LinkConnector offering $5 million in private stock

LinkConnector, a Cary online marketing company is trying to raise $5 million by offering private equity, according to a regulatory filing today.

The little-known 5-year-old local company competes in a $2.1 billion affiliate marketing industry against rivals like Commission Junction, LinkShare and Google Affiliate Network. LinkConnector and its competitors act as a brokers between merchants and "affiliates" who agree to promote the merchants' products online.

The company said it raised $275,000 in July in its filing with the Securities and Exchange Commission.

LinkConnector had previously raised $7.5 million and expects this to be its first profitable year, said company President Wofford "Choots" Humphries. It employs 18 people, down from 25 last year, after laying off seven workers in October to meet its objective to become profitable this year, Humphries said.

Affiliate marketing allows businesses to bypass conventional marketing outlets, like print advertising, but is also known as a free-for-all realm rife with fraud, since commissions are paid for online activity that is easy to manipulate.

The most common kinds of fraud involve affiliates who visit merchant web sites, sign up for trial samples or other free services, and collect commissions for generating fake "leads." Some buy products, collect sales commissions, and then return the products. A commission for a lead is usually $5 to $10, while a sales commission is usually 20 percent of the sale, Humphries said.

LinkConnector touts itself as having a zero-tolerance policy for fraud and has developed fraud-detection software. Since deploying the software in 2005, the company has eliminated about 2.3 percent of its affiliates, according to its web site.

The company has about 10,000 affiliates that promote products for about 330 merchants. An affiliate can be a private blogger whose blog carries advertising, or it can be a large corporation.

LinkConnector's merchant customers include 4FunParties, American Bridal Accessories, Boot Barn, Dremu Skin Care, Insurance Quote Exchange, Monster Learning, PeopleFinders, Surfside Sports, Texas Hot Rods and Kiplinger Washington Editors.