Click, click, click, kerching!

Monetising online content is difficult. One company is helping publishers do this, one click at a time. Jason Hesse reviews Skimlinks.

Affiliate marketing is often portrayed as a grubby, even sleazy, industry, full of link-heavy websites trying to flog you nutritional pills. Skimlinks is trying to turn perceptions around with transparent and ethical affiliate marketing tools for content producers.

Market

Skimlinks makes automatic affiliate marketing tools to help content publishers – blogs, forums and high-end editorial websites – monetise their websites.

The company’s software turns merchant links into affiliate links that pay a commission when visitors make a purchase. Skimlinks has two main products: Skimlinks, which turns merchant links into affiliate links by adding tracking, and Skimwords, which finds product references in content and turns them into links.

For example, if someone is reviewing a new digital camera on a blog, Skimlinks finds the product references and turn them into affiliate links on the fly.

“Rather than detracting from a page with big flashy banners, we are attempting to add value by providing users with in-context product price comparisons and links to places they can purchase product,” explains Alicia Navarro, co-founder of Skimlinks.

Skimlinks works with any online content that talks about products. “What we’re trying to do is to get [publishers] rewarded for the role that their content provides. It’s about purchase intent. Websites used to slap ads around content, but this doesn’t have much value any more, as most people ignore ads. Because we integrate the links into the text, it’s a seamless proposition that doesn’t cheapen the site.”

Skimlinks’ addressable market is, in Navarro’s words, “huge”. In theory, any website that ever mentions any products could use Skimlinks. ”Most of the web that isn’t selling products directly to consumers is talking about these products,” says Navarro.

The company is particularly strong on fashion, mothering and electronics products, but there are plans to expand into home and lifestyle, automotive and other key consumer verticals.

How does it work? A content publisher signs up on the Skimlinks website, and, once approved, they are given a line of code which they must copy and paste into their main site framework.

Skimlinks then crawls back through all of your older content and changes old merchant links into affiliate links; and the Skimwords product finds relevant product references and turns them into affiliate links.

Whenever a user clicks on a link, Skimlinks checks that the destination is with an affiliate programme. Using cookies, the company adds tracking for that retailer, so that if the user buys something within the next month, a commission is paid back via Skimlinks.

Affiliate marketing is one of the fastest-growing sectors in online marketing, growing 16 per cent year-on-year. Skimlinks has one primary competitor, the Google Ventures-funded Viglink, which plays in the same market but which consistently innovates more slowly than Skimlinks, which appears to be pulling ahead in mindshare thanks to a well-publicised installation on Pinterest, about which more below.

The challenge for Skimlinks has been to educate users about the service, explains Navarro: “We need to let people know what is possible. Publishers are constantly worried about what people will think, but there will always be people who don’t like any advertising on a site. It’s about balancing the 10 per cent of users that will kick up a fuss against the 90 per cent that accept that’s how the site will fund itself.”

Team

Skimlinks was founded by Alicia Navarro and Joe Stepniewski.

After studying computer science at the University of Technology in Sydney, Australia, Navarro worked for ten years on internet applications, designing and launching mobile and internet-based apps in Australia and the UK. Her first company, Skimbit, was a B2C user-generated website (“a Pinterest, six years too early”). Skimbit’s site’s monetisation strategy was to use affiliate links.

Stepniewski was brought on as a co-founder of Skimlinks in 2008. He and Navarro had met at university in Australia; both had moved to the UK in 2001. Before Skimlinks, Stepniewski founded SiteRefinery, a company which would acquire under-performing domains and turn them around. He has also worked at Cisco and was head of new media at independent electronic music label Finger Lickin’ Records.

“We’ve been close friends for 15 years now,” says Navarro. “When I first started Skimbit, Joe was running an internet marketing company. He knew a lot about online monetisation and affiliate marketing, and he helped me pivot the company into Skimlinks.”

Navarro looks after the product and technology side of the business, while Stepniewski is responsible for finance and business development. “He is more structured and methodical. He thinks things through more, while I’m more of a ‘big ideas’ person. We work well together,” she explains.

