| The Internet seems
like a giant ocean, with every conceivable kind of fish trying to survive in its waters.
But with millions of Web sites serving millions of purposes, how can any one online
organization attract more attention than others and stay afloat? Maybe it’s time to stop trying to swim alone.
Join a school of fish. Creating a partnership
that’s mutually beneficial to you and the partnering company is one way of
strengthening a business that’s gaining increasingly positive attention. There are a
variety of ways to create online partnerships, and the ones that work best for your
business are those that give you access to customers and value-based relationships that
you might not have gotten on your own. But not all partnerships are created equal, nor is
any one partnership arrangement perfect for everyone.
Can a Partnership Benefit Your Web Site?
Partnerships allow for a number of promising
scenarios. One of the simplest is the referral or affiliate partnership, in which Company
A allows Company B to add a link to its own site on Company A’s site. If someone
browses Company A’s site, sees the link to Company B, goes there and purchases
something, Company A gets a "referral fee." Company A benefits by getting
revenue from an indirect source; Company B benefits by gaining a customer to whom it might
not have had prior access. Many of the bigger Web retailers, including Amazon.com, use
referrals or affiliate programs extensively.
But other, more complex, kinds of partnerships
exist as well. Suppose you’re the manufacturer of high-end children’s clothing,
which you want to sell on the Internet. Customer response says they’d buy more from
your site if you offered baby equipment and a gift registry, but those aren’t your
specialties, and you’re afraid that diverting resources to those efforts will cause
your clothing business to decline. Partnership could be the solution. "In this
competitive market, companies now have the need to focus on what they do well and partner
with companies who do everything else," says Linda Heasty, spokesperson for
Partnerware, a provider of partner relationship management services. "Instead of one
company providing the complete solution from end-to-end, there will be partnerships, each
providing part of the total solution." Joining forces with those complementary sites
by co-hosting (sharing a Web site) or co-branding (using both products to create a
recognized joint brand) could send those sales figures soaring.
That kind of partnership arrangement has helped
VirtualRelocation.com, a Web site devoted to helping people find services and location
information when faced with a move. They co-host with such providers as Allstate
Insurance, moving companies and real estate agents around the U.S. to give users of their
site a "one-stop-shopping" feel. VirtualRelocation.com funds its site by
advertising, and it’s easier to get those advertisers when there are companies like
Allstate sharing space on the site. Allstate, in turn, has noticed an increase in
retention of customers who are moving: they use VirtualRelocation.com to locate an agent
in their new hometown. "These are all unique needs to be filled," says Brian
McCabe, VirtualRelocation.com’s vice-president of marketing and communication.
"Allstate wanted to track their customers when they moved, but to do that, they
shouldn’t need to have a full site of their own."
Working with another company can even lead to a
"silent" partnership arrangement, by which one party operates or hosts a site
for another party, without the hosting company’s name being promoted. An example of
such an arrangement would be iPrint.com’s contract with Kinkos.com. Kinko’s site
looks to be completely Kinko’s—but the technology is supplied and operated by
iPrint.com. Why would competitors do that? For iPrint.com, the upside would be getting
revenue from printing business that they might not get from a loyal Kinko’s customer.
And Kinko’s benefits by not having to reinvent the wheel.
Factors in Considering a Partnership
Because there are so many ways to partner,
it’s important to consider the options and potential advantages or disadvantages of
each option for your site. "People often jump into a partnership without thinking
about how complex managing that part of the business can be," says Chris Huff,
vice-president of sales and marketing for Teleknowledge, which develops and markets
customer care and partner-management solutions for broadband service and content
providers. "Especially in cases where the partnership is a primary source of revenue,
the management of the partnership is very complex, yet often companies aren’t
thinking about that. If you’re not managing the partnership properly, it’s like
the phone company sending hand-calculated phone bills."
Be comfortable with your answers to these
questions, before you sign onto a partnership agreement.
- What kind of partnership? Referral programs sound
easy, and for small companies trying to get their foot in the door, it can be a good
start. But for larger or highly specialized companies, paying a referral fee for business
they would probably have gotten on their own would be a questionable practice.
- What are you willing to do? Co-hosting and
co-branding can be highly profitable ventures for complementary companies, but are you
willing to relinquish some control and profitability? Co-branding won’t work if
you’re concerned about losing autonomy. Can you live with the thought of providing
services to a competitor in a "silent" partnership?
- Can your systems handle the partnership
arrangement? Your Web site needs to be prepared to handle increased traffic, but
that’s not the only concern. The back office work is as important as the site itself,
especially if there are several partners and partnership arrangements. "One of the
biggest problems we see is companies not knowing if they’re getting paid properly, or
not paying others properly," says Huff. "You have to meet your business
partner’s needs, or they’ll leave for the competition." What your
partnership will require from your systems is dependent on a number of factors:
- Size of the site
- Traffic to the site
- Size of the hosting company
- Size of the partnering companies
- Number of partners
- Types of partnerships involved
- What can you gain from the partnership? Do you
want increased traffic to your site? Increased sales? The opportunity to expand with a
co-host? Blindly entering into a partnership without being clear about your company’s
particular needs may cause problems down the road.
- How detailed is the contract between the
partners? "Be very careful about placement on the site," says McCabe. "Pin
it down in the contract. You need to know exactly where you’ll be, because it has a
huge impact on your business. And you need to know what will happen to your placement if
the site is redesigned." You also should detail what kinds of payment will be made
and when, along with any accounting records you want.
- How well do you know the partner? You don’t
have to have attended elementary school together, but given the fly-by-night nature of
some Internet companies, a little background research is necessary. "Pick your
partners based on integrity," says McCabe. "It should be a partnership of mutual
respect."
- Are you a good match? If your company is large
and the potential partner is small, it may be time to be blunt: what’s in it for you?
Make sure that a need is being met on both sides, even if the need on your side is simply
to help someone else get a foot in the door. That’s okay, as long as both parties
understand what the motivation is.
- Do you understand available payment systems? Some
partnerships offer cash in one direction or the other; some offer a credit system, whereby
costs are offset by advertising revenue; and some even go so far as to offer a barter
system (as in, "If you let us co-host your site, we’ll provide the
technology."), with no cash exchanging hands. (Be sure to check with your accountant
for tax implications.)
Moving Forward
There are almost endless possibilities in
partnering, from referrals to co-hosting to silent partnerships, from direct payments to
credit situations to barter systems. Enjoy this sea of possibilities, but don’t lose
sight of the fact that partnering is indeed a business proposition. It may appear easier
to implement in the virtual sea than on the bricks-and-mortar land, but that doesn’t
mean it deserves any less attention to detail.
As long as you move carefully, having a partner
can make it easier to swim with the bigger fish.
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