There are two types of deals on the Web, says VerticalNet’s Blair LaCorte, senior vice president of strategic planning, “Barney deals and Jerry McGuire deals.” A Barney deal is a vague pledge of mutual support that is the e- business equivalent of singing “I love you, you love me, we’re a happy family.” A “Jerry McGuire” deal–like the film character played by Tom Cruise-screams, “Show me the money!”
LaCorte’s terminology may be tongue-in-cheek, but it’s certainly as precise as phrases such as affiliate program, co-branding, strategic alliance, or joint venture. It’s tough to be an island on the Web. After all, the basic foundation of the Web is its ability to link sites together. And in the absence of actual profits, Internet marketing hype often revolves around partnerships, forcing even the smallest companies to master the art of the joint venture. But many companies are realizing that it is no longer enough to exchange links and wait for traffic or commissions to roll in.
“A Barney deal isn’t a bad thing,” explains LaCorte, but it is primarily a marketing ploy that generates little more than a press release. Increasingly, Barney deals are becoming, well, dinosaurs. These days, companies want to emulate the Tom Cruise character by doing deals that involve some hard cash–or at least some tangible results.
“A lot of these partnerships are fluff,” says Edward Moed, managing partner of Peppercom, a New York-based public relations firm that specializes in helping its clients form Web partnerships. “There is no thought as to what their goals are or how they set benchmarks so they can evaluate if this [partnership] is a success.”
Probably the simplest–and least controlled– form of partnership is a link swap. Even the smallest company can spread its logo across the Web using this type of “viral marketing,” says Moed. At the next level are affiliate programs, where one site send sends traffic to another, typically in exchange for a percentage of any business the traffic generates.
There are thousands of affiliate programs, says Michele Pelino, program manager of Internet Martket Strategies at Boston-based YankeeGroup, but “it takes resources to back these things and track them.” Pelino is not talking about technology. From cookies to click counters to nesting and frames, there is plenty of technology available to keep track of customer activity. True control freaks can even host their partner’s transaction pages on their own site, but at that point, it may be easier to simply pick a reputable partner and trust them to deliver accurate reports. Indeed, the key to successful Web partnerships, says Pelino, is not technology, but evaluating which partnerships make the most sense.
Companies are learning that lesson. “Just because everybody who’s got a Web site calls you up doesn’t mean that’s the best use of your firm’s time,” says Neal Goldman, who gets 5-10 such calls a week as managing partner of on-line investment banker CapitalKey Advisors. “It is better to do stronger, deeper partnerships [than] a great many so-so deals,” he says.
CapitalKey, for example, offers its services through VerticalNet’s site in what both companies call a co-branding effort. VerticalNet users interact with CapitalKey on a page that resembles other VerticalNet pages, although it is actually at CapitalKey’s site. The online banker pays both a placement fee and a commission for any business generated by VerticalNet traffic, and also pays to market the service. CapitalKey may sound more like a high-tech advertiser than a partner, but leading Web companies say all content on their sites–no matter what the source–affects their reputation and repeat traffic. “A lot of Internet destination sites really have to be pretty picky,” says Marcia Engles, VP- financial services industry for on-line bill payment provider Transpoint, “because they have a finite amount of real estate to present services to their customers.”
VerticalNet’s LaCorte agrees, and also scoffs at affiliate programs based solely on commissions or referral fees. “An affiliate program sounds so American, you know? If you can bring me business, I’m going to pay you,” he says. “In fact, it’s anti-American, because it [encourages] you to just throw a bunch of stuff against the wall . . . and not stick with your partner and not develop a relationship.”
VerticalNet is so serious about creating long term relationships that its investment arm has already acquired equity stakes in more than 10 partners. “We will not do an equity investment unless we [also] have a commercial deal [with that partner],” notes LaCorte. The idea, says LaCorte, is not to make a killing on Internet investments, but to help its partners succeed.