Skimlinks employs 40 people in London, San Francisco and New York. Half its employees work on product and technology and the other half on business development and account management. Development is handled in-house. “We’ve tried outsourcing, and it makes sense for people trying to build a prototype on a budget, but if you’re a high-tech company, you can’t outsource. We do everything here.”

Tech

Skimlink’s front-facing codebase was originally written in PHP, but it has transitioned to Python as the company has had to deal with more data. Navarro explains: “We manage huge amounts of information. PHP was great in the early days, but we’re now going through a process where decisions about scalability factor greatly into our choice of languages. Python is more suited for us, and most of our team is already experienced in it.”

A key technical decision was to make Skimlinks into a platform, she adds: “We see ourselves as a platform. Any external party can access our APIs. All of our internal systems also use those same APIs. This makes it incredibly modular and easy to build on and it’s more scalable.”

Skimlinks now receives over six billion API calls per month, which Navarro says has been a challenge: “We knew the importance of having a fully redundant server system load balanced all over the world. It’s completely in the cloud, any part can fall down and the publishers won’t be affected.”

Traction

Skimlinks is active with 33 affiliate networks, which look after 18,000 retailer affiliate programmes. More than 20,000 publishers use Skimlinks on their websites, including Hearst Magazines and Future Publishing.

Skimlinks’ revenue is commission-based. The company takes 25 per cent of whatever commission the content publisher makes from the retailer. For example, if a consumer clicks on a link from Skimlinks and buys a product worth $100, and the retailer pays 10 per cent commission on that, Skimlinks will take $2.50 of that and give $7.50 to the content publisher.

Average commission rates varies depending on the sector, but the average is between five and seven per cent, says Navarro.

The Skimlinks model is successful for its customers. In the past five months, over two million sales – valued at $100 million – have gone through the Skimlinks platform. While the average click-through rate for a banner advertisement on a website is 0.05 per cent, with Skimlinks content, this rises up to five per cent, according to Navarro.

Conversion rates, too, are strong: between one and five per cent of click-throughs. User-generated content sites, such as forums, convert higher. These average between three and four per cent, while editorial sites average one to two per cent. “This is because people go to forums to crowd source a purchase decision, they’re looking to buy,” Navarro explains.

Future growth is reliant on product innovation and geographical expansion. “We’re building a lot of new features at the moment. We want to make Skimwords the first and only product of its kind that achieves the balance of yield and user experience. It’s a really big shift.”

The company has raised $7 million in investment in three rounds. The company was seeded by angel Alex Hoye, and other investors include Sussex Place Ventures, NESTA Investments, The Accelerator Group and Bertelsmann Digital Media Investments.

Skimlinks became profitable in November 2011, but following its latest round of investment that same month, the company has been hiring more staff, so the company has dipped back into the red.

How have consumers reacted to Skimlinks? Are there not instinctively negative feelings towards publishers that use affiliate links? Navarro acknowledges this has always been an issue, but the perception is changing.

“Without a doubt, the history of the industry is on the dodgier side. But we’re showing that it needn’t be,” she says.

“High-end sites can and do use us. You’re always going to get people that complain. But in reality, affiliate links are more independent than classic advertising, as the links are added after the content has been published – it’s independent and doesn’t impact the integrity of the content.

“Also, affiliate links do not impact the user at all – nothing comes out of the user’s pocket. More people are becoming educated about how the model works, and how it helps mainstream sites to make money.”

She uses Pinterest as an example. Pinterest was a Skimlinks customer for two years, until news emerged last February that it was using affiliate networks to make money. There was a backlash against Pinterest, as critics said the site wasn’t being “honest” about its monetisation. Navarro says that while Skimlinks is not obtrusive, the fact it is an affiliate link is fully disclosed.

“Ultimately, the internet relies on monetisation. Affiliate marketing carries a negative connotation, but as people get educated, they realise this is one way their favourite websites can stay online.”

Editor’s Note: Alicia Navarro, chief executive of Skimlinks, is an advisor to The Kernel’s parent company, Sentinel Media Ltd.