $70 to $90 range. They were gracious enough (thanks Richard Lorber and Alive Mind Media) to offer me titles to present to the networks.
A few weeks later, I learned about the second part–and probably the main reason–why Cinema Indie attained so little traction from affiliates. This problem was more fundamental: Branding. Essentially this is what I learned: Unless you are a well-known product that is selling oodles on the Internet, which means the affiliates are making a lot of money off the program, the affiliates will not (1) integrate your banner into their website ad rotation or (2) buy key words and search terms that would generate traffic to your banner ads on their website. The affiliates treat their website like valuable real estate, and affiliates put banner ads on their site in ways that maximizes their income. Affiliates will go as far as buy key words on the major search engines to drive traffic to your website–via their affiliate link–in order to make a commission. These decisions are very ROI driven, and they tend not to take gambles on unknown quantities. If we were New Line Cinema selling the collector’s box set of “The Lord of the Rings”, yes, then tons of affiliates would probably sign-up.
So the initial flurry of sign-up activity we witnessed in June masked the fact that most affiliates probably liked the novelty of the program, but thought it too risky to put it on their website immediately. Affiliates talk amongst themselves, and it seems like no one could validate Cinema Indie as a proven commission generator for affiliates. Without that validation, and being an unknown brand with unknown film titles, we were sitting on a chicken-egg dilemma.
Even though our marketing company and agency had convinced a large network to take another crack at promoting C.I. (Note, part of the agency’s compensation was based on sales, so C.I. had been a money loser for them, too) , in mid September we essentially pulled back on C.I., and currently deciding on new strategy.
We spent thousands on the experiment with zero results, but came away with a better understanding how Internet affiliate marketing with larger networks work, and some basic conclusions.
The first conclusion is that the Internet affiliate marketing networks are not a right fit for indie films for two reasons: price point and branding. The affiliates in the networks, and the networks administrators themselves, are looking for commission structures above $10 per sale. That would require clients to sell DVD and merchandise at $50 minimum. Unless clients can bundle products together to hit a higher selling price, it is hard to meet this threshold. The other issue, branding, is even more difficult to overcome. It is not possible from a cost standpoint to build a branding campaign that would create awareness at the level these affiliate networks are seeking.
The second conclusion is that the effort it takes to setup and maintain an Internet affiliate program working with larger network probably exceeds the marketing capability of most indie film teams. We had one person on staff working with a marketing company who worked on the campaign at least 20-30 hours each week, for three months. In addition, there were technical questions and support, such as website creation, coupon implementation, and pixel-firing code installation into the cart (which incidentally, are now automated for clients of Neoflix), that requires some web knowledge tech support. My impression was that these activities, cumulatively, would be more than most of our clients can handle.
