Re-Intermediation: The Year of the Network

True enough: The web has empowered people. Millions of niche sites now drive huge volumes of the web’s traffic. But harnessing these pockets of activity requires network power, such as ad and affiliate networks — in either case, an entirely new form of intermediary. In fact, with every passing day, the web’s fragmentation accelerates and with it the need for re-intermediation grows.

My prediction: As the web continues to unfold in 2001, the re-intermediating power of networks will make them more sought after than ever. But not all networks are created equal. Critical success factors include actually having a network of meaningful size and using that network to deliver worthwhile audiences.

Virtual Storefront Update

All aspiring networks need to reach critical mass — where the whole starts to become greater than the sum of the parts. They will need to reach the part of the curve where increasing returns begin to materialize.

About this time last year, the new breed of virtual storefront providers seemed full of that promise. But it hasn’t worked out that way. Of the two providers we profiled at the time, Affinia folded overnight: An email sent August 31, 2000, informed partners of a September 1 shutdown. Affinia was apparently unable to reach critical mass despite $15 million in funding. (Note to network builders: Bring plenty of cash.) Vstore seems to have also conceded, morphing its business model dramatically and becoming Vcommerce.

The past year has also brought promising new players such as ePod and Yo!, while the difficult funding environment has forced other start-ups such as Nexchange and OneMinuteShopper to come and go just as quickly as Affinia.

Vcommerce

What started as Vstore is now Vcommerce. In the past year more than its name has changed. Vcommerce is now a provider of “outsourced commerce services.” I couldn’t find mention of the Vstore service on Vcommerce.com other than in an April press release announcing the name change. Unless you already knew about Vstore.com, you’d never know the service still existed.

Today Vcommerce looks more like a would-be competitor of other e-commerce service providers such as Escalate, CrossCommerce, Iconomy, and even Global Sports — not like an affiliate marketing company. Recent customer announcements include Twentieth Century Fox Home Entertainment and Cox Interactive Media. Vcommerce also pocketed another $21 million last month after raising $26 million in November 1999.

Yo!

Backed by Macromedia, XL Ventures, and others, Yo! is a collaborative personalization ASP. Built on Macromedia’s LikeMinds technology, Yo! enables merchant and affiliate sites to benefit from the power of suggestive selling, ` la Amazon.com, regardless of their size. The idea is for Yo! to compare the behavior of a current shopper with the behavior of previous visitors to a site — or network of sites — and accurately predict the products and content of greatest interest.

ePod

Launched in February, ePod quickly made the rounds at affiliate marketing conferences — and seems to have honed its positioning as a result. After raising $21 million in venture capital, ePod now pitches “enhanced advertising for the post banner-ad world.” Its partners are “advertisers,” not “merchants.” Still, ePod is a firm believer in the power of contextual commerce, and it is clearly a tool that many affiliate marketers would do well to have in their bag of tricks. Current clients include IBM, NBCi, and CDnow Online.

Conference Update

The start of the new year brings with it another season of must-see affiliate conferences.

Things kick off this month with Online Allies at the Fairmont Hotel Atop Nob Hill in San Francisco, January 24-26. The event features two tracks: one on affiliate marketing, the other on Internet partnerships. “Why Content Matters” is the subject of my conference-closing session.

Looking for a little romance? Why not take someone special to Affiliate Solutions Europe 2001, conveniently held on February 14 at the May Fair Inter-Continental London Hotel.

Later in the spring season is AffiliateFORCE 2001. Now in its second year, the April 19-21 summit is scheduled for the cavernous Miami Beach Convention Center.

The conference update is being provided because of repeated requests from readers. You can also check my conference page. If you have an event to announce, email me.

Calling All Strategists and Consultants

Do you offer affiliate program consulting? A future column hopes to offer a complete roundup of outsourced program management firms, affiliate marketing consultants, and other affiliate marketing value-chain participants.

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