Strategy Roundtable For Entrepreneurs: Twitter, LinkedIn – Why Not Affiliates?

During today’s roundtable, I opened with a question that was going to be a key topic of discussion at the end of the show: Why do large sites like Twitter, LinkedIn, Facebook, etc. make so little use of the affiliate business model for monetization purposes?

This is a question I would like to address to you guys as well. Please use the comments below to give your thoughts and analyses on why you think Twitter is not using the affiliate business model to monetize its immense traffic. The same question applies to many large sites that prefer CPM-based display ads to affiliate deals, and my hypothesis is if they used affiliate-based monetization more aggressively, they would be making a LOT more money.

Sponsor

For related material, please read my recent post Making Money With Blogs. It would give you some concrete details to tackle this somewhat hairy strategy question that I believe the CEOs of Twitter, LinkedIn, TechCrunch and others need to consider.

Got Produce?

As for the presenters, first up, Deborah Walliser from Redding, California, presented Got Produce? This is a greenhouse technology to grow fresh agricultural produce. Deborah has interest from Whole Foods and some other grocery stores to build such greenhouses near their distribution centers. She, however, has framed the business model as a franchise, whereas in my opinion, this is a technology licensing and services business. I have advised her to course-correct and validate with the potential customers how much they are willing to pay and in what framework.

Priyanka Bhatnagar Jewellery & Accessories

Next, Priyanka Bhatnagar from Pune, India, pitched Priyanka Bhatnagar Jewellery & Accessories, an e-commerce jewelry line. Priyanka needs to learn a lot about how to position an e-commerce business in a hyper-crowded jewelry market. The only way I can really help her is by putting her through 1M/1M premium, because it is impossible for me to give her a crash course on e-commerce in three minutes.

Snowboard Wax Mobile Apps

Then Adam Lee from Incline, Nevada, presented a mobile app for snowboarders who want to wax their own snowboards. The market sizing of the business is full of assumptions that made me very uncomfortable, the chief of those being that over 40% of free members would convert to premium. Freemium conversion rates are usually 4% at the very best, more like 1% to 2% average. I advised Adam to also build this as a B-to-B business selling apps to snowboard wax makers and even board vendors. Of course, this needs to be validated.

Finally, we had a discussion on Adam’s proposal to sell 20% of his equity for $50,000, which I thought was preposterous. That’s like selling your prized assets for nothing in a flea market. No way! Adam needs a crash course on financing and should go digest the 1M/1M curriculum module on that topic ASAP.

You can select the business you like best of those discussed today through a poll on the 1M/1M Facebook page.

The recording of today’s roundtable can be found here. Recordings of previous roundtables are all available here. You can register for upcoming roundtables here. And you can sign up for the 1M/1M premium program here.

Also, folks, remember, the Microsoft India Startup Grant application deadline is May 31. Don’t miss it!

Sramana Mitra is the founder of the One Million by One Million (1M/1M) initiative, an educational, business development and incubation program that aims to help one million entrepreneurs globally to reach $1 million in revenue and beyond. She is a Silicon Valley entrepreneur and strategy consultant, she writes the blog Sramana Mitra On Strategy, and is author of the Entrepreneur Journeys book series and Vision India 2020. From 2008 to 2010, Mitra was a columnist for Forbes. As an entrepreneur CEO, she ran three companies: DAIS, Intarka, and Uuma. She has a master’s degree in electrical engineering and computer science from the Massachusetts Institute of Technology.

Photo by ilco

Discuss