Originally published by Sramana Mitra on LinkedIn: Startup Idea To Leverage Good Writers

As someone who is a prolific writer, I happen to respect good writing.

These days, however, writings skills are not generating much by way of compensation. Journalism, for instance, a profession that was a good livelihood generator for writers, is an imploding industry.

Against that backdrop, here is a startup idea that could become a good earning mechanism for writers, while not getting run over by the Media industry's existential crisis.

Here, I am thinking of writers becoming affiliates of a specific genre of e-commerce merchants.

I would like to see some new entrepreneurs develop some new, highly curated affiliate networks in specific genres. For instance, clothing for professional women, dress shirts for men, children's clothes, original art, adventure travel, culture travel, etc.

For each network, there would be, say, 50-100 affiliate partners, and 50-100 e-commerce sites that sell those products/services/experiences.

The writers - affiliates - would write about the products of the 50-100 e-commerce merchants that they represent. Traffic would develop through organic search, and ongoing relationship with the readers. As the products sell, the writers (affiliates) will get paid affiliate commissions.

Let's look at some numbers.

For an affiliate partner to make a good living, the network needs to help generate $100k in affiliate fees for the year. At 10% affiliate commission, that entails selling $1M worth of merchandise. If the average selling price (ASP) per order is $50, that means, each affiliate needs to generate 20k orders. If the ASP is $100, that means, each affiliate needs to generate 10k orders. So forth..

For high-end travel affiliates, for example, the ASP could be $200, in which case they only need to sell 5,000 units to make the numbers.

The network, if it operates on a business model of 10% off the top-line, would make $5M (10% of $50M) with 50 affiliates, and $10M (10% of $100M) with 100 affiliates.

So far so good. Win-win across the board.

Is it a win for the e-commerce merchants? Let's check the numbers.

On average, if the 50 affiliates are generating $50M for 50 merchants, then the average revenue per merchant is $1M. The merchants are paying 20% commission (10% to the network and 10% to the affiliates), so $800k post-commission margin. Assuming the products have a 50% gross margin, there is another $300k left for running the business. If the business can be operated within $150k, there is another $150k in profits.

Of course, some merchants will do better than others. Some products will be hits. But overall, with a set of right strategic decisions, a 3-way win-win can be created such that the unit economics do work well.

If we can develop 100 entrepreneurs, each running a network with 50 affiliates and 50 merchants each, we've developed 10,100 (100 x 101) viable entrepreneurs.

Not bad, eh?

Well, what are we waiting for? Let's get going. 

Published on: May 26, 2016