Transcript Presentation

MIT’s Media Tech Club
November 1999
1
Gordon Hoffstein
President & Chief Executive Officer
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Agenda
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
What is affiliate marketing?

Be Free history

What is the opportunity?

How are we doing?

The competitive landscape

Leveraging our leadership position
What is Affiliate Marketing?
Affiliate Marketing
Affiliate 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.
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Who Is Be Free?
We power the infrastructure
for the next generation of
online marketing:
Affiliate Marketing
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How Affiliate Marketing Works
Content Sites Partner With Merchants
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How Affiliate Marketing Works
Place Promotions in Context
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How Affiliate Marketing Works
Earn Commissions Based on What Is Sold
New York Yankees righthander David
Cone has become the second Yankee
in as many years to throw a perfect
game, as he blanked the Montreal
Expos on Sunday at Yankee Stadium.
The Yankees won the game, 6-0, on
Yogi Berra Day
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The Need for Affiliate Marketing


80% of online traffic
bypasses portals
Traditional online marketing
is not effective

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99.5% of banners are ignored
80%
Non-portal traffic
0.5%
Click-through rate
Be Free History
1

Founded in 1996 by Sam and Tom Gerace
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First customer launched in September 1997
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First round of venture funding in September 1998

Second round of venture funding in March 1999

IPO -- November 3,1999
What is the Opportunity?
Business to Consumer Online Sales
$200
$150
In Billions
US
Europe
$100
$50
$0
1
1999
2000
Source: Forrester Research and Jupiter Communications
2001
2002
2003
What is the Opportunity?
Worldwide Online
Ad Spending
In Billions
Performance-based
Online Advertising
$24.1
15%
$16.7
1999
$10.9
$3.3
1999
1
15A
$6.5
50%
2000
2001
2002 2003
Source: Forrester Research, Inc., August 1999
2003
How Are We Doing?
Our Rapidly Growing Customer Base
192
New customers
Existing customers
109
13
Q3 '98
1
27
Q4 '98
53
Q1 '99
Q2 '99
Q3 '99
Our Customers – Category Leaders
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Our Customers – Category Leaders
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Explosive Growth
of Our Customers’ Reach
Number of Affiliates
1,469,000
1,075,000
400,000
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31,000
67,000
Q3 '98
Q4 '98
Q1 '99
Q2 '99
Q3 '99
Dramatic Growth
of Our Customers’ Promotions
Number of Promotions Viewed
In Millions
1,156
825
541
221
Q3 '98
1
338
Q4 '98
Q1 '99
Q2 '99
Q3 '99
The Competitive Landscape
Banner Advertising
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 sale
assume $50 average sale

Spend
Sell
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$20,000
$5,000
Affiliate Marketing
commission-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
Sell
$600
$5,000
Affiliate Marketing Works!
Most Effective Marketing Methods
1 Affiliate programs
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3
4
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7
10
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E-mail to customers
Public relations
Television
Outdoor advertising
E-mail to opt-in lists
Direct mail
Magazines
Radio
Sponsorships
Buttons
Banners
Source: Forrester Research, April 1999
Competition – In-house Development
An Outsourced Infrastructure for
Affiliate Marketing
Benefits to Merchants

Eliminates development costs

Allows focus on core competencies
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Capitalizes on our expertise and knowledge
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Shortens time to market

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A strategic sales channel that online
merchants own and control
Our Dominant Leadership Position
Number of Customers
Among Top 50 Sites
11
Affiliate Market Share
75%
20%
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1
Be Free
2
Closest
Competitor
Source: Media Metrix, July 1999
All Others
5%
Be Free
Customers
Closest
Competitor
All Others
Source: Be Free Analysis, September 1999
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

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MIT’s Media Tech Club
November 1999
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Our Affiliate Marketing Infrastructure
Affiliate
Merchant
Recruitment
Management
Promotions
Viewed
ClickThroughs
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Tracking
Decision Support
and Analysis
Sales
ClickThroughs
Critical Success Factors





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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
Critical Success Factors
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
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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
Be Free’s Solution
A Robust Infrastructure for Affiliate Sales Channel
Hosted Services Accessible
Through the Internet
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