Some more developments for Referly, the Y-Combinator/500 Startups company co-founded by Twilio’s ex-head of marketing, Danielle Morrill. In what may be a hat-tip to the adept use of APIs at her former employer Twilio, today Referly is launching an API program that will let any online merchant create a referrals program powered by Referly’s pay-per-action marketplace. At the same time, the company is launching a service that will drive more traffic to its own retail operation: a new shopping directory for people to browse products being recommended by users of Referly’s referral program.
Referly describes the new API scheme as “customer acquisition as a service.” Free to use while the product is in beta, it is constructed loosely around a Google AdWords-style business model: businesses decide how much they are willing to pay to get a new customer (represented by a signup, or upgrade or whatever else is chosen). The businesses ”fund their account with a pre-paid deposit,” the company says. Referly subsequently takes from that account with each reward that is paid out: users get cash rewards when they generate actions like sign-ups or sales.
The service is open to all merchants, but Morrill notes that it will specifically be targeting software-as-a-service companies, which rarely have social referral programs and could benefit from them.
“The Dropbox referral program and Living Social referral program are awesome examples of how this tactic can be very successful,” she tells me. “We want to make it much more widespread and accessible to web-based companies of all kinds.”
Of course, Referly will also be looking to work with e-commerce sites, but some of that territory has already been trod by others. “We find they usually already have affiliate programs we can integrate with,” she says.
Since launching earlier this year, Morrill tells me the company has added “thousands of users.” She notes that referrals typically have been converting “very well,” and yield three to five times the eCPMs one sees with search engine marketing.
“There is a very simple reason for this,” she says. “People are only recommending products they believe in, to people who trust them. Individuals are more creative and have better targeting with their tweets, Facebook status updates and emails than any automated ad network.”
And in what must be music to some of your ears, so far Referly has seen very little spam. “Spammers don’t win when it comes to referrals and they find out very quickly,” she heeds. The reason for that is because if you post too many recommendations to your Facebook feed, your friends will name and shame you. “There is a social contract when using these tools that requires you to do something interesting, or risk getting unfriended. It’s a natural deterrent to spam,” she says.
As these services grow, it will be interesting to see if that continues to be the case. The movement for more social shopping, indeed, is being approached from many angles, from sites like Facebook and work on a so-called “want” button, to sites rewarding for referrals like Referly, to sites like Pinterest and Lyst that let users see what other friends looking at and endorsing.
In that context, the focus on more sophisticated browsing on its own site makes sense. The new service, with categories like apps, art, beauty, books and electronics (and adult, it turns out), will give a bigger, easier to read picture of what people are endorsing across Referly. One example here:
Morrill tells me that there are already some companies signed up for the merchant API but they cannot be named because they are mostly in the same class as Referly in the Y-Combinator program, and so they have not yet been launched. These should be coming out soon, however.
Although the beta version of the API is free, longer term, Morrill tells me that Referly will charge. She says the company is exploring two different models: pay-as-you-go where Referly takes a percentage of rewards; and flat rate where a business pays would a flat amount for various transaction thresholds.
The company is taking a refreshingly fluid approach to how it takes that next. “We’re open to exploring other models, too. This is a big reason why we are not waiting any longer to launch. We need to start figuring out pricing and the market can help us with that,” she says.